By Pádraig Hoare
Serious questions remain about the culture of banks and the extent to which boards and senior management are really living up to their promises of putting the customer first, the governor of the Central Bank has said.
Speaking at the Institute for International and European Affairs in Dublin on the current macro-financial environment, Philip Lane said the tracker mortgage scandal had a negative impact on public trust and confidence in lenders, “which was already fragile in the aftermath of the economic crisis”.
“We are undertaking behaviour and culture assessments of each of the five main lenders — AIB, Bank of Ireland, Ulster Bank, PTSB and KBC — and will report our findings to the minister for finance in June. Depending on what we uncover, we may require certain mitigating actions at our lending institutions,” he said.
He said action taken after the review could include requiring lenders to conduct an annual internal audit of culture; requiring the boards of the lenders to set up ethics sub-committees, and requiring that incentive schemes do not reward inappropriate behaviour to customers.
He said the housing market was moving in line with economic fundamentals but warned that there could be unforeseen factors that lead to another fall in prices.
Our analysis that house prices have moved broadly in line with fundamentals is fully consistent with a material risk of a reversal in house prices: buying a house is certainly not a one-way bet. In particular, international and domestic factors may trigger fundamentals-driven corrections in the housing market.
In relation to mortgage arrears, Mr Lane said not enough had been done in addressing long-term arrears.
“While sustainable solutions can be put in place quickly for engaged borrowers that are in early arrears, the resolution of long-term arrears has been a particular challenge,” he said.
"Given non-performing loans cause such considerable distress to borrowers, recent reforms of the insolvency framework are important “to give borrowers a second chance”, he said.
Data shows mortgage rates remain considerably above the EU average. The Central Bank said the fixed and variable rate for new agreements was 3.18%. The equivalent euro area rate was 1.8%. Total renegotiated mortgages amounted to €574m in January.