Updated 6.20pm
MINISTER FOR FINANCE Paschal Donohoe has said that the government strongly condemns the actions of the banking sector, calling the tracker mortgage scandal “disgraceful” and “simply unacceptable”.
Having met with the CEOs of the major banks this week, Donohoe said that he had received a timeline for when affected customers would be repaid and said that the government was considering new regulations to enhance accountability in the banking sector.
“The Irish people made extraordinary sacrifices to support the banks at the height of the financial crisis,” he said. “Having done so, it is right that we demand, on behalf of the people, that the banking sector now, more than ever, operates in the best interests of its customers.”
Both the government and the Central Bank have said that it is now up to the banks to provide the adequate redress for customers as quickly as possible, and restore faith in the sector.
The banks, meanwhile, have issued apologies and timelines for when customers would be repaid.
Ulster Bank
Ulster Bank CEO Gerry Mallon said the company “would like to apologise unreservedly” for the failures to customers.
Mallon said that the bank had “listened”, “is learning” and is “focused on completing this process [and] putting this right”.
The bank said that just under 3,500 customers had been identified as being affected by losing their tracker rates.
It said that 1,000 customers would receive payments by the end of 2017. This will increase to 2,500 customers in the first quarter of 2018, with the “remainder” paid by the end of June 2018.
“Where we identify a customer who has lost their home as a result of the loss of a tracker rate, we communicate with them, arrange a meeting and offer an upfront initial payment of €50,000,” Ulster Bank said.
AIB
AIB said that around 4,500 customers in all were affected – including 3,586 customers wrongly not on a tracker and 1,016 customers on a higher margin.
It said that 30 different customer groups had been affected by the errors.
Of the customers wrongly not on a tracker, it said that 12 had lost their homes as a result of this issue. These customers received redress and compensation by the end of March this year, the bank said.
It said that it had set aside €190 million to cover customers, and that the majority would receive compensation and redress by the end of this year, and by March 2018 at the latest.
It said: “AIB again sincerely apologises to customers and reiterates this should never have happened. AIB’s CEO Bernard Byrne confirmed to the Minister during their discussions of the commitment of management and board to bring the programme to a conclusion as quickly as possible in the interests of impacted customers.”
Bank of Ireland
Bank of Ireland said it had identified 4,300 cases in all where customers were either wrongly not on a tracker, or charged at the wrong rate.
It said it would start the compensation process for these customers from 10 November. It said it aims to compensate all customers by the end of the year.
BOI also said it would continue to examine if other customers had been affected, and it is understood that it is committing extra resources towards this.
Its CEO Francesa McDonagh said: “I unreservedly apologise to all impacted customers for the financial loss and anxiety this has caused them and their families.
All impacted customers must be identified as quickly as possible and treated fairly.
KBC
KBC said that around 490 customers were affected, but anticipated another 200 to 600 could be.
It expects to have paid back everyone by the end of the year.
“KBC fully acknowledges the past errors that occurred in relation to Tracker Mortgages should not have happened, were wrong and we sincerely apologise for this once again,” it said.
PTSB
Permanent TSB also issued an apology for the scandal.
“The bank accepts the failures that led to this issue should not have occurred,” it said.
It added that just under 2,000 cases had been identified, and had written to 1,608 of them to offer redress and compensation.
It has set a deadline of 31st December to issue offers to the remaining 363 customers.
It added: “The focus in Permanent TSB is on bringing this matter to a conclusion.”
Investigation
Minister Donohoe said that the Central Bank is of the view some bank behaviour on the tracker mortgage scandal had been “unacceptable, legalistic and not customer centred”.
He said: “There has been a varying response from the banks and as a result, banks that did actually respond in a more appropriate and customer centric manner will not receive any credit for doing so.”
The Central Bank will set deadlines for the banks to identify further affected customers and provide them with compensation.
Central Bank Governor Philip Lane said: “While we note the commitment of the banks to meet the requirements of the Central Bank and Government, given some lenders’ past behaviour, the Central Bank is under no illusion that this will require continued and concerted pressure to ensure all affected customers receive redress and compensation.
It is now incumbent on the heads of the banks to ensure that all affected customers are identified, and to ensure that redress and compensation are delivered swiftly to those to whom so much distress has been caused.
Donohoe will get a progress report in mid-December from the Central Bank on how the banks are faring in their investigations and compensation schemes.
If the Central Bank deems that not enough progress has been made, it could introduce stricter legislative scrutiny on banks’ reporting, amend tax law or use the government’s power as a shareholder in the banks to exercise greater power over the banks.
“Customer interests have not been sufficiently protected or prioritised. This is unacceptable,” he said.
