Banking Inquiry: ‘Feeding frenzy’ between lenders

A former EBS director has described a “feeding frenzy” which existed between lenders and developers in the lead-up to the crash and the bonus system in banks as “crazy”.

Banking Inquiry: ‘Feeding frenzy’ between lenders

Eithne Tinney said there was “testosterone blowing around” the top tiers of the building society and she was voted off its board after raising concerns about mortgage lending.

The former EBS non-executive director said the guarantee for banks in 2008 was “indefensible”.

Ms Tinney outlined how practices had altered at EBS and developers were facilitated at the height of the boom.

“There was a sort of feeding-frenzy as the banks clambered over one another to get a piece of the action, especially as new foreign banks had entered the market as competitors.”

Ms Tinney was a member of the board of EBS from 2000 until 2007. She told the banking inquiry how she was “removed” from the board as she was considered a “troublemaker”. She claimed that the CEO of EBS every year in the lead-up to the crash was presenting the board with the “most seductive figures on profit and growth”.

Ms Tinney described how bundles of mortgages were being sold onto vulture funds, how it was like a “pyramid scheme” but how this had not served ordinary mortgage holders.

“I could not get the image out of my head of a shark eating its own entrails.”

Ms Tinney claimed the board at one stage was told that an “employee in the treasury department had illicitly engaged in proprietary trading strictly against the rules of the society”.

She claimed this resulted in losses of €1.2m for the society but that no action was taken by EBS.

She said there was “a lot of testosterone blowing” around the management of the society in the boom, where there was strong competition among lenders to loan to developers.

Ms Tinney also had general criticisms about banking culture.

“The bonus system in banks is crazy. You get a bonus for lending money out. There is no incentive for getting it back in. Such a system encourages greed and recklessness.”

The 2008 bank guarantee was “indefensible”, Ms Tinney declared.

Her sense, as a former EBS director and citizen, was that there was a “deeply unhealthy relationship” between the Government, the Oireachtas, the banking sector and developers. However, Ms Tinney admitted she had no proof to back up her concerns.

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