Central Bank refers ex-PTSB CEO Guinane for inquiry in first individual tracker case

The Central Bank is setting up an inquiry into former Permanent TSB (PTSB) chief executive David Guinane for suspected regulatory breaches in relation to the lender's role in the tracker mortgage scandal, The Irish Times has established.

This is the first known move by the regulator to pursue an individual for an alleged role in the industry-wide debacle.

The Central Bank said in a statement on Wednesday that it had “determined that it has reasonable grounds to suspect that” an unnamed former PTSB manager had “participated in the commission of a suspected prescribed contravention” of part of the Consumer Protection Code 2006 by the bank.

It said that case was linked to the regulator’s previous enforcement action against PTSB that led to the bank being fined €21 million in May 2019 for the “unacceptable harm” it caused certain tracker mortgage customers, including some who lost their homes, when it wrongly denied them their discounted rate.

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A spokesman for the Central Bank and a spokeswoman for PTSB declined to identify the person involved, pending a decision by the official in charge of the inquiry, UK barrister Peter Hinchliffe, deciding whether to proceed with the inquiry in public or private. Efforts to secure comment from Mr Guinane, who was chief executive of PTSB between November 2007 and February 2012, were unsuccessful.

The decision to move to an inquiry suggests that Mr Guinane did not reach a settlement agreement with the Central Bank as part of an investigation, and that he believes he has a strong defence.

The setting up of an inquiry of this type does not in itself involve a finding of wrongdoing, but the purpose of the inquiry is to decide whether there were breaches of the code.

Fines

PTSB was the first bank to be fined in relation to its involvement in an industry-wide scandal, going back to 2008, that resulted in lenders denying more than 41,000 borrowers their right to a cheap mortgage linked to the main European Central Bank rate – or putting them on the wrong rate entirely. Close to €750 million has been paid out by the industry in refunds and compensation to affected borrowers.

KBC Bank Ireland has since been fined €18.3 million and Ulster Bank €37.8 million for their roles in the overcharging issue. The regulator is also pursuing enforcement cases against AIB and its EBS unit, who have put aside €70 million for likely fines, as well as Bank of Ireland, which had ringfenced funds for a monetary sanction as part of €72 million of tracker-related provisions on its balance sheet at the end of June.

The PTSB fine was levied over its treatment, including overcharging, of more than 2,000 mortgage holders.

Trackers were commonly sold at the peak years of the Celtic Tiger housing boom, but the products proved heavily loss-making for banks during the crash as their own funding costs soared.

PTSB admitted, as part of the settlement, 42 separate breaches of banking codes of practice, covering mortgages between the years 2004 and 2018.

Some customers were put on higher rates than those to which they were entitled, while others were denied tracker rates altogether.

Among the customers affected, 12 lost their family homes and 19 lost buy-to-let properties due to mortgage arrears incurred.

Law changes in 2013 doubled the maximum monetary penalty the regulator can impose on individuals for regulatory breaches, from €500,000 to €1 million. The higher rate can only apply to contraventions that took place after the amendment.

The regulator can also ban individuals from working in senior roles in regulated firms for specified periods, or indefinitely, depending on the severity of findings against them.