Central Bank faces damages claim over Fingleton INBS role
Published 19/11/2013 | 02:00
THE Central Bank faces a possible damages claim for tens of millions of euro due to its alleged approval for powers to be unlawfully delegated from the board of Irish Nationwide (INBS) to its former CEO Michael Fingleton.
The alleged delegation of powers led to some €6bn in losses at the building society, the Commercial Court heard.
The Financial Regulator had been informed of the delegation of powers and expressed a wish that it should be monitored and risk tolerance controls put in place, the court was told.
John Rogers SC said a "soft" reply from the regulator in 2007 concerning the delegation made clear he was "certainly not putting the boot in".
Mr Rogers was speaking on behalf of John Stanley Purcell, one of four former INBS directors being sued, separately from Mr Fingleton, by state-owned Irish Bank Resolution Corporation (IBRC) arising from the "catastrophic losses".
Mr Rogers secured an order from Mr Justice Peter Kelly joining the Central Bank as a third party to the case – so as to claim indemnity and contribution against the bank for any damages awarded against Mr Purcell over the alleged delegation of powers.
Mr Rogers argued that the Central Bank had, over some 12 years from 1997 to 2009, approved the delegation of powers of the INBS board to Mr Fingleton.
Neither the Central Bank nor the Financial Regulator, who was appointed in 2003, ever sought revocation of the delegation, Mr Purcell said in an affidavit.
Mr Purcell has denied any breach of duty on his part concerning the delegation but also pleaded, should the court uphold the IBRC claims, that the Central Bank must also bear responsibility and liability.
It is claimed that if the Central Bank had maintained proper control of INBS, the losses would not have been suffered, or would have been substantially reduced.
The case centres on actions allegedly taken by Mr Fingleton, who was with the building society from 1971 to 2009, and the board's alleged oversight of his role and management of the lender.
The other defendants are former INBS chairman Michael Walsh, Terence Cooney and David Brophy. They allege they were in a very different position from Mr Fingleton, as he had significant knowledge of transactions but they were non-executive directors who did not.
The losses mainly arose from development loans made while Mr Fingleton was CEO, the special liquidators of IBRC claim.
The liquidators allege that had the true picture of INBS's affairs been disclosed, Mr Fingleton would have been summarily dismissed for breach of duty by 2007 at the latest.
As part of the case, it is alleged that an "unusual" management structure had operated at INBS under which the board effectively delegated its powers over years to Mr Fingleton – who allegedly authorised many loans without prior board approval, in breach of the building society's lending policies.