A powerful Commons committee has said it is “dismayed” at the failure of officials to spot the danger signs at the doomed Presbyterian Mutual Society.
In a damning report, MPs set out how they believed the Department of Enterprise, Trade and Investment had “access to all the relevant information” yet did not take any preventative action.
It adds that although the department is not responsible for regulating organisations like the PMS, neither is anyone else and it was “surprising” no action had been taking to fill the gap.
In The Failure of the Presbyterian Mutual Society, published today following an inquiry by the Treasury committee, the lack of concrete action from London and Belfast was branded farcical.
Church leaders were also warned not to evade their responsibility for helping the 9,500 who lost their life savings despite not being legally responsible, because congregations were encouraged to invest by “pulpit calls”.
The report found there was a regulatory gap that was “neither publicised nor filled” over organisations such as the PMS.
Responsibility for registration and regulation of organisations in Northern Ireland is split. Although it is up to organisations to declare if they believe they fall under the requirement for regulation in the rest of the UK the FSA does both elements, which means each division can alert the other to unusual patterns.
Despite the rapid growth in the PMS from a few million in 2002 to over £309 million by March 2008 nothing was done to ensure it was being regulated. The committee claimed if “the Department of Enterprise, Trade and Investment Northern Ireland” been more alert it might have spotted a potential problem”.
The report states: “We note the Department of Enterprise, Trade and Investment NI opinion that it was not their legal responsibility to regulate the PMS or manoeuvre them into regulation.
“We are dismayed, however, that the department had access to all the relevant information and yet this did not result in any preventative action or further examination being undertaken.
“We are surprised that DETINI did not consider whether the regulatory gap needed to be filled.
It adds: “We consider it unacceptable and farcical that both the UK Government and the Northern Ireland Executive appear to have suggested some responsibility for solutions but have failed to act.
“There will not be a solution until a political lead is given.”
Following the run on deposits at the height of the UK banking crisis in October 2008 it went into administration but because those who had put money into were classed as investors and not savers and the organisation was not a bank there has been no government bail-out.
Downing Street and Stormont have set up a Ministerial Working Group to look into ways to help the savers but has yet to report its findings. It is not known if the DETINI will start disqualification proceedings following a confidential report on the Board submitted by the administrator.
While the Presbyterian Church in Ireland is not legally liable its role in promoting the society means it must not shirk responsibility. It states: “Legally, it appears that the Church has no liability. However, the society was linked to the Church, its role was advertised at the General Assembly, it was the subject of pulpit calls and it was enthusiastically endorsed by many of its ministers. We consider that the Church cannot evade responsibility for what happened, and should consider whether it can help in any way.”