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Friday 15 December 2017

New pressure on bank watchdog to publish details on Irish Nationwide

Donal O'Donovan

Donal O'Donovan

PRESSURE is mounting on the Central Bank to publish two reports into the running of collapsed Irish Nationwide Building Society (INBS) after new allegations of unorthodox lending practices under former boss Michael Fingleton emerged.

The latest controversy surrounds a €60m loan made by INBS to auctioneer and developer Louis Scully in 2005.

A report in the 'Sunday World' said Michael Fingleton -- who was in charge of the bank when the loan was advanced -- has insisted that the loans are "non-recourse".

This means the debt, which is now owed to taxpayers following the collapse of INBS, is only secured on land which now holds little value as a result of the property collapse, and not by a personal guarantee from the developer.

Typically, loans of this nature and value would have been secured by a personal guarantee as well as specific assets.

The report quotes the borrower Louis Scully as saying he and Mr Fingleton had known each other over many years, and photographs showed them meeting in Dublin in recent days.

The loan was originally made by INBS in 2005, but has since transferred to NAMA, which is tasked with recovering value for taxpayers.

The story has reignited the controversy surrounding Mr Fingleton's tenure as head of INBS before its financial collapse.

INBS was nationalised and merged with Anglo Irish Bank in 2011 to form Irish Bank Resolution Corp (IBRC) after "catastrophic" losses at the lender forced the state to inject €5.4bn to prevent the complete collapse of the building society.

INBS admitted that allegations of poor lending practices and poor corporate governance had been reported to its board and regulators by external accountants, prior to its collapse.

However, while the Office of the Director of Corporate Enforcement is currently finalising a major investigation into the collapse of Anglo Irish Bank, no such investigation has begun into INBS, not least because a legal loop hole means the Director has no authority over building societies.

However, the Central Bank is sitting on two reports into the bank, which have been completed by accountants Ernst & Young and law firm McCann Fitzgerald.

The reports were commissioned in 2010 by the team that took over INBS on behalf of the State following its bailout, but prior to the merger with Anglo.

They have been circulated to officials at both the Department of Finance and the Central Bank, but both have refused to publish the findings.


Meanwhile, executives now in charge of the bust building society say they cannot comment on the latest allegations or say whether there are problems recovering other loans because of a High Court action already under way.

That's a reference to a plenary summons in the High Court against Mr Fingleton and five other former directors of INBS that was initiated by IBRC back in March. The summons did not include any specific allegations, but having filed it, the bank can in future take a case over any actions at the bank dating back as far as 2006.

"As these matters may be relevant to the High Court proceedings recently commenced by the bank, IBRC cannot comment at this time," a spokesman said.

Irish Independent

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