THE CENTRAL Bank has taken witness statements from former staff of Irish Nationwide as part of its investigation into reckless lending by the former building society during the tenure of chief executive Michael Fingleton.
Former employees of the building society received letters from the Central Bank containing detailed questions about how Irish Nationwide approved loans and whether they were signed off by the society’s credit committee.
The Central Bank has followed up the letters, sent earlier in the year, and staff responses to the correspondence with detailed interviews from which witness statements have been taken.
Some former staff members sought assurances from the Central Bank in advance that their legal costs would be covered but these requests were refused.
The investigation, which is at an advanced stage, is focusing on specific customer accounts as examples of reckless lending by the building society, while lending practices within Irish Nationwide’s commercial loans department are also coming under examination.
The Central Bank investigation, led by the regulator’s enforcement division, is looking in particular at lending by the building society at the height of the property boom, 2004-2008, when most of the building society’s losses, which have led to a €5.4 billion Government bailout, were incurred.
The Central Bank said the investigation was being conducted under its “administrative sanctions procedures into historic lending practices at INBS”.
“Until this has concluded, no decisions may be made as regards any future potential action,” the regulator said in a statement.
The Central Bank said it could not comment further or provide additional details for legal reasons, citing confidential obligations under its own regulations.
Mr Fingleton ran the building society from the early 1970s until April 2009 when he stood down following pressure over his refusal to hand back a €1 million bonus paid in the weeks after the Government introduced the bank guarantee covering Irish Nationwide and the five other financial institutions. The investigation is being guided by two reports compiled by accountants Ernst Young and Dublin law firm McCann FitzGerald into lending practices and corporate governance failures at Irish Nationwide.
The Central Bank can fine firms up to €5 million and individuals up to €500,000 but these will double under new legislation, the Central Bank (Supervisions and Enforcement) Bill 2011.
Minister for Finance Michael Noonan said last October that his department had received the two reports but they were “of an interim nature”, confidential and subject to legal privilege.
“In view of the sensitive nature of their reports and their potential, if made public, to prejudice any future actions that may arise, I do not propose to publish the reports referred to at this time,” the Minister said in response to a parliamentary question.
Mr Noonan said in February the reports had also been passed to the Garda and they could not be published before the conclusion of the Central Bank’s investigation, any Garda investigation and civil legal proceedings taken by the former Anglo Irish Bank, which is winding down Irish Nationwide.
Irish Bank Resolution Corporation, previously known as Anglo, issued legal proceedings against Mr Fingleton and other former directors of the building society at the end of March over breach of contractual obligations.
The Office of the Director of Corporate Enforcement told The Irish Times last year that it had no power to investigate Irish Nationwide as building societies do not fall under company law.
