The culpability of senior bankers working in the State's main lenders will be investigated as part of the Central Bank's enforcement actions over the tracker mortgage scandal, governor Philip Lane has said.
Mr Lane appeared before the Oireachtas finance committee on Thursday to discuss progress regarding the investigation and, specifically, whether all affected customers have been identified, returned to their correct rate and received appropriate redress.
Enforcement investigations are currently under way into Ulster Bank, PTSB, and two other as-yet-unnamed lenders. However, Mr Lane said he expected all of the State's main banks to face enforcement investigations.
“Enforcement investigations are detailed and forensic, and routinely involve the scrutiny of thousands of documents and the conduct of interviews as part of the investigative process, to establish the exact circumstances of matters under investigation,” he said.
"In our enforcement investigations, the Central Bank will consider all possible angles, including potential individual culpability.
“While we are investigating, it is also important to remember that the board members and senior personnel of lenders have significant legal obligations to report potential regulatory breaches to the Central Bank.”
The Central Bank can fine an individual up to €500,000 for regulatory breaches carried out before 2013, which would cover the period when most of the tracker-related issues occurred. The fine was doubled to €1 million after that date. The regulator can also ban a person indefinitely from acting in a management position of a regulated financial firm.
‘Only right’
Central Bank director general for financial conduct Derville Rowland said the regulator takes the view that "it is only right" to investigate individual culpability and that it would be those senior bankers who drove the scandal who would be scrutinised.
“You don’t go after juniors,” she said. Often there is a lot of paperwork and it’s easy to find evidence against the fella that is proximate. That mightn’t be the senior, responsible, directing mind.
“You need the evidence to link them. The evidence is easier to find in respect of the entity. Management participating in the breach will be under scrutiny, and of course from a fitness and probity perspective.”
Mr Lane also provided an update as to the numbers involved in the scandal. As of the end of 2017, he said lenders had been “forced” to pay €316 million in redress and compensation.
More will follow, he continued, as the remainder of the 33,700 customers involved have their cases adjudicated upon.
“The result of this intensive engagement is that the issues around the inclusion of disputed groups of customers identified to that point have now been resolved to the satisfaction of the Central Bank,” he said.
Of the initial group of 13,000 customers accepted by lenders up to end-September last, 74 per cent have now received their redress and compensation.
The majority of the outstanding customers will receive theirs between now and the end of March, with the remainder receiving payment by the end of June. Some €181 million has been paid out to date to these customers, with more to follow.
Of the 13,600 additional customers accepted since October, 29 per cent have received redress and compensation of €87.9 million. “We expect the remainder to receive their redress and compensation between now and end-June,” said Mr Lane.
Satisfied
Overall Ms Rowland said about 51 per cent of all the affected customers had been compensated. Mr Lane said he was broadly satisfied with the co-operation of the banks at this point.
He said the “vast majority” of customers had now been identified but that the regulator would continue to “review, challenge and verify the work undertaken by the lenders and complete our intrusive on-site inspection programme”.
Mr Lane also said lenders “are counting the cost of this scandal” through redress and compensation owed, as well as “significant administrative costs” to conduct the examination in line with the regulator’s requirements.
“The main lenders have now made combined provisions of circa €900 million in respect of the examination, broken down as approximately €600 million for redress and compensation and €300 million for costs, while one lender recently disclosed that it had up to 500 people working on its redress scheme,” he said.
