Politicians have much to lose if Fingleton spills the beans
MICHAEL Fingleton's comment yesterday that he is willing to co-operate with the investigation into the banking crisis is likely to make some Irish Nationwide borrowers nervous -- not to mention politicians and former regulators.
Later this year, the Government's Commission of Investigation will look at what happened at the main banks between January 2003 and September 2008 -- including what went on at Michael Fingleton's Irish Nationwide.
If the former chief executive wanted to embarrass certain public figures, then he could do so by disclosing the terms and conditions of their loans and how they were granted.
RTE reported late last year that Mr Fingleton fast-tracked millions of euro in loans to leading politicians -- including €1.6m to the former finance minister, Charlie McCreevy.
Mr Fingleton's time running the society is likely to be explored in detail by the commission, although it is not clear if it will look at loans to politicians and whether they were given preferential treatment.
He could also shed light on the relationships between his building society and the political establishment and regulatory system of the time.
For example, did politicians (and the Department of Finance) know about the kind of lending that Irish Nationwide was doing?
Did the politicians know about the joint ventures the society entered into with various developers?
What did they know of pay practices at the society and the kind of control exercised by Mr Fingleton at board level?
Staff from the Financial Regulator's office could also face some embarrassment during evidence from Mr Fingleton, as various corporate-governance shortcomings were seemingly not combated by the regulator.
But the key question facing Mr Fingleton concerns how he could allow the society to build up such a large exposure to commercial-property lending at a building society which had traditionally specialised in mortgage lending.
For example, the customer loan book of Irish Nationwide grew from €4.27bn in 2003 to €10.4bn in just five years -- an astonishing increase of 143pc.
The profile of the loan book also changed during this period, with more loans to developers as a proportion of the book.
Mr Fingleton presumably thought he had enough capital in place if large numbers of these loans went sour.
But disastrously, the building society was hopelessly under-capitalised when the crash came, forcing the Government instead to mop up the losses with taxpayers' money.
During Mr Fingleton's time, the society's loan book was overseen by a tiny number of people, personal guarantees were not sought from many leading developers and many clients were not asked to put their own money into major loans.
Not only were 100pc mortgages common, but loans to some developers were given on the basis of 110pc loan-to-value.
These practices will be scrutinised by the commission. But already, the management which took over from Mr Fingleton has disclosed the kind of lending practices that took place.
Hopefully, Mr Fingleton can shed additional light on these matters in the coming months.