BELFAST BRIEFING:It is hard to see how the North's Department of Enterprise could have prevented Presbyterian Mutual Society collapse, writes FRANCESS McDONNELL

THERE ARE some questions that Google cannot answer – at least so says the current proclamation outside the Hillhall Presbyterian Church in Co Antrim.

Unanswered questions are something Presbyterians, particularly those who invested in the failed Presbyterian Mutual Society (PMS), are getting used to. The most pressing of these is who is to blame for the demise of a society whose assets were valued at more than £300 million in 2008 and which is now in the hands of an administrator.

A recent investigation into the failure of the PMS by the UK House of Commons treasury committee pointed the finger of blame at a number of potential culprits. Among them, it identified the North’s Department of Enterprise, Trade and Investment (Deti) as a potential scapegoat because it failed, in the treasury committee’s opinion, to take “any preventative action” to identify potential problems.

Back then, as today, Deti was responsible for registering industrial and provident societies, which is what Presbyterian Mutual was, in the North. However, the department has never been responsible for regulating any such groups.

Under UK legislation, Presbyterian Mutual was required to complete and file annual accounts with the Deti. These accounts, which were signed off by an officer of the society, never detailed the exact nature of its business. The abridged version did not, for example, disclose that the society was accepting deposits in the form or loans or reveal the purpose for which loans were being advanced to members.

As a former Northern Ireland minister with responsibility for the economy, John McFall should be well aware that a set of annual accounts often contains only minimal information about business activities. So it is somewhat puzzling why, under his chairmanship, the treasury committee believes Deti could have played any role in saving investors and savers in PMS from themselves.

What McFall and the treasury committee appears to be suggesting is that the Deti should have been actively investigating Presbyterian Mutual long before it ran into trouble. Quite why is unclear. Deti might have identified major issues in PMS if it did undertake such checks but perhaps the real issue lies a bit closer to home at Presbyterian Mutual itself.

The treasury committee found that Arthur Boyd, administrator to Presbyterian Mutual, had submitted a report on the activities of the directors of the society to the department. It is currently under consideration. In its report the treasury committee states: “The auditors of PMS are also subject to an investigation by their disciplinary body.”

The committee believes it is too “early to judge the degree to which the directors were culpable rather than unlucky” but it also states that “nothing . . . should detract from the fact that it is the duty of directors to ensure their companies are properly run”.

McFall and his fellow committee members believe there was a “fatal regulatory gap” in the North which led to the disastrous events which engulfed the PMS. The society should have really applied to be regulated by the UK’s Financial Services Authority (FSA). If it had done so, PMS would have been covered by the UK’s Financial Services Compensation Scheme. In the event of its collapse its members would have been legally entitled to reimbursement.

The thousands of small savers who are in a precarious position regarding their investments would have been guaranteed some security.

Deti has no powers to force any society to apply to be regulated by the FSA. The current system is “opt in” rather than “opt out”.

In concluding its investigation, the treasury committee states that “it is the directors, not the government, or the regulator, who have ultimate responsibility for such an institution’s management”. In the case of the PMS the committee added: “It is possible that a society which was mutual in life will prove to be far from mutual in death, and that small savers will lose out most heavily.”

The treasury committee’s investigation has provided no comfort to the 10,000 members of the PMS. The Minister, Arlene Foster, says there are a dwindling number of options that may deliver some form of solution. One is that a commercial institution may step in and take over the PMS business or that the Northern Ireland Executive and the UK can come up with a viable rescue plan which will include the establishment of a hardship fund.