The tracker mortgage scandal has dragged on for so long that it’s easy to forget about how and when it all started. But also, how it unfolded.
Last week it emerged that the scandal will cost AIB and EBS, both part of the same group, a combined €330m in fines and compensation payments.
Such a monumental and costly scandal which basically took place between 2004 and 2017, should have carried direct consequences for some of the senior echelons of the bank and its board over those years. Yet that is not how we remember it.
The first issue arose when in 2008 AIB stopped offering tracker mortgages, but didn’t consider the best interests of its customers, including their legal entitlements, according to the Central Bank findings.
Eugene Sheehy was chief executive at that time. The bank was imploding anyway. He resigned.
Next, the Central Bank says AIB failed to re-introduce a prevailing tracker rate until December 2013 – and at that stage it was only on a go-forward basis.
David Duffy had joined as CEO in 2011 and remained in place until 2015. Duffy is credited with performing important work in repairing the bank’s balance sheet.
Fixing AIB was a big job, but the Central Bank points to an important failure on the tracker front during his tenure.
Then, the Regulator says, the bank wrongfully excluded certain customers’ mortgage accounts from being considered for redress and compensation. They were not included until December 2017. Bernard Byrne was CEO from 2015 to 2018.
The Central Bank’s findings – published last week along with the fine – are unequivocal about the bank’s failures. AIB was not alone in these failings, and other banks have been fined on similar grounds.
The publication and scale of the fine brings this sorry chapter to a close. All but three of the AIB board members were appointed after 2018 and chief executive Colin Hunt, who was appointed in 2019, will be glad to draw a line under the saga.
Besides, with interest rates going up, some brokers have said they believe Irish bank share prices could double. So despite the record fine, it’s not all bad news for the bankers.
Quinn Insurance settled a potential €900m lawsuit against its former auditors PwC, the High Court was told last week. The case related to the audit of the insurance company’s accounts at a time when certain assets were double-pledged as security on loans.
The Irish Times speculated that the settlement figure ran into tens of millions of euro, but no details of the settlement were published.
Once again, the conclusion of a financial issue regarding the collapse of the former Seán Quinn empire does not result in a transparent outcome.
This has happened before with Central Bank settlement agreements with former Quinn Insurance directors. But it is surely a matter of public interest, given the taxpayer has had to provide funds through the Insurance Compensation Fund to enable the collapsed Quinn Insurance to meet claims?
Quinn Insurance went into administration in 2011. At the time, the balance in the compensation fund was just €31m. The Minister for Finance had to lend the fund €1bn between 2011 and 2015.
Through payment of a levy on insurance policies, €599m of that had been paid back by the end of 2020. Presumably the money from the PwC settlement will go towards paying back the outstanding balance of €610m.
“Tens of millions” suggests it won’t clear that debt. Commercial legal settlements between two private companies are private. But when the citizens of the State are on the hook for over €1bn, people have a right to know what happened.
Germans have been advised to prepare themselves for possible gas rationing this winter. The Russian state gas company Gazprom has reduced supplies to Germany as part of an annual maintenance programme on the Nordstream 1 pipeline.
But there are fears that it could signal a general slowdown in gas supplies which will prevent German industry from stockpiling gas in advance of winter.
Perhaps Ireland may have to enact its own gas rationing plan. Every EU member state is obliged to draw up an emergency plan to cover major accidents, weather events, or anything that might disrupt gas supply.
Our plan – which is titled the ‘National Preventive Action Plan Gas 2018-2022’ – makes for interesting reading. First of all, in the event of gas shortages, a committee like a Nphet for gas, kicks in.
Electricity generation stations which rely on gas are all obliged to be able to switch to a secondary fuel within 30 hours. They are supposed to have access to enough secondary fuel to run for five days. After that, who knows?
Protected customers will be given priority. These are defined as households and vital public services like hospitals, prisons, and social services.
It seems big business, which uses about 29pc of our gas needs, will be pushed down the queue. Officials will have the power to enter private premises of any commercial gas user, such as a factory that has not reduced its usage, and enforce the changes.
Most of the document deals with the risk to supply of a weather event or an infrastructure problem that effects the provision of gas. But a shortage of gas to the EU from external sources, like Russia, is mentioned.
Written back in 2017, the document concludes that due to our supply from the UK and Corrib, there is little threat to availability of gas here in such an eventuality.
Hopefully we won’t find out if they are right.
Accounting and consultancy giant EY is reported to be considering hiving off its consulting business from the rest. This isn’t the first time a consultancy arm at one of the big firms has been experiencing a lot of growth, and a separation is on the cards.
But history suggests it doesn’t always go to plan. Arthur Andersen was one of the big five accounting and consultancy firms. It hived off its consulting division which became the hugely successful Accenture.
In 2002 the accounting business voluntarily surrendered its licenses to practice as certified public accountants in the US after it was found guilty of crimes in auditing Enron.
Despite having the finding overturned it never really returned as a sizeable business.
In January 2000 KPMG spun out its consulting business which was later named BearingPoint. It expanded globally and its US operation racked up big debts from acquisitions.
At one point it had 17,000 employees worldwide – but in 2009 the US business filed for Chapter 11 with $2.3bn in debt. BearingPoint remains a very big consulting player in Europe, with 4,500 employees.
It shows that you can never tell how a separation will play out.