Friday 30 September 2016

It's 2015, not 2007 - we won't stand for PTSB boss Masding's posturing

Published 30/07/2015 | 02:30

Jeremy Masding, Group Chief Executive of Permanent TSB, at a press conference on Tuesday
Jeremy Masding, Group Chief Executive of Permanent TSB, at a press conference on Tuesday

Excuse me while I check the date. Yes, we're more than halfway through 2015. So why are we forced to witness behaviour from a senior banker which smacks of the gung-ho days of 2007? Why are we forced to listen to him refusing to be held accountable for significant shortcomings on his watch, when three-quarters of the institution he runs is State-owned?

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Permanent TSB's management wronged a number of its customers, and tried to avoid fixing mistakes by going to court. All the way to the steps of the Supreme Court, in fact. Some borrowers lost their homes as a result of being overcharged by the bank.

Yet even now, the bank's group chief executive is attempting to shrug off the overcharging and other deficiencies as an anonymous malfunction for which nobody is really responsible. It just seemed to happen somehow.

That's not good enough. And if he doesn't understand why not, it's up to Finance Minister Michael Noonan to set him straight on behalf of the bulk of shareholders. Otherwise known as the Irish people.

Jeremy Masding needs to accept there was a litany of failures for which somebody senior must be held accountable. Permanent TSB had to be forced to do right by the customers it abused - it fought against ethical behaviour every step of the way. Its conduct has been a betrayal of its customers' trust, but public confidence is also dented.

His bank's actions have sown doubt as to whether a reformed banking sector truly exists. Irish citizens, who have pumped €2.7bn into Permanent TSB, are now wondering how well some elements of the banking sector have absorbed the lessons of the collapse.

Financial institutions insist they now apply high standards of business conduct, and understand the importance of corporate social responsibility. But in the case of Permanent TSB, such concepts are exposed as a box-ticking exercise.

The bank has suffered considerable reputational damage, which was avoidable if it had adopted an ethical approach - not can we get away with our behaviour, but was our behaviour right in the first place?

Even now, its response falls short of best standards. It has embarked on a slick damage limitation campaign, presenting itself as taking responsibility for almost 1,400 wronged customers with offers of financial redress. Not particularly generous offers, considering the stressful circumstances they were forced to endure.

But that acknowledgement of wrongdoing had to be imposed on the bank. It ignored the Financial Services Ombudsman, which found in the borrowers' favour, and appealed the decision to the High Court. When the bank lost the High Court action, it proceeded all the way to the Supreme Court, only backing down when the Central Bank intervened.

The Central Bank, which launched an investigation into the overcharging, described the bank's failures as "serious". But Permanent TSB's upper echelons appear to be determined to minimise the gravity. Mr Masding doesn't admit the need for any resignations, least of all his own.

He was well briefed when he faced the media. That "serious, controlled, no smile" handwritten note on his papers at Tuesday's press conference was good crisis management advice.

But better advice would be to wholeheartedly accept accountability for failures. The overcharging didn't start under his stewardship. But the combative decision to resist all the way to the Supreme Court can be laid at Mr Masding's door. The legal actions continued into this year, delayed settlement and contributed to the distress of customers who were mistreated.

At least 22 mortgage-holders - but the figure could be as high as 61 - lost their properties following failures by the bank.

People have a right to hear from Mr Noonan on this matter. Shoddy standards were permitted at a 75pc State-owned bank - how can people have any confidence they will now miraculously improve? The Finance Minister has been rather restrained so far, with a mild comment about the overcharging as a regulatory issue for the Central Bank.

Regrettably, Permanent TSB board members didn't do their job adequately. Otherwise, they never would have allowed the management to risk the bank's reputation in such a trigger-happy way. Warning bells ought to have sounded at the Ombudsman's finding, and should have been ringing up a racket by the High Court stage.

There are six independent directors, in addition to the chairman, Alan Cook, a former managing director of the UK Post Office. It's worth listing the six non-executives. They are Julie O'Neill, former secretary-general at the Department of Transport; Ken Slattery, previously a senior banker with Bank of Ireland; chartered accountant Emer Daly, formerly with PriceWaterhouseCoopers; David Stewart, previously chief executive with the Coventry Building Society; Richard Pike, a banker with international experience; and Dominic Dodd, chair of the Royal Free London NHS Foundation Trust. An impressive array of talent. But is it possible the board didn't challenge the management sufficiently?

The board sets the culture, an important function. In this case, the Permanent TSB culture was one of belligerence towards wronged customers.

Did board members believe it was prudent or even appropriate to proceed all the way to the highest court in the land? Did they give adequate consideration to the dangers of losing the case, both reputational and financial?

This board, in common with others, is meant to oversee a performance culture that drives sustainable value creation without excessive risk-taking. Yet its members must have signed off on the legal actions.

The bank now faces a fine of up to €20m from the Central Bank and compensation to customers of up to €35m.

That loss will impact on future profitability, and will be felt by taxpayers. Such is the quantifiable cost. But a reputation, once tarnished, is difficult to restore. What price an institution's good name?

And let's not forget how this harm has been caused by the team brought in to clean up previous damage.

To date, we've heard apologies but no explanation of why Permanent TSB was utterly, even ruthlessly, determined to defend the indefensible. The public deserves better from all concerned in this shambles.

Irish Independent

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