Banker accountability rules sought in tracker scandal report

A report by the Central Bank, commissioned by the Government in the wake of the tracker-mortgage scandal, calls for Ireland to make top bankers accountable for failings under their watch. This would make it easier to fine and sanction senior individuals.

The recommendation is contained in a report that is set to be highly critical of banks for often failing to put customers first. The report was ordered by Minister for Finance Paschal Donohoe last year at the height of the tracker-mortgage crisis and is expected to go to Cabinet next week.

The Irish Times has learned it recommends that a senior managers regime be established in Ireland, requiring senior bankers to submit a clear statement of their responsibilities to regulators. This would limit the ability of individuals to lay blame elsewhere for wrongdoing in the event of a Central Bank investigation. The regulator has the power to fine individuals up to €1 million and bar them from working in important roles in regulated firms.

Property bubble

A decade after Ireland's banking system almost collapsed as the property bubble burst, the Central Bank's director general of financial conduct, Derville Rowland, spoke earlier this year of the merits of introducing such a regime in Ireland, similar to rules introduced in the UK in 2016. Such a move, while requiring legislative changes, could make bank boards and senior managers take more of a lead in rebuilding trust with their customers.

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Sources said the Central Bank, which carried out the culture review with the help of Dutch supervisory officials, has also issued individual findings to the country’s five remaining retail lenders in recent weeks on their performance. It has given banks until the end of the year to provide evidence of how they are following up on recommendations.

Spokeswomen for the Central Bank and Department of Finance declined to comment.

Onsite inspections

Central Bank officials conducted onsite inspections at banks and interviewed top executives and board members across the industry since the start of this year to assess how they are working to transform their culture to better protect consumers.

The five lenders, which are also now subject to enforcement investigations by the regulator, have set aside about €1 billion in provisions

Mr Donohoe directed the Central Bank last October to prepare a report on the culture, behaviours and associated risks in the retail banks, as he piled pressure on lenders – amid political and public uproar at the time – to acknowledge, once and for all, the extent to which customers were impacted by the tracker-mortgage scandal.

The five main banks subsequently identified about 17,000 additional cases where borrowers were either wrongly denied their right to a cheap mortgage linked to the European Central Bank’s main rate, or put on the wrong rate entirely. That brought the total number of cases, stretching back more than a decade, to 37,100.

Controversy

The five lenders, which are also now subject to enforcement investigations by the regulator, have set aside about €1 billion in provisions to cover refunds, compensation and other costs relating the dealing with controversy.

Meanwhile, Mr Donohoe said top executives from the five companies told him in a meeting on Tuesday morning that the “review and design phase” of a new Irish banking culture board, aimed at promoting high standards of behaviour and competence across the industry, has been completed.