Attorneys have petitioned for “supreme penalties” to be imposed on ex-banker John Stanley Purcell for his role in the regulatory violations that took place at Irish Nationwide Building Society, which ultimately went belly up, leaving a debt of roughly €6 billion. The claims were made during a hearing on Monday.
Mr Purcell, previously the institution’s finance director, was discovered in a lengthy investigation to have been involved in the infringement of rules relating to commercial loans granted by the organization from 2004 to 2008.
Remy Farrell SC, representing the enforcement division of the Central Bank of Ireland, stated in a penalty consideration hearing for Mr. Purcell, that the regulator regarded the infractions to be of the utmost severity. The potential consequences encompass a maximum €500,000 fine, a rebuke, and a ban from the financial services sector.
Mr Farrell highlighted that Mr Purcell’s repeated and serious failings in supervising the company’s loan policies and commercial loans constituted the offences. Although regulators concur that Mr Purcell’s actions were not the immediate cause of the collapse of Irish Nationwide into bankruptcy, their attorney maintained that his behavior should nevertheless be assessed in this context.
Irish Nationwide suffered a loss of €6 billion between 2008 and 2010, primarily on commercial loans. The burden of bailing the institution out was a hefty €5.4 billion, footed by the taxpayers. The company was then amalgamated with Anglo Irish Bank into the Irish Bank Resolution Corporation, which was dissolved in 2013 by the state.
The investigation disclosed failures by Irish Nationwide to handle loan applications adhering to its own protocols, to secure adequate protection for commercial loans, to procure proper valuation reports against assets it was lending, or to set up credit risk policies for profit-sharing loans with property developers.
Mr Purcell maintained his innocence against regulation breaches and successfully contested 20 out of 33 charges. Mr Purcell’s attorney, Brian Conroy SC, acknowledged the 13 rulings against his client in Monday’s hearing. However, Mr Conroy clarified that the builder’s society neglected to implement a recommendation made by KPMG for profit-sharing loan policy, a fact Mr Purcell wanted to highlight. Moreover, he noted that the advice given by KPMG pertained to record and file management on such loans.
Mr. Conroy shared during the hearing that Mr. Purcell viewed a €100,000 penalty as appropriate, and as a 71-year-old, he consented to the potential of a lengthy ban from finance-related employment roles.
The lawyer pointed out Mr. Purcell’s lack of direct involvement in any lending practices as he was not a lender and did not partake in lending. The wrongdoings of the culprit were categorised as acts of omission instead of commission, and it was agreed that Mr. Purcell ought to have taken more assertive actions to implement restrictions on the bank.
Mr. Conroy emphasised that the inquiry confirmed that Mr Purcell did not act dishonestly or recklessly and didn’t directly benefit from the building society’s budget dilution policies. He outlined that the potential of a €100,000 penalty and likely banning from financial services would act as a sufficient deterrent for a normal person presently operating in the sector.
The fact that the inquiry did not determine any causal correlation between Mr. Purcell’s behaviour and the fall of Irish Nationwide was also stressed. He is the remaining person among the five initially under investigation when the inquiry was initiated in 2015.
The Central Bank reached a settlement with three other persons – former chairman Michael Walsh, previous head of commercial lending Tom McMenamin, and Gary McCollum, who was in charge of UK commercial lending in the past. The Central Bank withdrew its case against the former long-tenured managing director, Michael Fingleton, currently 86, due to health reasons.