Accordingly, I have mandated the Central Bank under section 6A of the Central Bank Act to prepare a report for me on the current cultures and behaviours and the associated risks in the retail banks today and the actions that may be taken to ensure that banks prioritise customer interests in the future.
On foot of this report, the Government will determine whether any additional legislative and regulatory changes are needed that would enhance accountability in the banks for ensuring customer interests are prioritised.
What’s new in what the Finance Minister Paschal Donohoe announced today?
Other than demanding a timeline for actions and redress, the minister said he wants two reports from the Central Bank (as mentioned above). He said he MAY then take action against banks.
The first report (which was already in the process of being carried out) is due in mid-December. This is a progress report on whether the banks have made acceptable and sufficient progress in line with the commitments announced today by the banks.
The second report is on the culture within Irish banks. Despite the minister stating that there is something a miss within the culture of the Irish banking system, Donohoe is commissioning a report, due to be published in Spring 2018.
“On foot of this report, the government will determine whether any addition legislative and regulatory changes are needed that would enhance accountability in the banks for ensuring customer interests are prioritised,” said the minister.
How much will customers get in redress?
Donohoe said it’s up to the Central Bank to determine what sort of redress is appropriate to the estimated 20,000 affected customers.
What can the government do if the banks fail to deliver on their promises today?
The minister said a number of “follow-up” actions are open to him. These include:
When referencing tax, the minister is referring to the bank levy, imposed on banks post after the taxpayer bailed out the banks during the recession. He said he will consider raising it if the banks do not sort out the mess of the tracker mortgage scandal.
The minister said he will also not review the pay or the bonuses of bankers until the banks make progress on the tracker mortgage issue.
He added that the Central Bank is also concerned that two banks had failed to fully identify customers impacted, but he would not name those banks.
He will consider what sanctions can be imposed on both individuals and individual banks should they fail to deliver on their commitments, adding he may decide to take different actions on different banks depending on how they perform.
What about the gardaí? Why aren’t they involved?
The Independent Alliance, who are in government with Fine Gael, called for a full criminal investigation to be carried out into the banks. They said the minister must now exercise its rights as shareholder in some banks and bring its power to bear on board appointments and behaviour.
“We believe that what has happened to the more than 20,000 customers of these Banks should be the subject of a criminal investigation. The allegations of fraud which have been made more than merit a top-level criminal investigation rather than just a Central Bank investigation.”
“We must not forget that many people lost their homes due to an inability to repay their mortgage after being taken off tracker rates while others have suffered severe ill-health through the cruel tactics employed by some banks.”
“The time for talking is over. The Banks were given plenty of notice that this was a problem they had to solve. Now it is obvious that a criminal investigation is needed to get to the bottom of the scandal.”
The minister would not go so far as his government colleagues today, stating that the gardaí have been engaging with the Central Bank on the issue.
Whether the gardaí get involved is a matter that will “be determined by the report by the Central Bank”.
Is anyone going to lose their job over the scandal?
There is no indication that anyone will be out of a job over the scandal, just yet, anyway. The CEOs of the banks gave a commitment to the minister to deliver on redress and compensation. Donohoe said he will be “holding them to account” on that.
But he added, that for many, the “tenure in their jobs took place after many of these decisions happened which generated the issue I am now addressing today”.
Be that as it may, I have said to all of them, will be holding the banks accountable to how they respond to this issue.
He said the Central Bank has “sanctions open to them” and it is a matter for them to determine when and if they should be used. It would appear that any of these consequences for individuals and individual banks will have to wait until after the publication of the two reports.
How much will this cost the banks and what is the final figure of those impacted?
Donohoe said he did not know what the final cost would be, but said that he believes the Central Bank Governor Philip Lane when he states that some 20,000 people could be impacted. Others have predicted the numbers could be a lot higher.
What about those customers that already accepted compensation from their banks, many of whom who only received nominal fees and not the full amount taken from them?
The minister said there are believed to be some 7,000 customers that do not fall within the probe being carried out by the Central Bank. One TD in the Dáil yesterday said some of these customers have had sums of money up to €40,000 taken from them, but were only given €4,000 in redress.
Donohoe said those customers who believe they were treated unfairly by their bank should get in touch with the Central Bank. He said it can determine if or how much more money they are entitled to.
“They [the Central Bank] can adjudicate over individual decisions,” he concluded.
Beginning the debate on Fianna Fáil’s motion on the tracker mortgage scandal, Michael McGrath said the bankers “will sleep well tonight” after the reaction by the government today.
With additional reporting by Christina Finn
If you have been affected by the tracker mortgage scandal, we want to hear your story. Get in touch by sending a message to trackermortgage@thejournal.ie.
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