Banks push Central Bank to edge of powers in tracker scandal

The man on the bus rose slowly from his seat and looked nervously around before sheepishly admitting to his fellow passengers: “I don’t know what a tracker mortgage is.”

That ad for the Financial Regulator in 2007, when the property boom was at its peak, was intended to inform consumers that there was help out there for those not literate in finance-speak, or the ins and outs of managing one’s financial affairs.

Well, if there’s anyone still out there who’s unclear what a tracker mortgage is, they’re likely to hear an awful lot more about them in the short to medium term as the scale of the scandal surrounding the banks’ property lending over the past decade is unearthed.

Officials from the Central Bank were before the Oireachtas Joint Finance Committee on Thursday when governor Philip Lane described the investigation as its "largest, most complex and significant conduct review" to date in relation to consumer protection.

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Earlier in the week, the Central Bank said the number of those impacted had jumped by 23 per cent to 13,000, and that it expected the figure to rise “significantly further” – possibly to more than 20,000.

Some 60 per cent of those did not receive tracker accounts to which they were entitled, while a further 40 per cent were overcharged on the interest rate applied. As a result, lenders reported that 23 homes were lost, as well as a further 79 buy-to-let properties.

Despite an edict from the Central Bank demanding speedy recompense for those affected, it has emerged that just 25 per cent had received redress with only three lenders have started their redress programmes.

Remember, this has been going on for years. What’s worse, thousands of homeowners wrongly pushed off tracker mortgages may still be unaware that they are being overcharged, the regulator said.

The cost of resolving the whole thing may reach as much as €500 million, Investec said. Taoiseach Leo Varadkar said the Government had “lost patience” with the banks, and described the affair as “scandalous”.

The Central Bank has initiated formal action against two unnamed lenders, which The Irish Times revealed to be Bank of Ireland and KBC. Both institutions could be subject to hefty fines.

Lane told the finance committee the regulator had been pushed to the “limits of its powers” to force banks to deal with the issue. It is working with the Garda and other State agencies to resolve it, but, so far, no criminal investigation is under way.

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A storm of a different kind was brewing on Monday when former Hurricane Ophelia struck Ireland, causing millions of euro in damage and shutting businesses nationwide.

Insurance Ireland said it was too early to say whether – or more likely how much –premiums would rise on claims made on the back of the storm, though two leading insurers said the bill was unlikely to top the €111 million in damage caused by Storm Darwin in 2014.

Shares in FBD Holdings, Ireland's only listed indigenous general insurer, slid as much as 4.4 per cent afterwards, as chief executive Fiona Muldoon said she was "sure that a number of our customers are affected" given the severity of the storm.

Taoiseach Leo Varadkar said households and businesses affected should be covered by their insurance due to the fact “nobody is in a hurricane zone”, referring to how insurers have in the past escaped forking out to individuals in flood zones.

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As if buoyed by Minister for Finance Paschal Donohoe’s decision to leave the special 9 per cent VAT rate for the hospitality sector untouched for another year, several hotel groups announced expansion plans and posted results this week.

The O’Callaghan Hotels Group, owned by businessman Noel O’Callaghan, is embarking upon a €30 million facelift for the Stephen’s Green Hotel, as well as the Alexander and Davenport hotels in Dublin city centre.

Work has started on the Alexander, which O’Callaghan is renaming the Alex, and it will be finished by the end of the month. Refurbishments on the Davenport and Stephen’s Green will begin before the end of the year.

Meanwhile, operating profit at former billionaire businessman Seán Quinn’s hotel group rose to €893,000 last year from €103,000 in 2015, according to its latest accounts, although losses came to €3.4 million after the deduction of interest owed and expenses.

A former Quinn property, the Slieve Russell Hotel in Co Cavan, saw its operating profit plummet to just over €1 million from €8.3 million in 2015. Profits after tax, expenses, and interest payable fell to €332,000 from €7.4 million.

The Doyle Collection, with an Irish portfolio comprising the five-star Westbury Hotel in Dublin, the Croke Park Hotel, and the River Lee in Cork, increased its turnover by €2 million last year. The group also has a number of luxury hotels in the UK and Washington DC, but its Irish hotels generated revenues of €49.3 million.

In the southeast, the Griffin Hotel Group posted accounts showing revenue growth of 9 per cent for the year. Turnover grew to €22.8 million with operating profit, excluding exceptional items, at €3 million, representing growth of 12 per cent since 2015.

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UK foreign secretary Boris Johnson this week helpfully suggested that it was time to begin "serious negotiations" with the EU on Brexit.

It is fair to say Johnson was likely unimpressed though, when the Organisation for Economic Co-operation and Development (OECD) said the uncertainty around the talks rendered it likely the UK will leave the EU in 2019 without a free-trade agreement.

The OECD said a second referendum that reverses Brexit would have a “positive” and “significant” impact on the UK economy, which is on track to be crippled by its EU divorce.

Back in Dublin, Central Bank deputy governor Ed Sibley warned that a hard Brexit with no transition period is increasingly likely, and that companies need to prepare for such a scenario.

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It was a case of trying to get the corks back in the champagne bottles in Athenry as it emerged there will be applications to appeal last week’s judgment permitting US tech giant Apple to develop the first phase of a planned €850 million data centre.

But before any appeal can be taken, permissions must be obtained from the court. An application will be heard on Thursday but may not conclude on that day.

Meanwhile, IDA Ireland is understood to be seeking advance planning permission for future data centres to avoid similar disputes. The agency hired Jacobs Engineering in February to identify up to 24 potential sites for data centres and to report back.