Business Irish

Saturday 18 August 2018

‘This is the way we do things’ – Fingleton response to damning report

Former CEO Michael Fingleton
Former CEO Michael Fingleton

Gretchen Friemann

A top Deloitte executive has described his “surprise” at the casual reaction of Michael Fingleton to a litany of control lapses and governance failings within the organisation presented to the former head of the now obsolete Irish Nationwide Building Society (INBS) in 2006.

Colm McDonnell, who led the accountancy firm’s internal assessment of INBS before the crash and again in 2008, told the Central Bank’s ongoing inquiry into alleged regulatory breaches at the lender, that if he had brought this “type of report to other management in a different organisation they would have had a completely different response”

He claimed “other clients would be somewhat embarrassed and would certainly make assertions to fix this problem rather than be more relaxed."

Pressed by Brian O’Moore SC,  of the legal team assisting the inquiry, for the right adjective to charactise Mr Fingleton’s attitude back then to the damning Deloitte report, Mr McDonnell said “comfortable”.

So he wasn’t perturbed Mr O’Moore asked. “No” Mr McDonnell replied and emphasised that Mr Fingleton’s view was: “This is the way we do things”.

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

Deloitte’s initial report of July 2006 focussed on the Society's commercial lending practices - a draft version was prepared in February of that year - and detailed four critical risk control and governance measures that required “urgent” attention by management.

He also identified that the credit committee’s terms of reference were not being fully adhered to, with insufficient attendance at meetings while loans were approved beyond the committee’s   €1m ceiling. The inquiry has heard evidence over the past few weeks that loans over this threshold needed approval by the board.

Mr McDonnell said he had a vivid memory of the meeting with Mr Fingleton in early 2006 as it was in the Society’s board room and he was sitting in the full glare of the sun, which he claimed was shining “straight into my eyes”. 

“A bad seat to pick”, Mr O”Moore chuckled. “Unless it was given to you?”

In his role as a witness to the inquiry Mr McDonnell told the three member panel, headed by solicitor Marian Shanley, that Deloitte had not been made aware of recommendations by KPMG or the regulator in 2006 nor later in 2008, when the global financial crisis was unfurling.

Deloitte was called in by the Society to examine INBS’s books again following the 2006 assessment. According to Mr McDonnell Deloitte had also been asked by the regulator to broaden the scope of the audit expanding it to cover residential lending and “certain other matters including the the credit committee.

In December 2007 the regulator had conducted an investigation of INBS’ top exposures, as part of a sweep of over half a dozen lenders, and in February 2008 again raised  serious concerns with the Society’s board about the organisation’s  governance and controls procedures.

But Mr McDonnell claimed his team was not made aware of this and said it would have been “helpful” if he had been informed about these discussions.

This first phase of the Central Bank’s inquiry is focussed on alleged governance lapses by the Society’s credit committee. The investigation centres on four former senior managers and executives, including Mr Fingleon. Next week Tom McMenamim, the former head of commercial lending at INBS will become the first of the four to give evidence and will be followed by the former head of finance, Stan Purcell as well as Mr Fingleton.

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