Banking culture board to assess tracker lessons following investigations

The Irish Banking Culture Board (IBCB), set up three years ago in the wake of the tracker mortgage scandal, plans to assess where banks have learned “real and lasting lessons” from the industry’s biggest overcharging scandal after regulators complete enforcement investigations.

IBCB chief executive Marion Kelly said in the organisation's latest annual report that it is anticipated that the last two Central Bank of Ireland (CBI) investigations – into the AIB group, including its EBS subsidiary, and Bank of Ireland "will be completed in the coming year".

"Post the completion of the CBI's investigations, we intend to publish our views on how IBCB member banks have learned from the issues identified by the Central Bank, " she said.

The Central Bank has imposed almost €82 million of fines on four lenders in the past two years, including Permanent TSB and its former subprime unit Springboard Mortgages, KBC Bank Ireland and Ulster Bank, for their involvement in the industry-wide tracker mortgage scandal.

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However, the two biggest cases remain outstanding, with AIB having set aside €70 million to cover likely fines against the group. Bank of Ireland had €72 million of tracker-related provisions ringfenced on its balance sheet as of the end of June, including money set aside to deal with an expected fine.

Tracker mortgage scandal

As part of an industry-wide examination ordered by the Central Bank in late 2015, Irish lenders have admitted to more than 41,000 cases where they wrongly denied borrowers their right to a cheap mortgage tracking the European Central Bank’s main rate, or put homeowners on the wrong rate entirely.

Lenders have paid out more than €735 million to date. While the Central Bank has said its formal examination has concluded, the Financial Services and Pensions Ombudsman (FSPO) is continuing to work through individual complaints that may lead to further groups of customers falling in line for compensation.

Ulster Bank, which is in the process of exiting the market, launched three High Court cases over the summer against decisions by the ombudsman, Ger Deering, to include additional boom-era borrowers for compensation.

Padraic Kissane, a Dublin-based financial adviser who has run a long campaign on redress for borrowers affected by the industry-wide tracker scandal, says 300-400 borrowers may be affected by any precedent set by the outcome of the challenges.

Low level of trust

A survey published earlier this year by the IBCB found that the Irish public has lower trust in its banking system than consumers globally have of financial firms, according to a new survey. The findings come as a separate study shows bank workers in the State have seen improvements in the culture of their organisations in recent years.

The Irish banking sector received a net score of minus 28 in a public survey carried out earlier this year by consultancy firm Edelman for the culture board. This compares with a global average of plus 16 for banks globally under Edelman's so-called trust barometer.

The survey found Irish consumers had a more positive view of their own bank than the wider industry.

“The truth is, trust levels among the Irish public are not where they need to be,” said Ms Kelly. “The IBCB is determined to continue to facilitate cultural change in the banking sector in Ireland, that sees these trust levels improve.”

The IBCB has “strongly welcomed” the publication in July of the heads of Bill of long-planned new rules to make it easier for regulators to hold senior managers in banks and other financial firms accountable for failings under their watch. However, it may be the end of 2022 before new laws are enacted.