June 13th, 2013. Matthew Elderfield, the financial regulator who was brought in to restore some credibility to the Irish banking system after the great debacle, is at the end of his three years in Ireland.
He is making his final appearance before the Public Accounts Committee, and he wants to issue a warning.
“We must”, he says, “be wary of suffering amnesia when it comes to the financial crisis.”
He signals the onset of the smug belief that the banking system is now fixed for good.
“As a supervisor one is almost always playing catch-up with the industry, and it is dangerous to think one will get to a point when one can rest on one’s laurels … It is also especially important to be vigilant against backsliding.”
Then, as a very deliberate parting shot, Elderfield talks about impunity, the way the Irish legal system lets white collar criminals, including bankers, away with so much.
“If the committee would not mind a small digression about accountability for individuals … There is an open issue about how effective the system is, if I can call it that – that is, ourselves, the Garda and the Office of the Director of Corporate Enforcement – and about being able to ensure individual accountability through the enforcement and sanctions process.
“We have taken a lot of enforcement cases against firms – we have been very successful in that, I think, in terms of raising standards there – for systems and controls lapses, for misselling and for overcharging, but it is much harder to take cases against individuals … A reflection I have is that white-collar crime seems to be an area in which the system is just not operating well in terms of being able to tackle that. It is too protracted.
“The deterrent value of taking actions against firms is good, but the deterrent value of taking actions against individuals is much better.”
Tracker mortgages
Now fast forward to December 20th, 2016, and a meeting of the
Oireachtas
Finance Committee.
Philip Lane
, the relatively new governor of the
Central Bank
, is giving evidence.
One of the things he is asked about is the appalling scandal in which the banks deceived at least 15,000 of their customers into moving from tracker mortgages to considerably higher interest rates, often at dreadful personal as well as financial cost.
It is clear that this defrauding of customers was systematic and deliberate. It operated in 15 banks – essentially the entire Irish system – and so far as we know there is not one case of a “mistake” favouring the customer.
It raises in the starkest way exactly what Elderfield was talking about: individual accountability for misselling and overcharging.
Interestingly, Lane told the committee that the Central Bank would “take all necessary action to hold regulated firms and individuals to account for failures in regard to tracker mortgages” – “failures” and “individuals” being the interesting words.
In the first place there were no failures: the bankers succeeded in doing what they set out to do, which was to deceive their customers and take their money.
As for holding individuals to account, it sounds promising.
Until we remember that the Central Bank knew about much of this crookery going all the way back to 2010 when Bank of Ireland admitted fleecing 2,100 customers.
Deception
The Criminal Law (Theft and Fraud Offences) Act 2001 says: “A person who dishonestly, with the intention of making a gain for himself or herself or another, or of causing loss to another by any deception induces another to do or refrain from doing an act, is guilty of an offence.”
This offence is punishable by a fine and/or up to five years in prison. I can’t find the clause that says the law applies to misselling a second-hand car but not a mortgage.
We know that at least 15,000 people were deceived by bankers, and that they suffered considerable loss as a result. About 100 families lost their homes.
Over the lifetime of these mortgages the amount involved in this attempted bank heist was at least €500 million.
Yet in the six years since the Central Bank discovered this systematic deception we have no evidence of the Central Bank calling in the Garda to investigate what seems, on the face of it, to be multiple and organised crimes.
Legal consequences
Who devised this system-wide scheme? Lane thinks it a coincidence that all the banks did the same thing.
“I am pretty sure they know that the legal consequences of cartel-like behaviour would be devastating for them. I see no evidence of that kind of cartel-like behaviour.”
How does he know that when there has been no criminal investigation?
Who issued the instructions? Who ordered staff to keep schtum when customers were crying on the phone? And will any of these people be prosecuted?
Lane told the committee that it must wait and see what enforcement action will be taken against individuals in the banks.
But we’ve waited at least six years and seen nothing.
And there are words we have not read or heard: law, crime, police. Until we do it is hard to believe that the culture that led to the crash has not survived its consequences.