THE NEWS that former Irish Nationwide chairman Michael Walsh has told the Government the building society “cannot survive” without significant Government support is a major blow to thousands of members who have been waiting for years for a demutualisation of the society that would trigger a windfall.

Only a couple of years ago, members were anticipating a payout of up to €15,000 per member.

Demand from people to get on board for such a payout was so high that in 2003 the company raised to €20,000 the amount someone needed to open a qualifying account.

Dr Walsh, who resigned from the board of the building society earlier this week, had been chairman of the company since 2001 and a director since 1995. As such, he would have a clearer picture than most of the state of the building society.

That gives added weight to the two letters he penned this week to the board of the building society, where he stated the board “and ultimately the Minister [for Finance] should have the opportunity to provide new oversight and leadership” in light of the unspecified “unfolding events” at the society.

The next day, he wrote more bluntly: “It is clear to me that Irish Nationwide cannot survive without reorganisation and significant Government support.”

Although Dr Walsh did not allude to any specific events, Irish Nationwide has found itself embroiled in the ongoing saga of the collapse of Anglo Irish Bank and the struggle for survival by a number of Irish financial institutions. The Government has pointed out that Irish Nationwide is covered under the terms of the State guarantee – meaning that all deposits are safe, at least until September 2010.

However, that will be of little succour to those banking on a windfall. Some have been waiting more than a decade with their money locked up in the building society.

Irish Nationwide chief executive Michael Fingleton has made no secret of his desire to demutualise the society and sell it on to a larger institution.

He started lobbying Government for change in the mid-1990s, even while insisting that the society had made no policy decision on whether to demutualise.

At that time, existing legislation precluded a building society from selling off more than 15 per cent of its shares, or agreeing a takeover for five years after demutualising to become a plc.

For years he was frustrated in his efforts. Eventually, Mr Fingleton – who has been synonymous with Irish Nationwide for more than three decades – persuaded the current Taoiseach Brian Cowen, then minister for finance, to amend the law.

The new building society legislation was passed in July 2006. That opened the way for Irish Nationwide to demutualise and immediately agree a trade sale – triggering windfalls for members.

Following the new legislation, several suitors were in talks with Mr Fingleton and his fellow executives – with those interested reported to have included Icelandic bank Landsbanki and German financial group Hypo Real Estate.

However, all these plans have been shelved amid the deepening financial crisis. Landsbanki and Hypo have themselves been consumed by the volatility.

Another interested party, US group GE Capital, has since retrenched sharply.

Now the eligible members – numbering up to 125,000 by some estimates – seem further away from a payout than ever.

The society has not even updated the portion of its website dealing with queries about demutualisation since March 2008, when the full scale of the global financial crisis began to become apparent.

All in all, it appears that Irish Nationwide may have missed the boat.

The resignation of Dr Walsh, the fifth chairman or chief executive to step aside at an Irish financial institution in recent months, will only heighten the fears of members that the society will eventually be forced to merge with one of its peers in a move that would preclude any windfall for them.

With the grip of recession tightening and sums of more than €20,000 sitting on deposit with the building society, members may soon have to make some hard choices about the prospects of ever seeing a return on their patience and investment.