Ciarán Lynch (Cork South Central, Labour) | Oireachtas source

Thank you, Deputy. I'm going to move to wrap things up. I just have one question to ask that remains outstanding. I'll just wrap up with another question and then I'll invite the two final ... the leads in finally, Mr. Walsh, after which if there's any closing comments or remarks that you want to make yourself.

Mr. Walsh, did the level and tone of engagement with the Financial Regulator over the period of 2002 to 2008 cause any concerns at board level? And I'll just go through just a sample of this. March 2008, a letter from the regulator. These are all section 33AK documents, so they won't be coming up on the screen. Corporate governance arrangements in the society - this is on the first page of it. Moving on to the next page - I'm just going to give an aggregate of these, okay - concerns raised related to the growth in the commercial loan book. Then going on to 2004, another letter from the Financial Regulator - the Financial Services Regulator - stressed the need for an increase in the size of the board. The same report goes on ... the Financial Services Regulator "had concerns for some time with regard to the level of expertise and experience within INBS's Internal Audit function." It then goes on as well with regard to the regulatory follow-up and capital adequacy requirements "a significant shift in the nature and risk profile of INBS's business, particularly in the last couple of years. INBS has moved from being a predominantly and broadly based residential mortgage lender to a commercial property lender." And, then, going on to a ... even as far back as April 2002, another letter from the Central Bank talks about corporate governance once more, talks about the audit committee, seven meetings scheduled were adjourned due to pressure of time. Also, "There are no terms of reference in place for the committee." ... that's the ALCO committee. Concerns with regard, again, to commercial lending "that a substantial number of loans represented 100% loan to value[s].". That's in the commercial lending. In home loans, "There was no evidence of stress testing on five of the files examined." The same correspondence again talks about "There has been a lack of progress made in implementing a risk-based methodology." Then, returning back to 2006, another letter from the Financial Regulator, it talks about "The Society should demonstrate how it [has] satisfied the Internal Audit function" or:

The Society should demonstrate how it is satisfied the Internal Audit function now has the expertise to perform its audit of [treasuries]. The Society should consider requesting an external audit [form] to oversee the Treasury Audit.

It then talks about minutes of close out meetings with auditors and auditees, "The Head of [the] Internal Audit advised that [no] audit close out meetings [were] minuted."

And Irish Nationwide, again it talks about the inspectors noting that while some basic information in relation to Irish Nationwide Limited is contained in certain monthly reports, such as inflows and outflows, and in the management of accounts, there appears to be no specific discussions of its activities during the period reviewed by the inspectors. This relates to minutes between May 2005 and April 2006.

Once again - I'll just conclude, there are more pages I could be going through - the terms of reference ... this is to do with the credit committee. The terms of reference of the credit committee on page 2 need to be amended as they state that the committee can approve exposures up to €500,000. However, it is noted that the amounts approved were up to €635,000 and the inspectors were informed that the terms of reference to the credit committee were being amended accordingly.

Mr. Walsh, were the changes proposed at board level to address these concerns of the regulator ... were the changes actually made?