Tuesday 23 January 2018

How Fingleton's reckless lending broke the bank

Former Irish Nationwide chief Michael Fingleton. Photo: Frank McGrath
Former Irish Nationwide chief Michael Fingleton. Photo: Frank McGrath

Joe Brennan and Emmet Oliver

Disgraced banker Michael Fingleton orchestrated an outrageous regime of reckless lending that has cost the taxpayer dearly.

Irish Nationwide, which Mr Fingleton led for 37 years, is now in such a bad state that its new management team is looking at winding it down as part of an EU restructuring plan. Taxpayers have already pumped €2.7bn into the beleaguered lender to keep it afloat.

It emerged yesterday that several reports by independent experts expressing concern about the lax lending standards at the society were ignored by the board and the former financial regulator.

The devastating extent of Mr Fingleton's lending practices was laid bare by the new management team yesterday.

It revealed:

  • Losses of almost €2.5bn for last year -- more than the building society's profits over the course of its entire 137-year history.
  • Cases where developers were given 120pc of the value of the property or land they were buying.
  • That the building society invested members' money in a large number of property joint ventures, therefore taking on additional risk.
  • That a large number of developers got loans without giving personal guarantees -- particularly in the UK.
  • That loans worth €3.65bn were given to just 30 developers.
  • That almost 12pc of its €8.5bn of NAMA-bound loans are made up of just unpaid interest that has accumulated.
  • That the UK loan book, worth €4.4bn, was managed by just two lenders and four administration staff.

As he unveiled the dismal set of results yesterday, Nationwide's new chief executive Gerry McGinn said: "What has happened here is an outrage. Let's not beat about the bush about that.

"I was very surprised and taken aback by how I found things here.

"There's little point in trying to disguise it," he said.

The building society is taking a 58pc discount on the first batch of loans being transferred to NAMA -- the highest discount of all the lenders involved in the agency.

Mr McGinn said that the discount reflected the society's practice of high-risk lending, lax paperwork and security, as well as its tendency to take profit shares in developments it funded.

"There were gaps of some pretty basic information in the paper trail," he said

Mr Fingleton stepped down as chief executive of the building society last year but was controversially awarded a €1m bonus as part of his contract months later.


Irish Nationwide's new management said that despite promises by Mr Fingleton to return the €1m bonus, he has repeatedly ignored their attempts to claw it back.

The Irish Independent has also learned that his son, Michael Fingleton Jnr, is quitting the building society as the new management completes a cleanout of the top brass at the beleaguered lender.

Mr Fingleton Jnr caused huge controversy last year when, just days after the Government guaranteed customer deposits, he sent an email around London touting for business and bragging that deposits at Irish Nationwide had been secured by the Irish Government.

The debacle caused political uproar in the UK, where officials were still annoyed about Ireland introducing a guarantee without warning other European leaders.

The society was forced to issue a humiliating apology for his email.

In recent weeks, Mr McGinn has overseen the departure of Nationwide's long-standing former finance chief, John 'Stan' Purcell.

He has also seen head of commercial lending Tom McMenamin leave the company.

Fine Gael finance spokesman Richard Bruton last night said the results showed Irish Nationwide Building Society had been managed in a truly appalling manner.

Mr Bruton said it was all the more shocking that Mr Fingleton walked away with a €1m bonus on his pension.

"Clearly, of all the financial institutions in Ireland being bailed out by taxpayers, Irish Nationwide exercised the least care in securing adequate security," Mr Bruton said.

The lender has written to Mr Fingleton on a number of occasions about repaying some of his pension and the former banker has also publicly committed to returning it.

But Mr McGinn said the building society had yet to see any money.

Fine Gael vowed to raise in the Dail Mr Fingleton's bonus, as well as the €1.5m pension top-up arranged for Bank of Ireland chief Richie Boucher.

Irish Independent

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business