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Bank of Ireland and AIB put aside €140m to cover fines for tracker mortgages

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File photo.

Joe Meade

Joe Meade

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File photo.

The two largest banks in the State have put aside a combined €140m to cover fines and other costs from the tracker probe being carried out by the Central Bank.

The figures emerged as the Central Bank defended the length of time the industry-wide tracker investigation and sanctions process is taking.

It is now going on for 12 years.

AIB has set aside €70m, with a similar amount put into its reserves by Bank of Ireland.

This week, Ulster Bank was hit with a record €38m fine over its tracker mortgage failings.

After a five-year investigation, Ulster Bank was found to have come up with “deliberate strategies” to shift borrowers off cheap mortgages linked to the European Central Bank’s main rate from 2008.

It only put those who complained on the correct rate.

But the two biggest banks have yet to be fined.

EBS, which is part of AIB, has also yet to be sanctioned.

Permanent TSB has been hit with a €21m fine, while KBC Bank will have to pay €18m.

Springboard Mortgages, the former subprime unit of Permanent TSB, was ordered to pay €4.5m in 2016.

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The total penalties imposed on lenders for their role in the scandal now comes to €81.6m.

Now it has emerged that AIB has accrued provisions of €70m on its balance sheet to cover any potential future sanction liabilities.

Goodbody Stockbrokers banking analyst Eamonn Hughes said Bank of Ireland has a €74m balance-sheet provision to cover tracker fines.

However, this covers any future remedial customer redress as well as potential enforcement action costs.

Meanwhile, the Central Bank has defended the length of time its probe into the tracker scandal is taking, as well as the long delay in sanctioning lenders.

This publication reported in November 2009 that the regulator was asked by the then Financial Services Ombudsman, Joe Meade, to probe all mortgage lenders to ensure they were honouring agreements allowing people to retain their tracker mortgages.

But it was 2015 before the Central Bank initiated an industry-wide examination of the accusations that lenders were denying consumers their tracker mortgage entitlements.

Under the headline ‘Watchdog urged to investigate banks in tracker row’, the Irish Independent report stated that Mr Meade had written to the regulator and called for an all-lender probe. This came after he found against a lender that would not allow a couple coming off a fixed-rate mortgage move back on to a tracker.

Asked why it did not act in 2009 when Mr Meade sought an industry-wide tracker probe, a spokesperson for the Central Bank did not explain why it waited until 2015.

It admitted the Financial Services Ombudsman had issued two individual tracker-related findings to the Central Bank prior to the commencement of the tracker mortgage examination. “These were taken into account when pursuing a number of lender-specific issues prior to the examination.”

The Central Bank insisted it worked co-operatively and constructively throughout the tracker mortgage examination and subsequently with the ombudsman.

This was to ensure it acted on any individual findings which may give rise to a potential broader customer impact, the regulator said.


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