Eamon Quinn: Banks have long way to go to rebuild trust
The Central Bank has imposed its largest ever fine against Ulster Bank for breaching its regulatory obligations towards tracker mortgage customers. File picture: Sasko Lazarov/Rollingnews.ie
The huge fine levied for the misdeeds of Ulster Bank is the fourth of potentially seven multimillion-euro settlements the Central Bank will strike in its probe into the industry-wide mortgage tracker scandal.
The fine of almost €37.8m is the largest ever handed down and in part reflects the resistance Ulster Bank put up, with its lawyers, in fighting the investigation — and not least the harm it did to 5,940 of its own customers by overcharging.
As in previous cases, some people lost almost everything, with the terms of the settlement revealing the loss of 29 family homes.
In financial terms, the cost of the scandal can be more easily measured. The bill for compensation, redress, and the fines will cost six or seven banking groups, including their subsidiaries, as much as €1.5bn when all the settlement agreements are concluded.
The language used by the Central Bank in condemning Ulster Bank's disregard for its customers echoes that of previous settlements.
Permanent TSB was the first up in 2016 when its former subprime offshoot, Springboard Mortgages, was fined €4.5m for its part in the scandal.
It came too late to stop the loans of Springboard's unfortunate customers from being offloaded to a vulture fund.
Permanent TSB itself was subsequently fined €21m, involving 12 of its customers losing their family homes and the loss by landlords of 19 buy-to-let properties.
Last year, in the same language as used in the Ulster Bank case, KBC Bank was fined €18.3m and berated for bringing "devastating and avoidable" distress on its tracker mortgage customers.
Earlier this month, in a settlement outside the tracker probe, stockbroker Davy was fined €4.1m for the actions of 16 staff, including senior shareholders, in hiding their role in a sale of a bond from a customer.
The Central Bank said that all its enforcement settlements have the same issues: The huge failings by the financial institution to put customers first.
With each emerging scandal, the issue of making senior bank chiefs accountable for the misdeeds of the financial firm looms large.
The fines come after legally controlled investigations into the firms as corporate entities and are not specifically targeted at identifying senior people who endorsed the policies of overcharging.
In October 2020, Derville Rowland, head of financial conduct at the Central Bank, told the Oireachtas finance committee that the regulator regularly liaises with gardaí in its tracker investigation.
Mortgage brokers and bank consumer advocates have highlighted in the how existing products such as cashback mortgages work against the interests of customers.
Peter Lunn, research professor at the ESRI, along with fellow researchers, revealed in 2018 that people can be misled by the trade-offs offered by banks in everyday products such as mortgages and credit cards.
First-time borrowers facing cashback incentives to take out hugely expensive loans are the perfect example of the way banks mislead.
Regulators enforcing a policy of putting the customer first could start by looking at what lenders are allowed to do legally in plain sight.
