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Updated 13.20
FORMER IRISH NATIONWIDE Building Society (INBS) chief Michael Fingleton has been up in front of the Banking Inquiry this morning.
Looking slightly frail and labouring over his words, a nevertheless bullish (probably the most spiky witness since Charlie McCreevy in fact) Fingleton told the committee that he regretted the economic crash for the sake of his employees, the taxpayers and the state.
“I continue to pay the price personally as a result,” he said.
I don’t regret any of the decisions I took personally.
In a long opening statement Fingleton claimed that he brought Irish Nationwide into the commercial property market in the early nineties as there “was a shortage of property in Ireland at the time”.
He continued to apportion blame for the economic crash to many different agencies – Bear Stearns, Lehman Brothers, ratings agencies.
“I believe the society was a victim of the property market crash in the United States,” he said.
Fingleton insisted that a bonus culture didn’t exist at Irish Nationwide, although bonuses were obviously paid.
“Those bonuses were too high. If it was today, those bonuses wouldn’t be paid, that’s all I will say,” he said.
For the record, I didn’t decide my own bonuses.
Fingleton defended the €27.6m pension pot he received from the society in 2007, saying that he had grown the pot personally ten-fold, with the actual cost to the society being just €3 million.
When asked by Sinn Féin’s Pearse Doherty whether or not a disproportionate level of risk autonomy when it came to loan approval was afforded him Fingleton replied that that wasn’t true.
He also denied that he had ever approved a loan for an individual via a message on a post-it note.
“As CEO or managing director you’re always ultimately responsible for what takes place in the organisation,” he said.
I don’t accept that there were poor lending practices, and maximising the value of the society was not a motive (behind those practices).
No recourse
Fingleton asserted that the huge number of non-recourse UK loans (ie with no onus for repayment) at the society was dictated by the large percentage of profits being directed to the building society by developers in the UK.
He acknowledged that this was a contributory factor to the crisis but claimed it was not the dominating factor.
Fine Gael’s Kieran O’Donnell pressed Fingleton on a meeting held between INBS and the then financial regulator on 7 September 2014, a meeting Fingleton didn’t attend due to “other engagements”.
“The meeting took place as the regulator was worried about a possible run on INBS at that time,” Fingleton said.
They wanted to know if the other banks would supply emergency liquidity.
At that time we did not need liquidity.
I certainly do believe that INBS was solvent the night of the banking guarantee.
O’Donnell asked him whether or not he considered the €5.4 billion bailout incurred by INBS as the greatest banking failure in the history of the Irish state.
“If you accept the discounts applied by NAMA then yes, but I don’t accept those discounts,” Fingleton replied, whose answers seemed to be getting more contemptuous as the hearing dragged on.
Following a blocked question (blocked by committee chairman Ciaran Lynch) regarding the €11,000-value watch Fingleton received as a retirement gift, the questioning moved to whether or not he ever authorised a loan without the approval of his board.
He denied this was the case.
Chairman Lynch then reminded Fingleton that he was under oath, which seemed to alter the tone of his answers somewhat in the immediate aftermath.
The overall tone of Fingleton’s answers was one of open dispute – he didn’t accept most of the accusations put to him and suggested at every available juncture that someone else was to blame.
Bonus
Senator Susan O’Keefe attempted to bring up the issue of Fingleton’s infamous €1 million bonus which was initially awarded two months after the introduction of the bank guarantee in September 2008.
Again the question was quashed by Lynch citing legal advice.
INBS profit before tax increased by 300% in 2007 – did Fingleton think such growth was sustainable asked Fine Gael’s John Paul Phelan.
“It probably couldn’t be sustained, but we were operating within the parameters set out by the regulator at the time,” he replied.
Fingleton denied that the pursuit of growth was affecting credit quality.
“Not really, we were dealing with customers who we’d known for 15 years, customers who knew their business,” he said.
Questioning then moved once more to the size of the board at INBS and problems with corporate governance as outlined by the financial regulator in a letter from 2004.
