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Sam Boal

More banks to face fines over tracker mortgage scandal as officials coy about revealing cost details

Ulster Bank recently told an Oireachtas Finance committee that it will not be disclosing the amount of money it has set aside to deal with the fine.

BANK OF IRELAND, AIB and its subsidiary EBS, KBC Bank and Ulster Bank are all due to pay out hefty fines following on from their involvement in the tracker mortgage scandal. 

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.

This week, Permanent TSB was reprimanded and fined a record €21 million by the Central Bank for regulatory breaches affecting tracker mortgage customers. 

The €21 million fine was handed down under its Administrative Sanctions Procedure in respect of “serious failings to 2,007 tracker mortgage customer accounts which were impacted for the period between August 2004 and October 2018″.

This figure reflects a gross fine of €30,000,000 reduced by 30% to €21,000,000 in accordance with the early settlement discount scheme provided for in the Central Bank of Ireland’s Administrative Sanctions Procedure.

Following Thursday’s landmark fine, other banks who were also involved in the controversy are to face big fines. 

Central Bank fines

The banks have been preparing for such a move by the Central Bank. 

In recent Oireachtas Finance Committee meetings, Fianna Fáil’s Michael McGrath and Sinn Fein’s Pearse Doherty have been quizzing the bankers about how much money they are setting aside for such a fine. 

Banks have been coy about revealing the estimated figure they expect to fork out, but going on what PTSB are being forced to pay out, the total for all banks involved could hit €100 million. 

Ulster Bank total committee members last month that to date, the bank had paid out redress compensation of €120 million.

The bank’s overall provision is just under €300 million, Ulster Bank’s chief financial officer, Paul Stanley told committee members. 

He said that out of €297 million, “there is roughly a 50:50 split between the costs of the examination from our side and the customer compensation and remediation”.

“One can take from this that there is still an element of around €20 million or €30 million odd still to paid out from 31 March. That is a combination of some customers we
have got to since that date and the 190 customers who, to date, we have been unable to contact,” he said, adding that the bank had not “taken any significant estimates of provisions in terms of fines at this point”.

How much set aside?

When pushed to reveal what the bank thinks it might have to pay in fines to the Central Bank, Stanley told McGrath: 

We have not disclosed any information on that. We will deal with that when it comes to our final discussion with the Central Bank.

Doherty continued the questioning: 

I assume the bank has a requirement to provide for the Central Bank fine. The witnesses are very clear that, so far, the bank wrongly took €95.54 million from its customers’ accounts without their knowledge for many years. It kept that money from them and has only recently given it back.
We all agree that the bank is going to be fined. Is it not the case that it has to make provision? Otherwise it would not be furnishing accurate accounts.

Stanley replied:

First, we are not disclosing levels of provision. I wish to be open and
clear on that point. As I said, there is a level of provisioning but we do not disclose the amounts. They are estimates and it will ultimately be up to the Central Bank. 
… there is an estimate within that. It is not even an estimate; there is
an element of provision within that [€297 million] to cover the Central Bank fine but we are not disclosing that detail.

Doherty pointed out that the bank is making provision for the fine within the €297 million, indicating that just €7 million is being set aside. 

“I am aware that the bank is not disclosing but it does not take a genius to figure out it has made a tiny provision for the Central Bank fine. If the money it has
paid out so far to customers is €120 million and, as the delegates have said, if there is another €20 million approximately to pay out because 190 customers have not yet been contacted, and if there is €150 million for operational costs, then a tiny amount is left,” said the Donegal TD. 

No disclosure 

Stanley reiterated again during the meeting that Ulster Bank is not disclosing the

“I know the bank is not disclosing it. By deduction, however, one realises it is absolutely minuscule. If there is €150 million for the operational cost, if €120 million has been paid out, and if the provision in total is €297 million, my 12-year-old son at home
could figure out the maximum provision for a fine by the Central Bank.”

Chief Executive of AIB Colin Hunt was also quizzed on the impending Central Bank fine, telling the finance committee that the tracker examination process “is coming to an end and we are moving to a tracker enforcement process, which is likely to lead to the institution being levied with a fine by the Central Bank of Ireland”.

“We will see what comes out of that enforcement process. As I said earlier, the tracker issue is a very large stain on the character and reputation of the bank. The enforcement process is under way and we will address the issue when we see what comes out of that examination,” he said. 

With PTSB marking the first of the fines to be levied on the banks, we can expect a lot more to come in the months ahead. 

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