The Central Bank could face a possible damages claim for tens of millions over its alleged approval over 12 years of the alleged unlawful delegation of the powers of the board of Irish Nationwide Building Society to its former CEO, Michael Fingleton.
The financial regulator was also informed of the alleged delegation of powers, which it is claimed led to €6bn losses at INBS, but while the regulator between 2006 and 2007 expressed wishes it be monitored and risk tolerance controls put in place, he never sought to revoke the move, the Commercial Court was told.
A “soft” reply from the regulator in 2007 concerning the delegation made clear he was “certainly not putting the boot in”, said John Rogers, for John Stanley Purcell. Mr Purcell is one of four former directors being sued by the Irish Bank Resolution Corporation (IBRC) and INBS arising from the “catastrophic losses” of €6bn at the society.
Yesterday, Mr Rogers secured an order from Mr Justice Peter Kelly joining the Central Bank as a third party to the case so as to claim indemnity and contribution against the bank for any damages awarded against Mr Purcell.
Mr Rogers argued the Central Bank had, from 1997 to 2009, approved the delegation of powers of the INBS board to Mr Fingleton. In an affidavit, Mr Purcell said the INBS board had, in 1981, passed the first delegation of powers to Mr Fingleton, including powers to set and vary interest rates.
In 1994, it delegated to Mr Fingleton all the board’s powers for the effective management of the society.
In 1997, the Central Bank sought and approved amendments to the board’s delegation of powers to Mr Fingleton which stated that policy decision in several specified areas were reserved for the INBS board, Mr Purcell said.
Neither the Central Bank nor financial regulator, who was appointed in 2003, ever sought revocation of the delegation, he added.
Mr Purcell denied any breach of duty on his part concerning the delegation, but also pleaded, should the court uphold the IBRC claims, the Central Bank must also bear responsibility and liability for losses on grounds it failed to maintain proper and effective control of INBS.
Should the IBRC claims be upheld, the Central Bank, its servants or agents, acted with reckless disregard as to the consequences of their failure to maintain proper supervision of INBS insofar as their approval for the delegation continued for 12 years, he also claimed.
The losses mainly arose from development loans made while Mr Fingleton was CEO, the special liquidators of IBRC claim.
Had the true picture of INBS’ affairs been disclosed, Mr Fingleton would have been summarily dismissed for breach of duty by 2007 at the latest and not paid expenses inappropriately incurred, plus €1.2m performance bonuses for 2008 and 2009, the liquidators allege.
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