AIB sets aside €190m tracker compensation

AIB has set aside €190m to compensate customers wrongly moved off tracker mortgage loans. The bank also admitted 14 people had lost their home as a result of the error.

The bank was one of 15 institutions which wrongly moved upwards of 20,000 people off tracker mortgages onto more expensive loans.

Following a request from the Oireachtas Finance Committee, AIB said that it identified 3,003 of its own accounts affected by the scandal as of December 16 — but admitted the figure may be higher.

Of those 3,003 accounts, AIB confirmed that 14 people had lost their homes “because of the application of an incorrect rate and an assumption that an advanced forbearance solution would have been available”.

The tracker mortgage scandal broke two years ago when the State-controlled Permanent TSB set aside tens of millions in its accounts for a potential redress scheme in the run-up to a share sale. PTSB and its former Springboard unit were subsequently fined by the Central Bank.

It then emerged that as many as 15 banks had also been involved, and while Central Bank governor Philip Lane recently told an Oireachtas Committee 15,000 customers had been affected, sources now suggest it could be upwards of 20,000.

The list of the banks under investigation includes AIB and its EBS and Haven units, Bank of Ireland, Dilosk, Permanent TSB and its former Springboard unit, Ulster Bank, KBC, Danske and Pepper Asset Servicing, ACC, Bank of Scotland, Irish Bank Resolution Corporation, Leeds Building Society, Start Mortgages, and Stepstone.

In a letter to the committee, the office of AIB CEO Bernard Byrne confirmed that although 3,003 accounts had been identified, it expected more people to emerge this year. It said that of the 3,003 accounts, 2,230 had been sent redress letters and compensation to date. The remaining cases will be dealt with this year.

AIB Group has provided €105m for accounts where either the interest rates of tracker mortgages “were not in accordance with the relevant contractual documentation or where the group will offer revised terms on mortgage accounts”.

It said the €105m mainly related to the refunds of interest, as well as compensation to customers for time value of money, which is the concept that money available in the present is worth more in the future due to its potential earning capacity.

AIB Group has also provided €85m for the “accounting impact of a constructive obligation”, under International Accounting Standard 37.

The bank said it was too early to say with certainty when it would finalise its compensation package as further payments to customers could be required. It would wait until the final outcome of the investigation, AIB added.

The tracker scandal led to ferocious criticism of the Central Bank last month when Mr Lane appeared before TDs and senators with committee chairman John McGuinness accusing the Central Bank of being afraid of the banks, a charge Mr Lane vehemently rejected.