The cracks are beginning to open at Irish Nationwide Building Society (INBS). With just weeks to go before the announcement of its 2008 annual accounts, disagreement concerning proper oversight at board and executive level has driven the chairman away. And as the other Irish financial institutions prepare the market for larger-than-expected losses and writedowns, the prognosis for Irish Nationwide appears grim.

It bodes ill for Irish Nationwide that the profile of its heavily commercial loan book closely matches Anglo Irish Bank's. Apart from a vestigial rump of residential mortgages, the overwhelming majority of loans are to property development and construction. These loans are understood to be concentrated with just a few dozen clients. A recent note to bondholders late last year showed its biggest single customer owed €320m, a huge exposure for a relatively small lender with about €1.2bn in reserve capital.

Taking Anglo's 2008 year end figures as a proxy, INBS could be in line for a bad-loan rate of more than 4% of its €12.3bn book over the next three years of recession. This level of bad debt would knock out roughly a third of its reserves.

Of course, the market rejected Anglo's projections – grim as they were – as too optimistic given the prevailing conditions in the property sector. EBS Building Society, on the other hand, is preparing to write down an unprecedented 13% of its €500m 2008 property development finance portfolio – the portion of its book most similar to Irish Nationwide's business mix. If INBS is facing that kind of carnage on the €8.5bn it has loaned to property and construction, its reserves will be all but wiped out.

That chief executive Michael Fingleton has not gone to the markets or government looking for fresh capital suggests the situation is probably not that dire. Last year INBS did begin limiting its business to already contracted commitments and additional credit facilities; Fingleton also told bondholders he would try to reduce the loan book by €2bn-€3bn. These steps would help improve the capital position. Yet the customary low level of disclosure from Irish Nationwide prevents us from knowing for sure what's really going on.

Indeed, market sources have said chairman Michael Walsh resigned last week because he met resistance to opening the books to closer inspection. It is understood Walsh commissioned Goldman Sachs to perform an independent report of the building society to uncover anything Pricewaterhouse Coopers might have missed in its trawl on behalf of the government.

Walsh also met resistance when he pushed to appoint chief risk, operating and financial officers. Uniquely among Irish financial institutions, Irish Nationwide has nobody in these roles – a state of affairs the Financial Regulator belatedly sought to rectify in late January.

While this aversion to scrutiny is obviously shared across the top echelons of the banking sector to a certain extent, it is most pronounced in Fingleton and Irish Nationwide.

When Fingleton failed to find a buyer for the building society in late 2006 – after delaying the due diligence process for months – two of the suitors cited a lack of transparency into the books as one of the chief reasons for backing away. Secrecy is also ingrained in the corporate culture, which revolves tightly around Fingleton himself.

This issue was brought into a harsh light in late 2007 when Fingleton tried to suspend his home-loans manager, Brian Fitzgibbon, over €20m in bad loans to Michael Lynn and Thomas Byrne, the two Dublin solicitors who had falsely secured multiple mortgages on their property investments. Fitzgibbon sought an injunction preventing the action.

His affidavit stated Fingleton had personally approved multimillion-euro loans to both solicitors and had circumvented the society's own procedures to do so. It also said Irish Nationwide's credit committee for home loans over €1m was "a device" for the benefit of the Financial Regulator. Lending was "entirely informal and controlled by Mr Fingleton". According to the manager, Fingleton had even over-ruled Fitzgibbon's rejection of a loan request by Byrne. The presiding High Court judge agreed with the substance of the accusations.

But the building society's funding situation is perhaps even more pressing. Irish Nationwide has €1bn in bonds due for refinancing by mid-May, according to data provided by Bloomberg. The building society says its imminent funding needs are closer to €800m – probably due to decreased lending – and it will have no trouble raising this.

A market still exists for Irish government-backed bank debt, but at a price. Irish Life & Permanent's recent issue sold at 1.75% above the benchmark rate, much higher than AIB and Bank of Ireland had to pay late last year. INBS's bonds are considered the riskiest of all the covered institutions. Before the guarantee, its bond prices were getting hammered by nervous investors and its Moodys-implied rating plunged deep into junk status.

Even now its long-term credit rating is at the lowest rung of investment grade. Even now one of its long-dated bonds has been trading as low as half face value in the last week, an indication that investors expect a default before it matures. If the government extends its guarantee to five years, though, this eliminates a key problem for Irish Nationwide.

In the absence of further government support, however, it's hard to see how Irish Nationwide can remain independent.