Even bankers are blaming the banks, says Isabel Morton
Irish banks and the property industry (such as it is these days) remain inextricably linked.
However, now that their “marriage” has ended up in the divorce courts, the exact nature of their once apparently close relationship may have to be questioned.
Some of the “witnesses” taking sides and spilling the beans are doing so against their own camps.
Last week, I spoke with a banker who questions the morality of many areas of the Irish banking system. At middle management level, he has first-
hand experience of bank CEOs’ modus operandi and the effect it has had on our economy and our daily lives.
“Somewhere along the line banks changed from being conservative lending institutions to being retailers who sold ‘products’ and we were encouraged by the top echelons to sell, sell, sell,” he asserted.
“The ones who took the gravy were the guys at the top. Bonuses of €150,000 to €300,000 and sometimes much more, were a regular occurrence. There were some egos involved and the game at the time was to follow Anglo.”
He claimed that certain questions have yet to be asked, let alone answered. “How many bank CEOs looked at their profit figures towards the last quarter and realised that their executive bonus wouldn’t kick in unless margins or certain profitability jumped up another notch or two by the end of the financial year?
“If we had growth in lending or certain other areas, then our bonuses of 5 per cent would kick in, which would mean that instead of getting a small bonus of €70,000 we might get €250,000. So, how was this done fast? The quickest way was to lend more money into the property sector. The word would go out that the CEO wanted another €100 million lent into property by the beginning of December.”
He mentioned the name of one well-known property developer who “first came through the bank’s doors very late in the day”. (That is, 2005/6.)
“One has to ask whether the banks, in the full knowledge that the property market was overheated, were encouraging developers to get up to their necks in debt because they knew it was their last chance to get the sky-high bonuses they’d become so accustomed to?”
Many of the now bankrupt property developers may remember being given bank approval for large loans in the last few weeks of the financial year, particularly in either 2006 or 2007. They might even have been surprised at the time, to have certain loans suddenly sanctioned.
“Of course, Irish banks are now full of Pontius Pilates, who have washed their hands of all responsibility,” the banker went on. He condemned in particular those “who returned to Ireland having worked abroad and claimed innocence, despite the fact that they had been doing precisely the same things themselves elsewhere.
“Medium level bankers are now terrified of repercussions and bank staff are afraid to do anything for a customer,” he said. “It’s been made abundantly clear by those at the top, that we’ll be hammered for any tiny mistake. We’re afraid to budge. Nobody wants to take responsibility. Where it was once a case of ‘what can we do for our customers?’ Now it’s a case of ‘what can we avoid doing for them?’”
He went on to assert that scapegoats are being sought. “The top brass will use any excuse to come down hard and heavy on a bank employee and if possible, get rid of them. They are bullying people about small, ridiculous stuff, when in fact nobody at the top level is taking the blame for the bigger stuff. After all, where did the real losses arise?”
This banker complained that he could no longer give his customers small increases of their overdraft facilities without running it by “upstairs” and said the entire banking system has slowed down, as everything, however insignificant, must now be requested in writing. “The days when a customer just picked up the phone to ask for something are long gone.”
Bank employees, he said, are disheartened by the endless lies coming from the top. “We don’t even know if they have ever told us the truth. In fact, we don’t know whether to trust them at all. Employees believe that while there is management within the banks, there is absolutely no leadership.”
Homeowners, in his view, deserve to be given every chance of surviving the banking/property crash.
“We have to remove our blinkers and change our way of thinking about mortgage defaults. Perhaps not going as far as Japan, where debts are inherited but if we’re going to give people any chance at all of repaying their loans, we will have to allow them pay interest only for a few years and restructure mortgages for longer periods, perhaps of 50 or 55 years, even if they have to go towards equity in the property, when the homeowner dies.”
One way or the other, it’s time to stop the conflict and agree to marriage counselling, as bankers and homeowners have no choice but to go on living under the same leaking roof.
Isabel Morton is a property consultant
