Central Bank gets budget boost despite criticism over tracker scandal

The Central Bank has won approval for a 17 per cent increase in its operating budget, but was also criticised over its handling of the State's tracker mortgage scandal.

Minutes released on Tuesday for a November 28th meeting of the Central Bank Commission, the group comprising top bank executives and Government appointees that oversees the workings of the organisation, show that a request for an increase in the operating budget to €294 million was approved.

This was driven by costs of additional headcount, as the bank sought to boost full-time staff to 1,891 from a 2017 approved level of 1,803, and an increase in professional fees and IT costs. The estimated end-2017 staff level of 1,730 was about 120 short of complement, as the organisation continues to struggle to attract and retain staff amid stiff competition from the private sector.

Commission members noted that the Central Bank had increased the number of staff devoted to the mortgage-tracker examination “only in very recent times”.

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Members also said that regulator's communications strategy around the issue had been "flawed", especially in light of an appearance by executives, including governor Philip Lane, director-general for financial conduct Derville Rowland and deputy governor Ed Sibley, before the Oireachtas finance committee in October. The Central Bank was criticised by TDs and senators at the hearing for not being tough enough on the State's mortgage lenders and for not having a firm handle on the problem, almost two years after it began an industry-wide examination.

Uproar

The Central Bank subsequently revealed last month – after public and political uproar over the scandal intensified – that the number of customers hit by the controversy had surged by 13,600, or two-thirds, from the end of September to 33,700.

Impacted borrowers include those who were either wrongly denied low-cost mortgages linked to European Central Bank rates, or were put on the wrong rate.

The commission minutes note that Prof Lane said the “wave of publicity had reflected negatively on the reputation of the bank”, though he insisted that the “bank had been, and continued to be, working hard to ensure the matter was pursued and that impacted customers received redress and compensation”.

Unidentified commission members said at the November meeting that the bank needed “clarity in messaging” around the tracker controversy and that it should use different ways of communicating through local as well as national media and social media. Ms Rowland said the Central Bank had decided to bring the bank’s communications function “into the centre of the tracker mortgage examination programme in the bank”.

Updated figures

Ms Rowland said the updated figures issued last month “would not likely be the final picture but very close to it”, according to the minutes.

Meanwhile, the minutes highlight discussions surrounding a commission decision at the meeting to restrict circumstances where second-time and subsequent home buyers can breach a key loan-to-income borrowing restriction. It otherwise maintained the State’s mortgage-lending rules.

When asked what might prompt a tightening of the rules, Central Bank official Mark Cassidy, then head of financial stability, told commission members that it would be down to "dynamics between pricing and credit and whether valuations were broadly related to prevailing economic conditions".

Prof Lane added that it could be “both, or either, factors that would trigger a tightening”, according to the minutes.