The State’s remaining 130,000 tracker mortgage borrowers may have questioned the value of such loans in recent years, after the European Central Bank (ECB) hiked rates to fight inflation.
But ECB rate cuts since last June have now pushed your typical tracker rate back to 3.9 per cent – one percentage point above the official lending rate – to bring it in line with the most competitive 10-year fixed rates available in the market.
Tracker customers can look forward to at least three further quarter-point reductions over the course of this year, according to economists. These include thousands whose banks were forced by the Central Bank to put back on such products following a drawn-out examination into an industry-wide scandal that officially ended in 2019.
The watchdog subsequently imposed €279 million of fines on seven lenders for scores of regulatory breaches, going back to 2008, when banks stopped offering cheap tracker loans as their own funding costs spiralled during the financial crisis.
The number of individuals pursued to the end by the Central Bank to date: one – former PTSB chief executive David Guinane.
The chairman and sole member of the inquiry into Guinane, UK barrister Peter Hinchliffe, said on Wednesday he has found that, “on the balance of probabilities”, the former banker participated in PTSB’s failure between January 2009 and April 2010 “to ensure that it acted fairly in the best interests of its customers”.
While PTSB admitted to 42 regulatory breaches in a €21 million tracker settlement with regulators five years ago, Guinane was found to have participated in one contravention: of part of a general principle of the Consumer Protection Code that requires firms to act “honestly, fairly and professionally in the best interests of its customers and the integrity of the market”.
[ Ex-PTSB chief David Guinane breached consumer code, inquiry findsOpens in new window ]
To be clear, Hinchliffe said there was no finding of dishonesty against Guinane – or that he intended to harm customers.
The smoking gun? A three-word response – “okay to that” – Guinane sent in an email to a colleague on January 19th, 2009, when asked to sign off on a strategy, presented to him on foot of internal legal advice, on how to deal with a group of customers.
In brief, the ambiguous wording of certain loan contracts raised questions about whether borrowers were entitled to move back to their original tracker margin after a fixed period. The advice to Guinane was that customers who contacted the bank requesting the original margin should be offered the rate they believed they were entitled to.
It must be said that PTSB moved in early 2010 to reconsider its narrow position following engagement with regulators and remediated 234 borrowers affected by its previous stance. If only it and other banks had been as quick to acquiesce to supervisors on a host of other disputed groups of customers in the years that followed.
Guinane reiterated this week that he believes that he has been singled out by the Central Bank for events that happened more than 16 years ago and plans to appeal the “fundamentally flawed” findings. Ailbhe O’Neill, SC, for the regulator’s enforcement division, denied during a sanctions hearing on Wednesday that he was scapegoated.
“It’s never been suggested that Mr Guinane cooked up this policy or that he intended to injure customers or anything of that nature,” she said. “But he played an instrumental role. He wasn’t a cog in the wheel. The fact that other individuals also played a role doesn’t mitigate his involvement in any way.”
But what will the Irish Financial Services Appeals Tribunal (Ifsat) make of the inquiry’s final decision – including potential sanctions – when it comes? Ifsat issued a scathing judgment less than a year ago on how regulators vetted a finance executive for a fund board position.
Hinchcliffe’s own words this week, that Guinane “was entitled to receive better support” from PTSB’s then parent Irish Life & Permanent, will be a key element of any appeal.
Meanwhile, there is nothing to suggest that any other banker is still being pursued by the Central Bank for their role.
Asked about this by my colleague, Peter Flanagan, on Friday, Central Bank governor Gabriel Makhlouf said: “I don’t know how many historical cases are still left to be looked at, but it’s fair to say we’re now in the stage of completing a lot of that historical stuff.”
Observers, including some former central bankers this column has spoken to in recent days, say that pursuing individuals for more egregious tracker-related breaches in the years after Guinane left PTSB in 2012 may expose shortcomings in regulators’ handling of the industry debacle.
The Central Bank is known to have backed off in certain instances when banks threatened legal action – before the government forced bankers and regulators to properly tackle the scandal in late 2017 amid public uproar.
The new senior executive accountability regime (Sear) that came into force last July, which imposes clear responsibilities on specific executives in firms, also allows the Central Bank to draw a line in the sand.
“This will make it easier to enforce against individuals in future, as it puts the onus on them to make sure they are getting not just legal advice, but also – importantly – advice on compliance obligations, when making decisions,” says Kian Caulwell, head of financial services consulting at Mazars Ireland. “They will also have a responsibility to prevent further harm to customers when an error or failing is identified.”
But the pursuit of individual accountability on trackers is likely to end with a case in which the person deserves some sympathy.
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