Wednesday 13 November 2019

Fingleton takes Horan to task over INBS threat

Ex-INBS boss Michael Fingleton.
Ex-INBS boss Michael Fingleton.

Gretchen Friemann

Michael Fingleton, the once prominent head of the now-defunct Irish Nationwide Building Society, took the ex-regulator, Con Horan, to task yesterday for threatening to remove the lender's banking licence over a board election in 2006 when regulatory concerns met with less serious action.

At the Central Bank's ongoing inquiry into the stewardship of the society prior to its collapse, the octogenarian ex-banker mounted the argument during his cross-examination of Mr Horan, who led the Financial Regulator's banking supervision arm until 2003 before becoming prudential director in 2006.

INBS was nationalised in 2010 at a cost of €5.4bn.

Mr Horan rejected Mr Fingleton's line of questioning, arguing the watchdog had imposed two successive increases to INBS's solvency ratio, a reference to the amount of capital a bank must hoard, as evidence of the seriousness of its concerns.

He claimed the higher capital burdens, which were raised from 9pc to 10pc in 2004 and then to 11pc in March 2008, were "unique" and a "significant measure in relation to the Society" at the time.

Mr Fingleton countered that INBS's loan book and profits grew substantially following the first increase and pointed out the second was imposed when the Society had curbed new lending months earlier.

He challenged Mr Horan on why the watchdog did not resort to tougher measures given the pressure it brought to bear over a board election.

Mr Fingleton said: "If you had threatened that for the election of a mere director surely you could have issued something similar," to the Society if there were regulatory concerns.

"I'm not sure that was the case," said Mr Horan, referring to the contested AGM. He stressed that retracting a banking licence from a licence holder is a "very onerous" exercise and would reflect a "very serious issue".

Mr Horan had earlier told the inquiry, which in this first phase is focused on alleged governance failures within INBS's credit committee, that the regulator was "extremely disappointed and frustrated" at the Society's lack of progress in addressing concerns raised by the supervisor.

He said the Society's failure to introduce risk control measures that kept pace with the growth of the commercial loan book represented the chief problem for the regulator.

But he also pointed to the lender's "very narrow management team" and questioned whether "sufficient people" had influence in the organisation.

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