LAST UPDATE | 24 Sep 2020

THE CENTRAL BANK has fined KBC Bank Ireland €18.3 million for regulatory breaches relating to the tracker mortgage scandal.

This fine comes on top of the €153,524,363 that the Belgian-owned bank has been required to pay to date in redress and compensation.

In a statement, the Central Bank said the fine reflected the “devastating” impact that the tracker mortgage scandal had on its customers.

“The Central Bank has imposed a fine at the highest end of its sanctioning powers, reflecting the gravity with which the Central Bank views KBC’s failures,” the statement said.

It described the impact of KBC’s failings on its customers, which related to 3,741 accounts, as “devastating and included significant overcharging and the loss of 66 properties” — including 11 family homes.

The regulator said that the bank’s engagement with its investigation into the tracker mortgage issue was “deeply unsatisfactory”.

“KBC caused avoidable and sustained harm to impacted customers due to the firm’s unwillingness to acknowledge its failings until December 2017 and to take immediate action,” according to the Central Bank.

Had KBC adhered to the regulator’s guidelines, it said, “without the need for significant and sustained Central Bank intervention, the harm to its customers – particularly incidences of property loss – would have been significantly reduced.” 

It comes on foot of the Central Bank’s industry-wide investigation into tracker mortgages.

Through that investigation, the regulator found that “over the course of 2008, tracker mortgages were becoming increasingly unprofitable for KBC, resulting in the withdrawal of the product by July 2008.

“The Central Bank’s investigation found that in doing so, KBC failed to treat its existing tracker mortgage customers fairly and put KBC’s financial interests above the protections their customers should have been afforded.”

The regulator came to the conclusion that KBC had failed to adequately warn customers who were moved from trackers to fixed-rate mortgages that they would be unable to return to their tracker rates.

Not only did the bank fail to provide customers with “clear documentation”, but KBC also failed to inform customers that “they stood to pay more interest over the lifetime of their loan”, the Central Bank said.

In addition, the Central Bank probe found that KBC had inadequate mortgage systems in place to enable them to meet their regulatory obligations and that it had provided incorrect information to the Financial Regulator.

In a statement today, KBC Bank Ireland chief executive Peter Roebben issued an apology to those impacted by the scandal. 

“The tracker mortgage issue is a hugely regrettable chapter in Irish banking and one from which we in KBC have learned significant lessons. I profoundly apologise to KBC customers who were impacted by our management of their tracker mortgage. Undeniably this had serious consequences for all impacted customers, but particularly for those who lost their homes and properties,” Roebben said. 

We deeply regret these events and recognise that they have led to a breach of trust. 

“We respect the role of the Central Bank of Ireland in the regulation of financial services and we fully acknowledge the importance of constructive, timely and transparent engagement with the regulator.” 

With reporting by Hayley Halpin