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Bank bosses may face fines and sanctions in the future, but won't get jail time under new law

The new laws were drawn up in the wake of the tracker-mortgage scandal.

Image: Shutterstock/Derick Hudson

SENIOR BANKERS MAY face fines and or be disqualified for failings that occur while they’re in charge of an institution, under planned new laws being drawn up in the wake of the tracker-mortgage scandal.

Finance Minister Paschal Donohoe got Cabinet permission today to begin drafting heads of a new Bill which will give extra powers to the Central Bank to investigate and sanction bank bosses.

Speaking to reporters today, the minister said the new law will address serious cultural failings in the banks, stating that his request to the Central Bank for a report on behaviour and culture in the five main retail banks in Ireland has sparked an ongoing, national discussion on culture in the sector.

The tracker mortgage controversy saw tens of thousands of customers being overcharged by their lenders when they were either denied a tracker rate they were entitled to, or charged the wrong rate of interest on their mortgage.

Permanent TSB was reprimanded and fined a record €21 million by the Central Bank for regulatory breaches affecting tracker mortgage customers. More banks are likely to also face fines for the role they played in the scandal.

Tracker mortgage scandal 

The new law is based on similar legislation introduced in Britain after the financial crash, The legislation is expected to come into force from next year, however, the minister explained that as with all legislation, it will not be retrospective, and therefore will not have an impact on the bankers involved in the tracker mortgage scandal.

The minster said he was “very disappointed” in how the banks handled the tracker mortgage controversy, and its aftermath, and particularly criticised the handling of the redress for customers.

He said the Central Bank currently has a number of ongoing enforcement investigations arising out of the tracker mortgage examination. 

In a recent parliamentary question reply on the matter, the minister said these investigations are “considering all possible angles, including potential individual culpability.

“However the Central Bank has advised that it cannot comment further on any possible investigations into individuals without the risk of prejudicing the ongoing investigatory work”.


Donohoe said today that the new procedures will address individual accountability, such as the Senior Executive Accountability Regime (SEAR) and certain broad principles intended to improve the transparency and governance structures.

However, the minister added that any sanctions taken against a banker will be “civil in nature”, which will include fines as well as the Central Bank issuing findings against an individual “which would have very significant consequences for them”.

Due to the Central Bank “not being a court of law” no criminal findings can be made against a banker under the new law, meaning no jail time for bankers found to be complicit in wrongdoing. 

The finance minister said the gardaí have a role to play in that regard, not the Central Bank.

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The new rules are “intended to drive greater accountability in the financial sector, raising the standards of expected behaviour for individuals and firms, in order to achieve better outcomes for consumers and improve the sustainability of the financial system”.

The new Senior Executive Accountability Regime will place obligations on firms and senior individuals within them to set out clearly where responsibility and decision-making lies with a binding code of conduct for individuals and firms also to be introduced. 

Bankers’ pay

Donohoe also confirmed  today that he has received of a report on bankers’ pay and bonuses, which was carried out by executive search firm Korn Ferry.

He said he will be bringing the document to Cabinet in the coming weeks. Bankers pay in bailed-out banks was capped at €500,000, but recently the outgoing Central Bank governor Philip Lane advocated for the cap to be lifted.

The minister said he had not begun to consider the report, having only received it, but added that the opinion of Lane will be weighed up against, what the minister said was the public’s anger in relation to the recent tracker mortgage scandal.

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