The Central Bank has pledged that a new regulatory regime will ensure individual banks clean up behaviours that repeatedly fail their customers and will ensure no repeat of the €1bn tracker mortgage scandal that rocked the Irish lenders in the past year.
It follows a report, called Behaviour and Culture of the Irish Retail Banks, by the Central Bank, commissioned by Finance Minister Paschal Donohoe in the aftermath of the tracker mortgage furore.
The report into AIB Group, Bank of Ireland, Permanent TSB, Ulster Bank Ireland, and KBC Bank didn’t name individual banks and found that some had better plans than others, but said all five Irish lenders had “considerable distance to travel” in placing consumers top of their priorities.
Banks will be expected to act on individual assessments. It comes after the banks face programmes to make cost savings, automate bank branches, and transfer more procedures online.
Many shareholders at banks’ annual meetings have complained about poor service and automation at bank branches.
The study aims to help introduce a regulatory regime to make individual senior bankers responsible for future failures at their banks and make it compulsory for lenders to publish more information on their financial products, including information if rival lenders offer better rates.
However, consumers were not at the top of concerns of senior managers, the report found, possibly because lenders were still “fire-fighting” crises following the recovery from the banking crisis and the bailout of the banking system.
“More specifically, we found that two important prerequisites for successful transformation were not met in all instances. Collective understanding of what consumer focus actually means and what it requires in terms of behaviours,” it said.
“This collective understanding was not present in each case. It is imperative that all banks develop this shared ‘consumer compass’ without delay,” the report said.
“In other instances, banks are well underway in integrating the consumer focus in organisational structures and processes. Yet even these banks still have a considerable distance to travel to fully embed a consumer-focused organisational culture,” it said.
Instead, top managers were overly optimistic about the steps required to bring in change and should delegate decision making, the report found.
“And while efforts have been made, it is clear that consumer-focused cultures in the banks remain under-developed, and that banks need to overcome obstructive patterns of behaviour in order to transition to maturity,” it said.