Tuesday 21 August 2018

Fingleton and Walsh blame media for a €1bn run on INBS

Former CEO Michael Fingleton
Former CEO Michael Fingleton

Gretchen Friemann

Irish Nationwide’s former boss, Michael Fingleton and Chairman Michael Walsh this morning blamed an erroneous news story in the midst of the crash for a €1bn run on the lender and told the Central Bank’s ongoing inquiry into alleged regulatory breaches at the organisation that only a decision to halt lending in 2007 prevented a wider catastrophe at the time.

Under cross examination from Mr Fingleton, who ran INBS for 38 years, Dr Walsh described a Reuters story, published on September 5, 2008 as damaging given the “uncertainty”. He claimed that as a “result of that run” INBS’s deposit book shrank to “about €3bn” from a previous level of €4bn.

However he said that as a result of the board’s decision to stop all new lending in December 2007, the lender was still able to meeting its debt repayments at the end of 2008.

He said we could “only have done that based on the previous decision”.

Reuters subsequently withdrew the news item.

According to Dr Walsh, INBS had adopted a far more conservative stance than its competitors and claimed that while other banks were continuing to lend, the Society had responded to mounting liquidity constraints in the global markets by slamming on the breaks to any new business.

The former UCD professor of banking and finance said the “difference was we were actually building liquidity and everyone else was ploughing ahead in the market.”

Dr Walsh reached a settlement agreement with the Central Bank in February, accepting a €20,000 fine and a disqualification from managing any regulated financial services provider for three years.

In his second day of evidence at the Inquiry, he stressed that at the end of August INBS had cash in hand of €4bn, representing 40pc of the loan book.

However the former chairman and boss clashed over who had actually made the decision to restrict lending.

Mr Fingleton asked whether Dr Walsh could remember the board had formally approved an “executive” decision taken in October 2007 to curtail lending. But Dr Walsh replied he could not recall “any such restriction”.

The two also disagreed over the precise timing of when the board approved an extension in Mr Fingleton’s tenure.

Dr Walsh asserted he could not recall discussing the matter with Mr Fingleton at a board meeting in January 2008, just days before the prominent banker was due to step down.

Chairman Marian Stanley intervened, sweeping aside Mr Fingleton’s suggestions that the terms of his retirement package were also part of the board room conversation, and asked Dr Walsh whether he recalled proposing that Fingleton should remain on board. He replied he did not.

INBS was nationalised in 2010 leaving taxpayers with a €5.4bn cleanup bill.

The inquiry is focused on seven suspected prescribed contraventions at the Society between August 2004 and September 2008. Its first phase centres on the workings of the credit committee which a number of witnesses have claimed failed to meet its own terms of reference.

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