Tuesday 22 January 2019

Tracker mortgage scandal set to cost banks close to €1billion

Victims claim the controversy has led to suicides and health problems while 100 borrowers lost properties.

Philip Lane is governor of the Central Bank of Ireland Niall Carson/PA)
Philip Lane is governor of the Central Bank of Ireland Niall Carson/PA)
Charlie Weston

Charlie Weston

THE cost of the tracker scandal for the banks is approaching €1bn.

The revelation came as Central Bank Governor Philip Lane was told regulators should examine themselves when they are conducting a review of the anti-consumer culture in lenders.

The Oireachtas Finance Committee was told lenders had been “hoodwinking” the Central Bank.

The Central Bank is conducting a review into the culture in the banks, after being requested to do so by Finance Minister Paschal Donohoe.

But committee chairman John McGuinness told Prof Lane to get a big mirror when investigating the culture in the banks, to examine the role of regulators.

“When you are investigating the culture in the banks I hope you have a big mirror down there in the Central Bank and you will look into it,” Mr McGuinness said.

“Their attitude is shocking to a degree that no country or parliament or society should accept it - and you regulate them.”

The committee heard the main lenders have now made combined provisions of €900m in respect of the examination.

This is broken down as €600m for redress and compensation, and €300m for costs for the lenders.

Prof Lane said one lender has up to 500 people working on its redress scheme.

The committee was told just before Christmas that banks discovered 13,600 extra cases following pressure from the regulator in the closing months of last year.

Close to 34,000 bank customers had good-value trackers wrongly taken off them, or were put on the wrong rate. Others were not told of the implications of losing a low-cost tracker.

The Central Bank boss said regulators continue to challenge banks to own up to tracker-loss cases.

Ulster Bank came in for strong criticism for missing deadlines to compensate customers who lost the low-cost mortgages.

The bank promised to have compensated 1,000 customers by Christmas, and 1,000 by the first quarter of this year.

But “IT problems” are being blamed for the delay in repaying the customer money.

The regulators insisted they will go after individuals culpable of taking trackers off customers.

Director of financial conduct in the Central Bank Derville Rowland said the Central Bank view is it is right to go after individuals if there is sufficient evidence to take a case.

“We take the view that we won’t go after juniors in an organisation,” she said.

“It’s easy to find this sort of evidence – but it doesn't get at the ‘directing mind’.”

Asked by Sinn Féin’s Pearce Doherty about the size of sanctions that can be imposed on lenders, Ms Rowland revealed that for breaches that occurred before 2013 the Central Bank will only be able to fine up to €5m.

The law changed in 2013 to allow fines of €10m, or 10pc of the turnover of the bank.

Fianna Fáil’s Michael McGrath accused the Central Bank of siding with lenders on the so-called prevailing rate.

This is where people are put back on a tracker rate, but it can be as high as 3.67pc.

Mr McGrath said the response of regulators was a “cop-out” and will make it harder for this group of customers, who are being offered just €1,000 for the contractual breach, to appeal.

Prof Lane said 13,000 tracker mortgage customers still to be repaid should get cheques by June.


“In our enforcement investigations, the Central Bank will consider all possible angles, including potential individual culpability.

“While we are investigating, it is also important to remember that the board members and senior personnel of lenders have significant legal obligations to report potential regulatory breaches to the Central Bank.”

Press Association

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