Minister to force banks to pay compo; Government to up pressure over tracker mortgage scandal

Finance Minister Paschal Donohoe is to bring forward a range of measures tomorrow aimed at forcing banks to fully compensate thousands of customers wrongfully removed from their tracker mortgages.

While Central Bank governor Philip Lane said those affected will be repaid and compensated by Christmas time, the Government is not convinced and is to increase pressure on the banks to resolve the scandal.

At a Cabinet meeting last night, Mr Donohoe made it clear that the previously “deferential” attitude towards the banks is at an end. He will make a major announcement tomorrow, several ministers confirmed.

Mr Donohoe told ministers that, in addition to the 13,000 cases that are known, there are 7,000 further cases where agreement has not been reached between the Central Bank and the banks.

Ministers have told the Irish Examiner that one of the options under consideration is subjecting senior bankers to fitness and probity evaluations and possibly using that to force some from their posts.

Just one of the three banks, Permanent TSB, offered an apology to affected customers following a meeting with Mr Donohoe at the Department of Finance yesterday. Neither Bank of Ireland nor KBC made any conciliatory comments following meetings with the minister.

Permanent TSB was also the only one of the banks to commit to deliver redress to its affected customers.

“I can’t comment around the operational plans of my competitors. Certainly, the desire of Permanent TSB is to do that, yes,” said chief executive Jeremy Masding.

It has also emerged that the Government will accept a Fianna Fáil bill on the tracker mortgage issue this week.

The bill calls for “a thorough investigation” as to how the tracker scandal occurred and a probe into whether there was any “co-ordination, formal or informal, across the industry”.

Any offences must be reported to Revenue and gardaí, among others, it says, and extra powers should be given to the Central Bank.

The Government should also vote against the reappointment of directors to the banks and introduce legislation to stop repossession proceedings on tracker-related mortgages until all affected customers are redressed, states the bill.

A spokeswoman for Mr Donohoe told the Irish Examiner the Government’s view is that the general thrust and objective of the Fianna Fáil motion can be accepted.

During his meetings with the banks, Mr Donohoe accused them of “dragging their feet” over their failure to resolve the scandal, which has come at a “real human cost”.

Mr Donohoe warned that the behaviour of the banks in relation to removing people from tracker mortgages was “completely unacceptable”.

In a Government statement, he said it was “very disappointing” that, despite the significant management and board changes that have taken place since the financial crisis, there “still seems to be a cultural issue with some of the banks”.

Mr Lane said there is no upper limit to the amount of compensation banks will have to pay customers they wrongly removed from tracker mortgage rates.

He said banks have paid out €163m in redress and compensation thus far.

“We think the vast majority of those cases will be paid out before Christmas,” he said. “However, we continue to press the banks to expand their coverage to make sure that all those affected are included in their schemes.”

Financial adviser Padraic Kissane, who is helping customers, was reluctant to believe that bankers would commit to change, admit their wrongs, and fully compensate customers. He believes as many as 30,000 customers have been ripped off.

Speaking to RTÉ, Mr Kissane said banks had refused to fix the problems for years and he questioned how suddenly it would all be resolved in a few weeks.

“I’m waiting to see, you’re asking leopards to change spots,” he said, adding that there was a lot of “resistance and condescension” among banks.