Saturday 14 December 2019

Banks have 'repeatedly resisted doing right thing' on mortgage rates, customer debt - Central Bank

Central Bank deputy governor Ed Sibley
Central Bank deputy governor Ed Sibley

Shawn Pogatchnik

Consumers have good reason to distrust banks in Ireland because too often they have "repeatedly resisted doing the right thing" and punish loyal customers with unnecessarily high interest rates, Central Bank deputy governor Ed Sibley told banking executives today.

In his hardest-hitting comments on banking culture since the tracker scandal, Mr Sibley told the Banking & Payments Federation Ireland retail banking conference that consumer distrust of banking was "so problematic that an entirely new organisation, the Irish Banking Culture Board, has been set up with one overriding mission - to make banking in Ireland trustworthy again."

"It is remarkable that this is necessary," he told the audience, which included representatives of every retail bank in Dublin.

Mr Sibley ticked off banks' recent advertising hooks - and suggested that customers often viewed these slogans as hollow.

"Delivering for your customers requires more than branding and marketing slogans. Being trustworthy requires you to deliver in line with them on a consistent basis," he told the bankers.

"You are 'backing brave', 'providing help for what matters', 'the bank of you', and encouraging customers to 'begin' or 'keep going'. 

"All admirable sentiments, doubtless carefully considered, expensively developed and suggestive of a desire for a deep and long-lasting relationship between bank and customer," he said.

"However, the real test of a relationship is not when things are new and going well, but over the long term - including when difficulties are experienced, when there are bumps in the road.

"In circumstances when trust is low and one party in the relationship has repeatedly resisted doing the right thing, one has to question the future of that relationship," he said.

"On too many serious issues - such as tracker mortgages, non-performing loans, some Brexit preparedness issues - the Central Bank has had to push too many retail banks too hard over too long to actually put your customers first."

Mr Sibley said Irish banks relied on market "inertia for sizable differences in interest rates to persist between new customers and existing ones. Some products are being designed to embed that differentiated treatment.

The Central Bank has acted to ensure that customers are informed if their provider is offering cheaper interest rates, but switching remains low."

He said Central Bank consumer protection officials were "still having to push banks and non-banks too hard to take a customer-centric approach to resolving arrears".

Referring to the event's slogan of "delivering for customers", he said this concept must "extend to those who are in difficulty if you truly want to be considered trustworthy".

"What does it say on your commitment to delivering for your customers when you are still having to be pushed on mortgage arrears? What does it say about the sustainability of your concentrated business models that you are relying on inertia rather than proactively looking after your loyal customers? These are not idle questions," he said.

Mr Sibley noted he recently had watched an RTÉ 'Reeling in the Years' programme covering the year 2007. It showed, he said, "footage of the Irish banks’ CEOs giving assurances about risks being well understood, highlighting record levels of profitability, and complaining about being shackled by regulation".

"While we need to avoid being obsessed with the past, we do need to remember it. In short," he said, "we need to beware the return of hubris."

Online Editors

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