Taoiseach Brian Cowen has said he was “certainly not” made aware of bad financial practices by Irish Nationwide Building Society while he was minister for finance.
The building society yesterday reported a loss of €2.5 billion for 2009 after writing off nearly €2.8 billion in loans – almost a quarter of its €10.5 billion loan book – due to high-risk lending to property developers and land speculators under former chief executive Michael Fingleton.
Speaking during Leaders’ Questions in the Dáil today, Mr Cowen said the banking inquiry would investigate all the matters. He said “serious questions have to be asked and will be asked” by that inquiry.
He was responding to Labour leader Eamon Gilmore, who asked whether Mr Cowen had ever been made aware during his time as minister for finance between 2004 and 2008 of the bad practices at the building society.
Mr Gilmore asked whether the Financial Regulator, the governor of the Central Bank or others had ever produced reports to this effect.
“I don’t think it was ever brought to my attention that that sort of practice existed," Mr Cowen responded. "Certainly not.”
Mr Gilmore said this was “remarkable” in light of legislation brought to the House by the Government on the night it finished for the summer recess in 2006. He said the legislation was “tailored to allow the speedy demutualisation and sale of Irish Nationwide”.
Mr Cowen said that whether building societies demutualised or not was a matter for the members of those building societies to decide on. He said there was no question but that the banking inquiry should ask all necessary questions and make people accountable.
Fine Gael leader Enda Kenny and Mr Gilmore both asked the Taoiseach about the top-up paid to the Bank of Ireland pension fund in respect of its chief executive Richard Boucher’s pension fund.
Mr Kenny asked if the Taoiseach was prepared to invoke the section of the legislation guaranteeing the banks in order to revoke the payment.
Mr Cowen said his understanding was that a €1.49 million contribution was made to the fund and was not made to Mr Boucher personally. He said it was his understanding the chief executive was not receiving any additional pay or entitlements than before.
“Contrary to how this is being portrayed, this is a payment into an overall fund that provides for the pensions of most Bank of Ireland staff. If it wasn’t made, the fund would be short-resourced to meet its obligations to all Bank of Ireland pensioners and staff who retire in the future," the Taoiseach said.
“It’s a payment which was being paid to the bank staff pension fund in order to sustain agreed pension of the chief executive, a pension which is based on his salary and which is now controlled by Government under the Covered Institutions Remunerations Oversight Committee.
“The payment is into the pension fund, because unlike public service pensions, obviously it must be pre-funded.”
Mr Cowen said the payment was in order to recover the contractual arrangements allowing Mr Boucher retire when he is due to retire. He insisted it was “not an enhancement”.
“Contrary to speculation, it doesn’t undermine the salary cap imposed by Government on the sector executives…and directors of the covered financial institutions.”
Mr Kenny said the reply was “a complete and utter whitewash”. He said to expect the general public to accept a situation where the chief executive of the Bank of Ireland got what he understood to be a €1.9 million top-up to his pension fund was “outrageous”.
The Labour Party leader said the pension payment made in respect of Mr Boucher was “rather generous and somewhat exceptional, I think”.
He said Mr Cowen had made it sound as if the top-up was “for the bank porters and the bank tellers”.