Business Irish

Thursday 19 September 2019

Banks are 'in denial' over tracker scandal - Makhlouf

Governor Gabriel Makhlouf
Governor Gabriel Makhlouf

Donal O'Donovan and David Chance

The new governor of the Central Bank of Ireland is worried that the tracker mortgage scandal shows Irish bankers have not learned the lessons of the financial crisis and that they need to rebuild trust.

In an interview with RTE 6-1 after his first week at work here, Gabriel Makhlouf (inset below) also defended his own handling of a budget leak in New Zealand when he was the country's top finance official, saying he had "acted in good faith".

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Mr Makhlouf's views on the State's banking institutions come at a time when the industry is pressing the government to lift pay and bonus caps.

"My sense is that some financial institutions are in denial," he said of the €1bn tracker scandal which affected 40,000 people.

"I think the onus is on them to show the community as a whole that they have changed," Mr Makhlouf said.

My Makhlouf did not address the issue as to whether the Central Bank itself had contributed to the tracker problem due its own delayed response.

The push on reputational risks chimes with pressure from the Central Bank to get financial firms here doing more to hamper money laundering by drug dealers, human traffickers, terror groups and crime gangs.

Central Bank director general for financial conduct, Derville Rowland, told banks that politicians can pose a particular risk and that they can require additional customer due diligence.

"That's because people who hold - or have held - a high political profile can pose a higher money-laundering risk to firms as their position may make them vulnerable to corruption such as accepting bribes or contributions to election campaigns and political parties in return for advantages," she said.

Ms Rowland was speaking as the Central Bank published guidelines to help financial firms prevent money laundering and the financing of terrorism.

It is estimated that between €715bn and €1.87 trillion is laundered every year.

A money laundering scandal that began in banks in the Baltic region has engulfed banks across the Nordic states over the past year, and cast doubts over the effectiveness of anti-money laundering strategies throughout the EU.

"At the Central Bank, we believe that effective regulation in this area strengthens the integrity of the financial sector, and contributes to the safety and security of citizens, by preventing drug dealers, and those engaged in human trafficking, terrorist attacks and organised crime, from using the financial system to support these activities," Ms Rowland said.

"Lives can be saved, if such criminal activity is curtailed."

Irish Independent

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