DISGRACED banker Michael Fingleton was in charge of Irish Nationwide at the time when many of the poor-quality loans at the building society were granted.
It now requires €5.4bn in fresh capital from the State, making it one of the biggest building society collapses in Europe. The company only had assets of €13.3bn at the end of last year, and an €8.1bn customer loan book.
High loan-to-values are the chief reason for the poor quality of loans at the society and write-downs on these loans are the reason for the additional capital requirement. The heavy presence of development land at the society is also a key factor.
The majority of the loans were extended during the tenure of former managing director Fingleton, who has retired. Mr Fingleton was paid a bonus of €1m just weeks after the State bank guarantee, which has still not been paid back.
In March Finance Minister Brian Lenihan said the building society needed €2.7bn of capital, but further advice from the National Treasury Management Agency (NTMA) forced this to double, he said yesterday.
The precise reasons for the additional capital was not given, though the scale of NAMA discounts on Irish Nationwide loans is believed to be the key reason. Irish Nationwide has the worst quality property loans of any institution, according to the NAMA discounts.
In the first tranche of transfers, the building society's loans were discounted by 58pc and by 72pc in the second tranche. NAMA is forcing Irish Nationwide to crystallise loan losses up front, explained a banking source yesterday.
The building society had some loans which were given no value by NAMA in the second round of transfers.
The building society has been effectively nationalised with the government taking a special investment share, vetoing the powers of the society's members.
The building society will now be sold, but this won't happen for some time as the society needs approval for such a step from the EU Commission. Its €4bn deposit book is attractive to suitors, and it also has a residual residential mortgage book. No approach has been made for its deposit book.
The final NAMA discount on Irish Nationwide loans is not known, but it is likely to be about 75pc, according to bank sources.
The 50-strong branch network of Irish Nationwide is currently being reviewed by a former executive from Bank of Scotland (Ireland) Antoinette Dunne, who is working at the society as a consultant.
Mr Lenihan said yesterday the latest capital support for Irish Nationwide would reassure depositors.