“I was suffering from the perception that was out there that it was me, and me alone, who represented the society,” said Fingleton.
We did try to increase the board but at the time we were being sold, and recruiting proved very difficult, given the perception of us in the market at the time.
Fingleton added that INBS had been responsible residential lenders in comparison to other banks.
“We didn’t do any tracker mortgages, and only a fraction of our mortgage lending was over 90% of value,” he said.
Politician
Sligo senator Marc McSharry then pressed Fingleton on his own personal investments and dealings with INBS.
TheJournal Politics / TwitterNow a qn on loan 'warehousing' is shot down citing legal concerns - is there anything they CAN ask? #banking inquiry http://t.co/Niz9hU8JVz
— TheJournal Politics (@TJ_Politics) September 2, 2015
Fingleton stressed that he always maintained a deposit account with the society, and any loans he received were processed via the “usual channels, with no concessions”.
He confirmed that in such dealings he had associations with one outside party, who was a politician. He declined to name who that person was.
When Fingleton persisted with certain cynical utterances regarding NAMA and their portfolio, senator Michael Darcy put it to him that he was “swimming against the tide” when it comes to certain opinions that are seen to be accurate at this stage.
“I’m just expressing my opinon, senator, it is the first opportunity I have been afforded to do so,” was the reply.
Darcy followed up with a question regarding the so-called ‘warehousing’ of loans at the society – a question that was promptly shot down once more by Lynch citing the committee’s legal briefing.
Wronged
“Do you feel you have been wronged, Mr Fingleton?” asked Fianna Fáil’s finance spokesman Michael McGrath.
“I feel I have been misrepresented deputy,” a noticably irritated Fingleton replied.
80% of what has been written about me is totally wrong. 10% might be disputed.
Hugh O'Connell / TwitterHere’s that @thejournal_ie article that @JoeHigginsTD has just referenced at the #bankinginquiry http://t.co/nrxFT2MmIv
— Hugh O'Connell (@oconnellhugh) September 2, 2015
Fine Gael’s Eoghan Murphy asked Fingleton about troubles the INBS encountered in having deposits placed with the institution by the NTMA.
Fingleton insisted the reason was because the society didn’t have an AAA rating from the ratings agencies.
When asked further why this was the case he replied “we had adequate ratings for our business”.
Coming to the end of his testimony Fingleton was becoming increasingly tetchy in his responses.
Asked by senator Seán Barrett about losses made by the society in 2008 he replied that no losses were realised. When pressed as to whether or not INBS was struggling to locate a buyer at the time Fingleton replied “what has that to do with liquidity deputy?”
Summing up
As the session drew to a close, chairman Lynch pressed probably the most direct question of the day on Fingleton.
“Going by your testimony you don’t seem to believe you have done anything wrong. That being the case, can you explain to me how your institution ended up costing the state €5.4 billion?” he asked.
“I have not excused myself from anything,” Fingleton replied, after a brief moment where he seemed desperately to be gathering his thoughts.
I have answered all questions to the best of my opinion and given my opinion as asked.
Anticipated
Fingleton’s appearance stands as possibly the most anticipated of all the committee’s witnesses given his former status as CEO of the doomed society.
He was chief of Irish Nationwide until 2009, a year before it emerged the building society required a government bailout that eventually totalled €5.4billion.
It was later folded into the Irish Bank Resolution Corporation (IBRC) alongside Anglo Irish Bank.
Irish Nationwide provided loans for high-profile figures including Minister for Finance Charlie McCreevy and Celia Larkin, ex-partner of Bertie Ahern.
Questions
After the summer break, the inquiry is back in business and will resume public hearings by meeting with Fingleton and two other former Irish Nationwide executives, Michael Walsh and John Stanley Purcell.
A qualified chartered accountant and barrister, Michael Fingleton joined the building society in 1971.
