Irish Nationwide inquiry told it is ‘obliged’ to dismiss charges

An inquiry into alleged regulatory breaches at Irish Nationwide Building Society has been told that it has a "constitutional obligation" to dismiss the charges against former chairman Michael Walsh.

Michael Collins SC, representing Mr Walsh, questioned why the former chairman was the only non-executive director of INBS that was facing charges. He said it went against the principles of natural justice, saying it was “unfair, smacks of injustice and certainly requires explanation”.

Mr Collins said Mr Walsh had been singled out by the Central Bank as the only non-executive director of any Irish bank to face such an inquiry, while "others had no case to answer".

He said the Central Bank had “resolutely declined” to explain this to him and that the board of INBS had always acted collectively in its decision-making.

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Mr Walsh had at all times co-operated with the Central Bank in relation to his role with INBS and was “puzzled and shocked” to receive a notice that he was being charged for alleged breaches, Mr Collins said.

He acknowledged that the three panel members of the inquiry were independent of the Central Bank. However, he said the inquiry was “tainted by inherent bias” by virtue of being an agent of the regulator, which is providing administrative support to the panel members and had appointed them to their roles last year.

Alleged breaches

Mr Collins also questioned the delay in bringing the charges against Mr Walsh, arguing that this “could have been carried out much earlier than now” and that the Central Bank should have had these “concerns years ago”. The inquiry heard that Mr Walsh has not had any access to INBS documents since stepping down as chairman seven years ago.

Mr Walsh served on the board of INBS between 1995 and 2009, latterly as chairman. The lender was nationalised in 2010 having received a €5.4 billion bailout from taxpayers.

He faces seven charges of alleged regulatory breaches, which took place at different periods between August 1st 2004 and September 30th 2008.

Mr Walsh did not attend the hearing. He is one of five former directors and senior managers of INBS accused of regulatory breaches by the Central Bank.

The others are Michael Fingleton, former chief executive, Stan Purcell, a former company secretary,Tom McMenamin, a former commercial lending manager at INBS, and Gary McCollum, who headed the building society's lending into Britain from a base in Belfast.

Mr Purcell was the only one of the five to attend the hearing on Tuesday.

Internal controls

The inquiry, which is being chaired by solicitor Marian Shanley, has set aside two days to hear Mr Walsh’s application for the dismissal of charges against him and to deal with submissions on access to documents.

The five are accused of failing to ensure that commercial loan applications were processed and later approved correctly.

It is also alleged that INBS failed to obtain proper security for commercial loans, including personal guarantees.

The regulator also suspects that proper valuation reports on assets were not received and that loan-to-value limits were not adhered to in accordance with sound internal controls.

It is also alleged that the executives failed to ensure that commercial lending was effectively monitored in line with internal policies.

In addition, it is alleged that INBS’s credit committee failed to perform certain functions properly and that it failed to ensure that certain reports relating to commercial lending and credit risk management were provided to the board as required by legislation.

The hearing continues on Wednesday when counsel for the Central Bank’s enforcement unit will put forward its case for the inquiry to reject Mr Walsh’s application.