Bankers face pay penalty over tracker mortgage overcharging scandal

The Central Bank has expressed its growing exasperation with Irish banks, and has hinted at imposing individual fines and claw backing pay of top Irish bank chiefs if they fail to come into line following their handling of the €1bn tracker mortgage overcharging scandal.

The director general of financial conduct at the Central Bank, Derville Rowland, has called in colleagues from the Dutch central bank to conduct an audit on the “behaviour and culture” of five Irish banks and will weigh bringing in tougher personal controls over individual bank chiefs if their conduct does not improve.

Such controls would be similar to those faced by bank bosses in the UK, which the Central Bank here believes will close remaining loopholes.

Speaking at an industry consumer conference, Ms Rowland said: “Depending on what we uncover, we may require certain mitigating actions at our lending institutions. These could include, for example, requiring the lenders to conduct an annual internal audit of culture; requiring the boards of the lenders to set up ethics sub-committees; and linking incentivisation to appropriate behaviours.”

The comments show growing impatience with the continuing misconduct of the lenders so soon after the banking system was bailed out by the State at the cost of billions. However, senior economist Jim Power said he was “deeply cynical about the whole exercise” of the Central Bank tackling the culture of banks.

“I have lived with banks through the boom, the crash, and now into the recovery, and the behaviour of the banks doesn’t change,” Mr Power told the Irish Examiner. “I cannot see any possibility the regulator will be able to change that.”

He also asked whether the Central Bank was right in bringing in a fellow ECB bank to conduct its review.

In a continuing round of hearings with bank chiefs, TDs and Senators on the Oireachtas finance committee yesterday criticised Permanent TSB and AIB for their plans to sell distressed mortgage loans.

Permanent TSB was accused of “throwing its customers to the wolves” by Sinn Féin’s Pearse Doherty over its decision to sell around 14,000 homes in the overall €3.7bn Project Glas portfolio of 18,000 properties.

In response, Permanent TSB chief Jeremy Masding said it would not be possible to meet ECB requirements to reduce its non-performing loans unless it sold some on.

“When I came to Ireland, the bank had been bailed out to the tune of €4bn. What drives us every morning is to pay that back,” he said.

Committee members lambasted AIB officials for failing to acknowledge the existence of Project Redwood, a distressed loan book said to be worth billions.

Fianna Fáil’s Michael McGrath said it was disturbing that AIB, a State-owned bank, would not tell Oireachtas members about such an important sale.

“You are coming before the national parliament and giving no information,” he said. “There may be no family homes, but there may be farmers, SMEs, retailers, buy-to-lets — we have reasonable and legitimate questions. The lack of openness is stark and remarkable.”

Separately, the country’s leading debt expert said the only solution to the mortgages arrears problem is for banks to write off debt for households who have faced long-term distress, as figures showed the banks were making slow progress in resolving the home loans crisis.

Paul Joyce, senior policy adviser at the Free Legal Advice Centres, said the average amount owed by households behind in their home loan payments for over two years was €77,000 in installments alone.

It was “impossible” to expect any household to pay off arrears of €77,000 and then expect them to pay down the capital, he told the Irish Examiner. He thought it unlikely banks anywhere else would turn their backs on debt write-offs in the face of such a crisis.

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