National Irish Bank is to return £131,166 plus interest to 370 customers after two inquiries into allegations of improper interest- and fee-loading by the bank. Its chief executive, Mr Grahame Savage, yesterday offered the bank's "unreserved apologies" to the customers.
He said that no one in the bank had yet been disciplined in relation to the overcharging, adding: "We won't shirk any issue. In the fullness of time there may be disciplinary action." The customers affected were mainly personal and small business clients, and an inquiry by the Garda Bureau of Fraud Investigation into the charges levied on their accounts is continuing.
NIB estimates that it will spend £4 million this year on its own investigations and other inquiries by official inspectors and an authorised officer, who are investigating the overcharging allegations and the unconnected controversy surrounding the bank's sale of offshore bonds.
Mr Savage was speaking at a press briefing at which details of an Arthur Andersen report on interest-loading by the bank were disclosed. The report dealt with interest charges at five branches: Carndonagh, Co Donegal; Carrick-on-Shannon, Co Leitrim; South Mall, Cork; Walkinstown, Dublin; and Blanchardstown, Co Dublin. The periods examined varied from branch to branch, but averaged two to three years and were all between October 1987 and May 1993. The periods are those referred to in an RTE report last March, which first alleged interest-loading by the bank.
The Arthur Andersen report found that of interest charges totalling £228,715, which were debited by the branches during the periods examined, charges totalling £96,350 required explanation.
With regard to £41,238 of this, it "was not possible to establish a basis" for the charges. In many cases, documentation no longer existed. With regard to a further £55,112, the interest amendments were imposed to charge for management time spent on the accounts. Such charges should have been imposed as fees rather than interest, Mr Savage said.
He continued: "Following the work of Arthur Andersen, National Australia Group's internal investigation team tested interest-charging practices across the National Irish Bank branch network, covering the 10-year period since 1988, and found that a total of £34,816 lacked sufficient supporting rationale." National Australia is NIB's parent bank.
The amounts uncovered by the two investigations will now be reimbursed with interest. Of the 370 customers affected, 272 banked with the five named branches. In all, difficulties were found in fewer than 10 branches.
Mr Savage said it seemed, from "anecdotal" evidence, that managers might have imposed legitimate charges on accounts by way of interest rather than fees, as this would be "slightly less obvious" to customers. However, this was not proper procedure. The interest-loading had not been motivated by managers wanting to increase the profitability of their branches. If that had been the case, the figures involved would have been much higher.
National Australia's internal audit team is also conducting an inquiry into the charging of fees.
Asked about the findings, Mr Ross Pinney, managing director of National Australia Group (Europe), said: "I wouldn't call them grave. It's unfortunate and we accept it happened, but they are isolated exceptions and they happened in the past."
Mr Savage said he believed the picture relating to interest charges was accurate. It was not the case that what was being disclosed was "the tip of the iceberg".
In relation to the ongoing investigation into NIB by the two inspectors appointed by the High Court, Mr Justice Blayney and Mr Tom Grace, Mr Savage said that the bank found itself in a difficult position. While it had always wanted its managers to deal in a co-operative way with the inspectors, it had also said it would support its staff financially in terms of any legal fees they encountered.
