Elderfield talks tough on bank fines

BANKS and insurance companies will have to pay tens of millions of euro in compensation to customers when up to 20 investigations into overcharging are completed by the Financial Regulator in the coming months.

And Financial Regulator Matthew Elderfield is looking for a substantial increase on the €5 million maximum fine that can be imposed on financial institutions found to be overcharging or guilty of slack practices.

Mr Elderfield told the Irish Examiner that each financial institution being investigated for overcharging has been given a deadline by which time repayments must be made.

“We have set a deadline, we wrote to all those banks and insurance companies and told them not to drag this out,” he said.

Mr Elderfield would not be drawn on the scale of the overcharging but said: “Some case are pretty modest, other cases run into millions.”

Already, Anglo Irish Bank’s chief executive Mike Aynsley confirmed the bank is investigating overcharging on loans taken out between 1999 and 2004. “We’re thinking at this stage that it (the cost) is more likely to be in the €30m to €50m range. It’s a lot of money but certainly not as big as the billions that we normally talk about in this bank,” Mr Aynsley said in September.

Mr Elderfield confirmed that the Central Bank is to take a far tougher stance with firms that overcharge. He said enforcement is an important tool: “The key thing is to make some examples and encourage others to do better.”

He said they have a range of options and can disbar people permanently or temporarily from the industry. “We plan to do more fining. Our cap right now is €5m, and we are making a request to the Government to increase that. I won’t say what we have asked for but we are hopeful in the second banking act in the autumn we will have the ability to take tougher fining measures. We want a significant increase,” he said.

Mr Elderfield said that they will also take more financial institutions to court, if settlements on the Central Bank’s terms cannot be agreed.

“I’d like to see higher fines and I’d also like to see better clarity,” he said. You want to have it so it’s very clear, so that you guys in the media can interpret it, and can explain what the problem is.

“What that means is we have to be more willing to say we are not going to settle. If you don’t take our fine and our formula of words we are going to take you to inquiry. We are going to have to have a better legal risk appetite and be willing to lose some cases,” he said.

Mr Elderfield said whistleblowers are an important ally to the regulator and praised the actions of whistleblower and former group internal auditor at AIB Eugene McErlean.