Call for wider probe into all banks after Walsh fine

By Eamon Quinn

A finance expert has called on the Central Bank to investigate the operation of all the credit committees of the banks whose unsustainable lending during the boom years led to the crash and the €64bn bill for taxpayers.

The call by Brian Lucey, professor of finance at Trinity College’s School of Business, comes after the Central Bank censured and imposed a fine of €20,000 on Michael Walsh, former non-executive chairman at Irish Nationwide Building Society.

One reason the Central Bank cited for the settlement was the INBS “credit committee’s failure to function in accordance with INBS’ internal policies”.

The settlement sees Mr Walsh banned from managing a regulated financial firm for three years.

Mr Lucey said there has been no specific investigation into how all the credit committees at all the banks in the boom years had broken basic rules to lend billions to an overheated economy. 

“There has been no individual audit of the hygiene and the operations of these committees,” he said.

Of the €64bn-plus that taxpayers pumped into all banks, INBS received €5.4bn.

Other observers have, in the past, pointed to the mystery of how credit committees and bank boards sanctioned lending excessive amounts to a single industry — commercial property.

Asked about credit committees at other lenders, a spokesman for the Central Bank said it does not comment on its enforcement investigations, “whether ongoing or potential”.

Brian Lucey

The spokesman said the breaches admitted by Mr Walsh related to a period from the start of August 2004 to late September 2008. Mr Walsh resigned from INBS in early 2009.

“The maximum applicable monetary penalty for breaches occurring at that time is €500,000 for a natural person,” said the Central Bank, adding that the “appropriate sanctions” were decided after taking into account factors including the need “for an effective deterrent impact” on other non-executive directors.

Niamh Brennan, professor at the UCD Quinn School of Business, said it is better to “hold individuals to account” because fining institutions hurts shareholders and borrowers, not wrongdoers.


Most Read in Business

  • House builds at ‘incredibly low levels’

    House building is at “unsustainable and incredibly low levels” and is coming nowhere close to meeting demand, according to a new analysis by Goodbody’s Dermot O’Leary.

  • ESB warned on staff moves

    The energy regulator has expressed its concern about the plans of ESB to transfer senior executives into its retail business which may give the conglomerate an advantage over its retail energy rivals.

  • BoI shares in ‘key’ investor day in June

    Davy Stockbrokers has upped the stakes for new Bank of Ireland chief Francesca McDonagh, saying the lender’s investor day next month — in which it will spell out its plans to analysts and investors — will be “a key catalyst for the stock”.

  • Why Samsung is stumping up £400m to rival Apple

    Will anything change for the tech changes following the latest ruling on patent infringement?

  • New data law means ‘ongoing’ work

    Businesses and organisations must realise compliance with the General Data Protection Regulation (GDPR) is ongoing and must be factored into business models, an IT expert has warned.

World Markets