THE DEPARTMENT of Finance has described Irish Nationwide as “an important actor on the Irish banking system” in defence of the decision to include the building society in the State bank guarantee scheme.

William Beausang, assistant secretary at the department, said that Irish Nationwide was systemic to the Irish system because it has “a substantial retail branch network” with 49 offices providing banking services to the public and about €6.7 billion in customer deposits.

Mr Beausang told Labour finance spokesman TD Joan Burton in a letter received earlier this week that the mutual building society had a large number of members nationwide. “The society is an important actor on the Irish banking system and has many dealings with other covered institutions and customers of other covered institutions,” he said.

In a follow-up reply to queries raised at an Oireachtas committee last month, Mr Beausang told Ms Burton the aim of the guarantee was to maintain the stability of the banking system as a whole. He said any perception the Government “would adopt a selective approach” to supporting individual guaranteed institutions “is likely to be interpreted negatively by international markets, including in relation to the credibility of the guarantee overall”.

In a separate development, the new acting chief executive of Irish Nationwide, Danny Kitchen, has told staff the lender will remain independent and has a five-year plan to increase lending for residential mortgage customers and decrease commercial lending.

He told staff last Friday the bank would rebalance its loan book and adopt a greater concentration on gathering deposits.

Mr Kitchen addressed staff following the retirement of Michael Fingleton as chief executive the previous day after 37 years in charge of the building society.

Irish Nationwide sharply increased lending to the commercial property and development sector over recent years.

Loans to the sector accounted for 80 per cent of Irish Nationwide’s overall loans of €10.4 billion at the end of 2008, while loan losses of €464 million, primarily as a result of the collapse in the property sector, led to a pretax loss of €280 million for last year.

Mr Kitchen said the society would make a number of senior appointments over the coming months. A new chief financial officer was appointed last month.

He dismissed reports that Irish Nationwide did not have an independent future, saying the society was in a strong position and, like other institutions, needed the bank guarantee to secure funding.

Mr Kitchen, who is also chairman of the society, plans to meet management and staff from Irish Nationwide’s Dublin branches this week and to visit the regional branches after the society’s annual meeting next Tuesday.

Ombudsman's criticism

The Irish Nationwide Building Society is facing criticism from the Financial Services Ombudsman over the extent to which it has refunded hundreds of customers who were overcharged by the financial institution.

Ombudsman Joe Meade is expected to express his dissatisfaction today with the bank over the manner in which it carried out a "look-back" exercise requested by his office.

In 2006, the High Court upheld the ombudsman's decision to order Irish Nationwide to repay part of an early loan redemption charge to a commercial customer. Mr Meade also told the building society to look back at other similar cases, and this exercise resulted in the payment of €2 million to other borrowers.

Mr Meade has indicated he will raise the issue today at the publication of his annual report, which shows that complaints about banks, building societies and insurance companies rose 36 per cent last year.

Although the recession is driving an increase in his caseload, Mr Meade will point out that consumers have benefited by up to €50 million as a result of his decisions.

However, a number of his significant rulings have been challenged in the courts and this has led to an increase in legal costs, he will say today.

Mr Meade will also renew his criticism of unsuitable investment policies and poor sales practices by some financial institutions, in addition to the sale of "wrapped around" insurance policies. Some institutions are trying to "defend the indefensible" to his office, he claims. – PAUL CULLEN