ANALYSIS:The baton is now with the Government to intervene at INBS, writes ARTHUR BEESLEY
DR MICHAEL Walsh’s departure from Irish Nationwide Building Society (INBS) passes the baton to the Government to intervene immediately in the institution.
Chairman of INBS since 2001, he leaves at a time of great uncertainty in an organisation that has been in business since the 1870s.
Although INBS has been dominated for decades by its now 71-year-old chief executive Michael Fingleton, Dr Walsh’s chairmanship was seen in business circles as a counterweight to Mr Fingleton.
He is best known as an executive director of International Investment and Underwriting (IIU), the private equity firm controlled by billionaire businessman Dermot Desmond. Unlike Mr Desmond and Mr Fingleton, his public profile is very low, and he is virtually unknown outside the upper ranks of the business community.
In removing himself from INBS at this time he may yet avoid the spotlight in whatever developments follow his resignation. His departure means he will not stand in the way of any Government intervention. On the contrary, it specifically invites intervention and a replacement of the society’s current leadership.
Following the recapitalisation deal last week with Allied Irish Banks (AIB) and Bank of Ireland (BoI), the INBS was widely perceived to be next on the Government agenda as its strives to fix the banking system. Dr Walsh’s departure hastens that process.
The trading position of the INBS is weakened by the heavy exposure of its €12.48 billion loan book to the sharp deterioration in the Irish and British property markets. INBS has been embroiled for weeks in the directors’ loans scandal at Anglo Irish Bank and it emerged two days ago that it had provided tens of millions in dollar and sterling loans to former Anglo chairman Seán FitzPatrick, loans he used to conceal the full extent of his own loans from Anglo.
Also on Monday, the society had its debt downgraded by Moody’s credit rating agency to one level above “junk” or speculative status.
On Tuesday, in his first resignation letter to the board, Dr Walsh was very clear on what he believes should now be done but did not refer to any specific development.
“In the light of the unfolding events at Irish Nationwide and my responsibility as chairman of the society, I believe that the board and ultimately the Minister should have the opportunity to provide new oversight and leadership.”
He went further than that in his second letter yesterday. “It is clear to me that Irish Nationwide Building Society cannot survive without reorganisation and significant Government support.”
These concerns were not reflected in the public statement issued yesterday by the remaining directors on the INBS board after they appointed Terence Cooney to succeed Dr Walsh on an acting basis.
“Dr Walsh has informed the board that there are no commercial issues which would have impacted on his decision,” it said.
Dr Walsh’s letters of resignation were sent to Minister for Finance Brian Lenihan and the Financial Regulator.
In his capacity as INBS chairman he met Mr Lenihan on a number of occasions in recent times in a round of meetings the Minister held with the chief executives and board chairpeople in each of the institutions covered by the State guarantee.
While the tenor of his resignation letters raise questions as to whether he expressed similar concern to Mr Lenihan at any earlier occasion, it is believed that he did not previously indicate that the society could not survive without Government support.
On Tuesday the society’s company secretary told staff that the INBS will “probably” be the only financial institution not to seek Government capital in the coming weeks. Dr Walsh’s departure from a job with a €100,430 remuneration package tells a different story.
