The Central Bank's inquiry process was subject to challenge during 2016, but has ultimately received resounding endorsement by the High Court in decisions against two former directors of the Irish Nationwide Building Society (INBS), Michael Fingleton and John Stanley Purcell.
In July 2015 the Central Bank published a notice of inquiry confirming that it was to investigate alleged regulatory breaches by INBS and persons concerned in its management. This was the first time that the Central Bank had exercised its ability to refer a case to inquiry under the Central Bank Act 1942.
Subsequently, separate challenges aimed at overturning the Central Bank's decision to carry out the inquiry were brought by Fingleton, former chief executive of INBS, and Purcell, a former director of INBS.
Fingleton's challenge was dismissed by the High Court in January 2016. His primary argument had been that the Central Bank had no power to involve him in the inquiry, since he was a former INBS employee and not currently concerned in the management of the society. Additionally, Fingleton challenged the inquiry on the basis that his involvement in the ongoing civil action with the Irish Bank Resolution Corporation, which related to the same circumstances, obliged him to "fight on two fronts". He contested that his ability to be tried had been compromised by the prejudicial publicity that both cases had received. The court dismissed these claims along with a claim of financial hardship and endorsed the Central Bank's Administrative Sanctions Procedure.
In July 2016 Purcell's challenge was similarly dismissed by the High Court, the reasoning for which closely followed the earlier judgment dismissing Fingleton's challenge. Purcell had challenged both the validity of the Central Bank's decision to include him in the inquiry, as well as the constitutionality of the Administrative Sanctions Procedure.
It was argued on behalf of Purcell that the inquiry imposed on him a burden that was disproportionate to the public interest in inquiring into the 2008 banking collapse. The court refuted this argument and stated that financial institutions require "constant in-depth surveillance" in order to prevent the banking crisis from repeating itself and "an inquest into what went wrong, and who was responsible, will be an essential part of such control".
The court considered a number of points in dismissing the challenge brought by Purcell. While a number of years had passed between the decision to hold an inquiry and the relevant events, the court did not accept that there had been any resulting prejudice caused to Purcell by the delay. It also reiterated that Purcell could not be absolved of responsibility merely by virtue of the fact that he was no longer involved in INBS management or by the fact that he was a party to a settlement with the state in civil proceedings against former INBS directors. Finally, the court did not consider there to be any basis to suggest that the publicity concerning Purcell could affect inquiry members.
At all stages of poceedings the inquiry has been free to continue with its investigation. The Central Bank conducts its inquiries with strict confidentiality, so the current status of this inquiry is effectively unknown. An inquiry management meeting was announced for July 29 2016 – the same day that Purcell's High Court action was dismissed – being the third management hearing in private in relation to the inquiry.
The judgments are indicative of the court's recognition of the vital role of the financial regulator in regulating and enforcing the financial sector. Indeed, in the Purcell case, the court commented that:
"it is to be hoped that a thorough inquiry of the kind proposed in this case will illuminate the mistakes both corporate and personal that brought about [the collapse of INBS] which was a national financial disaster. The public interest in knowing what happened is overwhelming."