Tracker scandal: Banks to be named if they fail to act

The Government is set to name banks that are not co-operating with its attempt to resolve the tracker-mortgage scandal by committing to compensate customers.

Minister for Finance Paschal Donohoe briefed the Cabinet last night. Sources said he indicated that the Government would publicly identify any banks that were holding out.

Mr Donohoe said he would make a statement on Wednesday on the scandal – which saw banks wrongly refuse thousands of customers access to tracker mortgages, which were loss-making for the banks in the postcrash period – after he has met a number of the banks. Some overcharged customers struggled to meet their new, higher repayments, and faced repossession in a number of cases.

Until now the Government has largely dealt with the banks as a whole, but Mr Donohoe indicated this strategy would change if the banks did not respond satisfactorily. “There will be a distinction between those who are being helpful and those that aren’t,” one Minister said after the Cabinet meeting. “We won’t be talking about ‘the banks’. If there are banks that aren’t being helpful, that will be recognised. If there are others that are being helpful, that will be recognised too.”

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It is understood Mr Donohoe did not indicate at Cabinet which banks are being helpful and which are not. There was wide support for the Government’s stance from Ministers. Sources said it is hoped that banks will co-operate before sanctions are necessary.

KBC and Bank of Ireland lagging peers

There is a growing expectation that the two lenders lagging behind their peers in starting a redress and compensation plan for affected customers, KBC Bank Ireland and Bank of Ireland, will now comply with the Government's demands. The Government has asked for a clear timetable for compensation for all customers, which Ministers have said must be under way by Christmas.

A sticking point with KBC and Bank of Ireland has been the status of some customers and whether they would be eligible for inclusion in compensation schemes. These would be in addition to the 13,000 who have already been identified as part of a Central Bank of Ireland investigation into the controversy.

A further 7,100 cases had already been resolved before the Central Bank began its investigation, two years ago, and the status of another 7,000 customers is in dispute. Mr Donohoe told his Cabinet colleagues he wanted clarity on these issues this week. He also pointed out he would be dealing with some banks as a shareholder, suggesting he might have more leverage with these.

Mr Donohoe is due to meet AIB and Ulster Bank on Tuesday morning.

The Government is now expected to largely accept a Fianna Fáil motion calling on the banks to outline a compensation timetable. The motion, to be debated this week, calls on the banks to formally apologise to customers and says the Government and the Central Bank should consider drastic action to end the controversy.