Tuesday 11 December 2018

Central Bank fines ex-Irish Nationwide chairman €20k

INBS was nationalised in 2010 and later merged with the remnants of Anglo Irish to form IRBC. Photo: PA
INBS was nationalised in 2010 and later merged with the remnants of Anglo Irish to form IRBC. Photo: PA

Gretchen Friemann

Michael Walsh, the former chairman of the collapsed Irish Nationwide Building Society, has accepted responsibility for his part in the lender's downfall after striking a settlement deal with the Central Bank.

Under the terms of arrangement, Dr Walsh - a former banking professor at UCD - must pay a €20,000 fine and is banned from working at a regulated financial services entity for three years. He has also accepted a reprimand.

It is the first time that a director at a bailed-out institution has publicly accepted legal culpability for their role in the run-up to the crash.

INBS was nationalised in 2010 and later merged with the remnants of Anglo Irish to form IRBC.

The settlement, first reported by the Irish Independent, excludes Dr Walsh - a former banking professor at UCD - from any further involvement in the regulator's long-running inquiry in to alleged regulatory breaches at INBS.

In a statement, the Central Bank said Dr Walsh, as the non-executive director (NED) of INBS during the period under investigation, from August 1, 2004, to September 30, 2008, has admitted to "certain prescribed contraventions of financial services law".

The breaches related to the lender's management of commercial loans and credit risk.

The Central Bank emphasised that Dr Walsh, as an NED, was not "directly engaged in the day to day management of INBS".

However it highlighted his position as non-executive chairman of the board from May 14 until June 30, 2008 - when INBS was gripped by a lending frenzy.

As property valuations and loans shot through the roof during the boom, the once comparatively small building society ramped up its lending to the sector, taking its commercial loan book from €2bn in 2000 to €9.8bn in 2007, mostly in the form of high-risk site financing.

The Central Bank said Dr Walsh was "in a position to ensure that the Board received timely and relevant information from management and that the Board was addressing all relevant issues." It conceded that Dr Walsh "took a variety of steps to address these issues, which were flagged by various internal and external reports during the Review Period" but said he "accepts responsibility as non-executive chairman for the fact that these issues were not fully addressed".

The regulator said that as a result the enforcement action reflected Dr Walsh's participation in INBS's failure to properly manage its commercial lending and credit risk management in accordance" with internal policies.

It also cited the need to provide an "effective deterrent impact" to other entities and their management, including "in particular non-executive directors".

Irish Independent

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