Questions asked
Chairman Ciaran Lynch TD said that Fingleton and Walsh “will be asked to give evidence on a number of lines of inquiry”, including:
They may also be asked about the appropriateness of the bank guarantee decision; the decision to recapitalise Anglo, AIB, Bank of Ireland, EBS, Permanent TSB and the alternatives available and/or considered; and the appropriateness of the regulatory regime.
Other lines of enquiry include:
Purcell will be questioned along similar lines, but in addition will be asked about liquidity risks, financial reporting, valuation policies and loan security.
Full committee proceedings will be webcast live ,while Oireachtas TV will broadcast proceedings from 9.30am.
Additional reporting Aoife Barry
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Why were those houses ever built on what is clearly a flood plain?
@eoin fitzpatrick: You took the words from my mouth. The location of these houses is complete madness.
@eoin fitzpatrick: Brown bag. It is as simple as that. Greed and corruption are good in this country.
@eoin fitzpatrick: my first thought exactly, it’s only when you see an aerial shot like that you can clearly see nothing should ever have been built there
@eoin fitzpatrick: class action law suit incoming from those residents against planning authority.
@Shimo F: Against themselves maybe. They could clearly find out. Anyone buying a house that close to a river and at the same level of a river isn’t the brightest.
This is terrible news for all involved but is anybody asking “Stanley: New Homes”, who recently built The Meadows estate in question, why they built homes surrounded by The River Feale on 3 sides and didn’t disclose to residents that this land has always been a natural flood plain for the river? How often has it flooded like this in the past? Who approved the planning permission in the local authority? Was there a natura impact statement carried out as part of the planning process?
Housing crisis compounded by stupidity – yet again!
@Kieran Farrell: jesus, that’s shocking….when you say ‘recently built’…. like in the last decade??
@Kieran Farrell: Planning granted by the Local Authority for that was a flood plain, simple solution is to sue the Local Authority. This Local Authority don’t give local people planning permission on their own land with top notch sewage systems, yet they give a Developer planning for multiple Houses on a flood plain, same old ding dong in Ireland, it’s who you know & who you give your brown envelope to. The next Govt of FF & SF will bring this to another level again. Ireland is a failed State.
@Kieran Farrell: CORRECTION – The Meadows was built in 2006, and ‘Stanley: New Homes’ were not involved.
@Kieran Farrell: Fair enough! Thanks fir clarification
@SV3tN8M4: Virtually impossible to sue the local authority.
@Kieran Farrell: the flooding was described today as a once in 100 year event. The height of the river was measured at 4m on Saturday afternoon – the next highest ever recorded was 3.5m in 1973. I’m not sure that bad planning decisions is the cause this weekends flooding
Terrible, obviously condolences to everyone effected. Does the aerial view tell a story? Like why are so many housing estates within 100 yards of an oxbowing river? Seems mad, but I know little of geography or surveying land for development.
@Thesaltyurchin: ask the Healy Rae’s
@Temp Stuff: Healy rea’s aren’t from Listowel
I feel so sorry for those people.
Nothing worse than flooding and just before Xmas.
@Stanley Marsh: Christmas
The FG fella was straight out with the standard party line ‘ lessons will be learned’
But we have to help the rest of the world,that’s the most concerning thing for the politicians of Ireland. Never mind our own, especially the people of Listowel, Killybegs and the rest of the country affected by the detrimental weather. Shur here’s an idea, let’s just worry and support every swinging dog across the work’s who needs our generosity. Let’s give them money, refuge, support while our own have homes & businesses destroyed. Shur never mind, it’s only our country at the end of the day.
@Brian Barry: *Works =World.. Just in case ye lefty punctuation police come knocking!!
@Brian Barry: Eamon is on his way back from the annual jolly, COP where he signed us up as a donor for a 300Billion ( per annum) dollar windfall ….. You couldn’t make it up in a Hollywood comedy
Cost us 200million to build flood defences in 2 years time. Lot of money for incompetence in Kerry coco
Boom time building with ‘no holds barred’ planning permissions given to those who knew who to give the brown envelope to
A photo of houses built on a flood plain. Interesting planning.
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