‘Radical culture change’ needed in Irish banks

A “radical culture change” is needed if customer trust in the banks is to be repaired and restored, according to the deputy governor of the Central Bank.

Despite material changes in banking in recent years, there remains a “clear necessity” for the banking sector to undergo “further transformation”, Ed Sibley, the financial regulator’s deputy governor in charge of prudential regulation, told the Banking and Payments Federation Ireland national conference.

“It is evident that, in numerous ways, the banking industry has consistently failed its customers over the last decade. This is evident both in Ireland and internationally and is not sustainable. One of the fundamental expectations of banks is that they can be trusted; trusted with the funds that they hold, trusted that they will be there in the morning, and trusted to respect the primacy of their customers’ needs,” he said.

“Restoration of this trust is necessary for the delivery of the Central Bank’s vision for financial services as a whole, including banking — specifically, that it functions well, is well-managed and well-regulated, and it serves the needs of the economy and its customers over the long-term. Undoubtedly, rebuilding trust is in all of our interests.”

Mr Sibley said the soundness and prudence of the banking systems was shown to be “entirely misplaced” over the past decade — noting the Libor rigging scandal in the UK and the mis-selling of payment protection insurance.

He said there have been numerous examples of problems not being addressed when first raised, where otherwise the costs to customers could have been much lower and prevention or earlier fixing of the problem could have been accomplished.

“It was, and still is in cases, prevalent in the approach to addressing non-performing loans. It has led to catastrophic failings in dealings with customers impacted by the tracker mortgage scandal, which has done further lasting damage to the reputation of the Irish banking sector,” said Mr Sibley

At least 20,000 borrowers have suffered due to being incorrectly moved onto more expensive loans by the banks. The financial advisor who exposed the scandal, Padraic Kissane said the number will “without a shadow of a doubt” reach 30,000.

On Thursday, the Central Bank was accused of a dereliction of duty by advising affected customers to take legal proceedings themselves. Governor Philip Lane said direct legal enforcement proceedings could be too cumbersome and lead to lengthy delays in the overall scandal being fully unravelled fully.

More than the 23 people already confirmed to have lost their homes will be included in the final figure, he added. Just 3,300 have received redress and compensation, up 700 in the last six months.

Fianna Fáil finance spokesman Michael McGrath called the tracker mortgage scandal “one of the greatest consumer rip-offs in State history”.

The scandal occurred when thousands of tracker mortgage holders were wrongly moved onto more expensive loans. Despite a majority of banks admitting wrongdoing, there are still customers who have not been moved back onto the correct rate.

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