Central Bank allegedly knew of board powers delegation
THE Central Bank has asked the High Court to strike out legal claims that could make it liable for losses at Irish Nationwide Building Society (INBS) totalling hundreds of millions of euro.
The legal claim concerns the Central Bank's alleged approval of what is claimed was an unlawful delegation of the powers of the board of INBS to its former chief executive Michael Fingleton.
John Stanley Purcell is one of four former directors of INBS being sued, separately from Mr Fingleton, by state-owned Irish Bank Resolution Corporation (IBRC) over "catastrophic" losses of €6bn at the Society between 2008 and 2010.
INBS was folded into IBRC after it was taken into state hands.
Mr Purcell denies the claims against him, and he is claiming entitlement to a contribution and indemnity from the Central Bank, if IBRC wins its case.
That is because, he claims, the Central Bank and Financial Regulator knew of the alleged delegation of board powers to Mr Fingleton over 12 years between 1997 to 2009.
In an affidavit, Mr Purcell said the INBS board passed the first delegation of powers to Mr Fingleton in 1981, including powers to set and vary interest rates on all loans and in 1994 delegated to Mr Fingleton all the board's powers for the effective management of the Society.
He claims the Central Bank was aware of the situation.
The regulator expressed wishes between 2006 and 2007 that the so-called delegation should be monitored and risk tolerance controls put in place, but never sought to revoke the delegation, it is claimed.
The Central Bank was previously joined to the case as a third party and its counsel David Barniville SC, in a pre-trial application yesterday to Mr Justice Brian Cregan, sought orders striking out the claims against it.
Mr Purcell had made out no stateable case to support claims of negligence towards him or of breach of statutory duty, breach of duty of care and misfeasance in public office by the regulators, counsel argued.
John Rogers SC, for Mr Purcell, argued his claims against the Central Bank were admissible. Mr Purcell was alleging breach of duty to him in his office as director and also as secretary of INBS.
Mr Purcell denies any breach of duty on his part but pleads, should IBRC win its case, the Central Bank must bear responsibility and liability for losses on grounds it failed to maintain proper and effective control of INBS. Had it done so, the losses would not have been suffered or would have been substantially reduced, he claims.
The other defendants are former INBS chairman Michael Walsh, Terence Cooney, and David Brophy. All four allege they were in a very different position from Mr Fingleton and contend he had significant knowledge of transactions but they were non-executive directors who had not.
The losses mainly arose from development loans made while Mr Fingleton was CEO, IBRC claims.
The hearing continues.