AIB chief admits bank benefited by up to €100m from tracker scandal

Wrongly switching thousands of customers off low-cost tracker mortgages or applying incorrect interest rates probably boosted AIB's income by up to €100 million, chief executive Bernard Byrne has admitted.

Mr Byrne told the Oireachtas Joint Committee on Finance that, while he could not be certain of the overall amount, it was reasonable to assume that failing to put customers back on tracker products or applying incorrect rates was worth somewhere between €15 million and €20 million per annum to the bank for several years after the 2008 crash.

However, in the context of overall income and a cost base that changed by €1.3 billion, he said this was not very much and would not have been the “logical place for the bank to focus a lot of resources”.

Mr Byrne said the bank did not adequately consider the potential consequences of removing their tracker mortgage product from the market in 2008 and that the controversy was partly a product of process and system failures.

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“It is clear that the potential fallout of the decision to stop offering the tracker product to new customers was not considered in terms of how existing customers might be impacted in the future, as some of these customers had a right to revert to a tracker,” he said. “This clearly should not have happened.”

Mr Byrne said a total of 9,348 AIB customers have been impacted by the controversy and that the bank had set aside €190 million to cover the cost of compensation, €133 million of which had been used.

Legal advice

Mr Byrne admitted the bank never sought any legal advice when removing customers from tracker contracts.

He also noted that 14 customers who lost their homes as a result of the scandal – in most cases being forced to sell their properties after falling into arrears – have been compensated.

However, two of them have launched appeals against the amounts offered by the bank.

“As I have said to this committee before, AIB is deeply conscious of the adverse effect that this issue has had on impacted customers,” Mr Byrne said. “Many people are angry as a result of the treatment they encountered and I apologise again for this on behalf of the bank.”

The Central Bank’s trawl into affected customers has uncovered more than 33,700 cases where banks either denied customers their right to a low-cost mortgage linked to the ECB’s main lending rate, or applied the incorrect rate.

“AIB’s culture and reputation can only stand on the foundation of fair treatment for the customer,” Mr Byrne told the committee. “Where we fall short of this standard, it undermines our values and the credibility of the bank.”