Michael Fingleton, former CEO of Irish Nationwide Building Society, pictured in 2015. Photo: Tom Burke
Failed lender Irish Nationwide Building Society (INBS) was operating akin to a merchant bank when taking “very strong lending positions on speculative proposals”, a state-appointed director has told the High Court case against former bank chief Michael Fingleton Sr.
State-appointed chartered accountant Rory O’Ferrall told the High Court on Tuesday that a series of multi-million euro loans were “very unusual” in the face of an economic crash and “hard to justify” given Mr Fingleton pledged in 2007 to the society’s board that the lender should be “risk averse” in the face of the financial climate.
The civil case against the former INBS chief executive and managing director alleges that he negligently mismanaged the building society and engaged in property “gambles” with high-net-worth individuals in an informal and speculative manner in the mid-2000s, leading to fatal losses.
Mr Fingleton (87), who cannot give evidence due to ill-health, joined the building lender in 1971 and retired in 2009. He held the roles of both managing director and chief executive in that time. At its height in 2007, INBS reported assets of €16bn but was a high-profile casualty of the financial crisis of 2008.
Liquidators for Irish Banking Resolution Corporation (IBRC) have taken the case against Mr Fingleton, who denies the allegations.
The total losses at INBS had been estimated at €6bn. However, only €290m in damages is being pursued by IBRC, relating to five specific loans, allegedly approved by Mr Fingleton.
The court has been told that Mr Fingleton was allegedly “nodding through” top-ups and extensions to certain clients without the knowledge of the society’s board.
At the High Court on Tuesday, Mr O’Ferrall likened the lending of the society to that of a “merchant” bank which, he said, takes higher risks in lending but takes a share of the proposed profit from loans made on projects.
Mr O’Ferrall said Irish Nationwide under Mr Fingleton took up “very strong lending positions” on speculative proposals in the UK and France.
Mr O’Ferrall said that at around the time of loans issued between 2006 and 2009, there was a “generally held view by investors and banking” by 2007 that there was going to be a property market downturn and that by 2008 “all banks” were experiencing the predicted difficulties.
The case continues.
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