Irish Nationwide Building Society’s (INBS) credit committee acted against its own rules in recommending the lender’s board approve hundreds of millions of euro of loans during the boom, an inquiry into the failed institution heard on Tuesday.
Brian O’Moore SC, of the legal team assisting the inquiry, highlighted a number of instances in late 2004 when the credit committee reviewed loan applications with only two members in attendance, before sending them on to the board for sanctioning. The terms of reference for the committee dictated that it needed a quorum of three to hold meetings.
“I find it difficult that five or six meetings took place with just two of us,” said Tom McMenamin, the society’s former commercial lending manager, who convened and chaired credit committee meetings and is one of four men subject to the ongoing inquiry into a series of alleged breaches of financial law between August 2004 and September 2008.
“I also find it difficult to believe, Mr McMenamin, but it’s staring me in the face,” Mr O’Moore replied, referring to minutes of meetings which were signed off by the one-time INBS executive.
Mr O’Moore spent much of the hearing on Tuesday trying to establish that Mr McMenamin was the effective head of the commercial lending department and de facto chairman of the credit committee during most of the period under review. Mr McMenamin ultimately accepted both were the case.
Alleged contraventions
The inquiry, which started public hearings last December, is currently looking at one of seven alleged contraventions of financial law. This phase, which is coming to an end, is concerned with whether INBS’s credit committee failed to adhere to its terms of reference. These included that it review large loans in arrears and non-performing, management information systems (MIS) reports on sectoral concentration, credit review reports on top borrowers, as well as issued raised by internal audit, outside advisers or regulators.
While Mr McMenamin told the inquiry he was aware of the credit committee’s obligation to have a quorum of three to carry out its duties, he said he didn’t know about the other requirements.
“You always knew the minimum quorum was three . . . How did you know that fact about the terms of reference and not the other terms?” Mr O’Moore asked.
“I can’t honestly answer that question,” said Mr McMenamin. “It’s 13 or 14 years ago.”
Regulatory breaches
Mr McMenamin, INBS's former long-standing managing director Michael Fingleton and one-time finance director John Stanley Purcell are subject to the inquiry into alleged failings of the credit committee. The three, as well as the society's former head of UK lending, Gary McCollum, are being investigated for their involvement in the other alleged regulatory breaches.
“I would like to say at this state that during my time at Irish Nationwide, I worked diligently and honestly,” said Mr McMenamin, who, unlike Mr Fingleton and Mr Purcell, had not been in the room of the inquiry up until now. “I worked extremely hard and I wouldn’t like that people in this room think that I was guilty of misdemeanours or deceiving anybody, including the Central Bank.”
Mr McMenamin is due to continue giving evidence on Wednesday.
