Fingleton agrees INBS controls over data given to regulator failed

Former Irish Nationwide Building Society (INBS) managing director Michael Fingleton agreed that if he had taken his seat on a key bank committee, he could have ensured it was meeting commitments to regulators and auditors.

A Central Bank inquiry into the lender's €5.4 billion collapse has established that INBS told regulators in 2005 that its credit committee saw regular reviews of its commercial loans, even though this was not happening.

Mr Fingleton denies that he was a member of the credit committee between 2004 and 2008, the period on which the Central Bank is focused, even though the board appointed him to the body and internal documents state he had a seat on it.

Inquiry senior counsel Brian O'Moore pointed out several times that had Mr Fingleton taken his seat on the credit committee he would have known that it was not getting reviews of its commercial loans, despite recommendations from the regulator and auditor KPMG that it should do so.

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‘Issue’

“I accept that, but I was never on the credit committee,” Mr Fingleton told him at one point. He argued that had “some issue” been brought to his attention, he would have dealt with it, but this did not happen.

Mr O’Moore said that the bank told the regulator something that was just plain wrong. “The controls in the society to ensure that accurate and correct information was provided to the regulator had failed, had they not?” he asked.

Mr Fingleton replied that, based on the information given to the watchdog, the answer was “yes”. Commercial lending manager Tom McMenamin had told INBS compliance officer Ita Rogers in 2005 that reviews of the bank’s commercial loans were submitted to the credit committee, when this was not happening.

However, the regulator and auditor KPMG were told that the bank was submitting reviews to the credit committee in line with the recommendations.

Mr O’Moore asked Mr Fingleton if he had a “smidgen of regret that three times in 2005 people were wrongly told about the implementation of the recommendations”.

Mr Fingleton argued that he relied on “senior and competent people” that he trusted to deal with such things as the KPMG recommendations and the regulators’ concerns.

Asked if that trust was justified in Mr McMenamin, he replied: “No, not on this point.”

Arrears

The inquiry is looking at whether the credit committee failed to scrutinise large commercial loans in arrears, INBS’s exposure to specific customers or specific sectors, or risks highlighted by auditors, advisers and regulators.

Auditor KPMG recommended that the credit committee see reviews of the bank’s commercial loans in 2004. Both the accountants’ firm and the State’s financial regulator expressed concern that this was not happening.

Senior managers informally discussed how large commercial loans were performing, but the KPMG report pointed out that there was no structure for following up any problems raised.

The inquiry is focusing on Mr Fingleton, former finance director Stan Purcell, Mr McMenamin and Gary McCollum, who ran the society's UK business.