No comprehensive review of borrowers at INBS, inquiry told

Irish Nationwide Building Society (INBS) did not conduct any comprehensive annual credit review of its largest borrowers, an inquiry into alleged regulatory breaches at the building society before the financial crisis has been told.

Brian O’Moore SC, of the legal team assisting the inquiry, noted that a schedule to a letter concerning an inspection in December 2007 showed that regulatory inspectors had advised that results of credit reviews be provided to the building society’s credit committee, although that hadn’t been taking place.

Giving evidence to the public inquiry for a second day on Tuesday, INBS compliance manager Ita Rogers said such a finding “would have been serious”.

The inquiry is seeking to establish if Michael Fingleton, former INBS managing director, and three other former managers were involved in seven so-called contraventions at INBS between August 2004 and September 2008. It was set up on foot of a Central Bank decision in 2015. Public hearings began in December.

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First module

The first module of the inquiry is looking at whether the society’s credit committee failed to adhere to internal policies by not reviewing cases of large commercial loan arrears, exposure to specific sectors or customers, or issues raised by internal audit, outside advisers or regulators.

Mr Fingleton is one of four individuals subject to the inquiry. The others are former INBS finance director John Stanley Purcell, one-time commercial lending manager Tom McMenamin, and Gary McCollum, who once led the society's UK lending activities from Belfast.

Questioning Ms Rogers, Mr Purcell noted the existence of a number of documents which, he said, "clearly set out" the responsibility and intention of the building society in complying with a recommendation from KPMG, then the group's external auditors, to regularly review top borrowers at the institution.

Credit review report

In 2005, a credit review report with 89 cases was submitted to the credit committee in line with KPMG’s recommendation, he said.

Mr Purcell also flagged a job specification, dated March 9th, 2006, for a credit risk manager. He said the specification required the credit risk manager to report to the managing director and implement recommendations set out in the annual management letters of the society’s auditors.

The inquiry continues with David Brophy, a former INBS board member, to give evidence on Wednesday.