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Cost of Central Bank’s INBS probe topped €30m

The Central Bank has disqualified a former board member of Irish Nationwide Building Society (INBS) from being involved in the management of a regulated financial-services firm for four years.

The regulator has also reprimanded John Stanley Purcell and directed him to pay a fine of €130,000.

The sanctions, which must be confirmed by the High Court to take effect, follow an inquiry into the affairs of INBS, the outcome of which was published today (21 May).

It is the first decision of an inquiry concluded under the Central Bank Act 1942.

The Central Bank also revealed that the total cost of the 15-year investigation and inquiry into INBS had come to more than €30 million.

‘Seriously deficient’

The inquiry decision found that, between 2004 and 2008, Purcell participated in breaches of financial-services law by INBS relating to its commercial lending.

It found that INBS was run in “a seriously deficient manner” in relation to its commercial lending, credit risk, and associated corporate governance.

“The breaches by INBS were of a serious and systemic nature, and related to commercial lending, which made up the majority of INBS’s loan portfolio,” it stated.

Bailing out INBS during the financial crash cost the taxpayer €5.4 billion.

Legal action

The Central Bank's figures showed that the 15-year investigation and subsequent inquiry into INBS had cost it more than €32 million – just over €24 million in external costs and €7,8 million in internal costs. The internal costs had previously been disclosed in the Central Bank’s 2020 annual report.

The regulator had previously concluded its enforcement actions against INBS and three other individuals involved in its management by way of settlements.

In December 2019, the regulator decided to permanently halt its inquiry into former INBS chief executive Michael Fingleton on medical grounds.

Fingleton and Purcell had taken legal action to try to stop the inquiry, which the Central Bank successfully defended, at a cost of just over €2.7 million.

A breakdown of the external costs shows that law firm Arthur Cox received over €3.3 million for assisting members of the inquiry over the ten-year period from 2015 to 2025.

Mason Hayes & Current was paid €1.3 million for legal advice provided to the Central Bank’s enforcement division, while the firm was also paid an additional €1.1 million for work on the legal challenges to the probe. 

Probe risks ‘warranted’

Central Bank Governor Gabriel Makhlouf defended the regulator’s actions against INBS, saying that firms and individuals had to understand that it would follow evidence of breaches through to a full Inquiry.

“While we rarely use these powers, we will not hesitate to do so if necessary.  In doing this, we accept that outcomes are uncertain and we may be challenged.

"We believe it is our role as regulators of the financial system to take that risk where it is warranted,” he stated.

Makhlouf said that the costs of the investigation and Inquiry reflect its length and complexity – including “extensive work” to unearth the facts and “the need to defend the statutory framework in the face of court challenges by persons under Inquiry”.

“The lessons learnt have led to changes to the legislative framework, which have introduced efficiencies and further safeguards – including the Individual Accountability Framework,” he added.