ECB: Ireland’s Central Bank must enforce tracker mortgage redress

Banks that ripped off tracker mortgage customers could be investigated by the European Central Bank for failing to control financial risks and internal misconduct.

ECB: Ireland’s Central Bank must enforce tracker mortgage redress

The prospect of Irish banks paying out compensation to customers and fines over the scandal has raised the likelihood of the ECB intervening, particularly over supervisory concerns.

Estimates suggest the scandal could cost the banks €570m . It is now thought more than 30,000 homeowners were overcharged.

The Central Bank, banks, and Finance Minister Paschal Donohoe will this week issue updates on customers wrongly moved off the rates.

Mr Hayes wrote to the ECB in October asking if any “systematic risks” could arise in the banking system and if it would intervene.

Daniele Nouy, chairwoman of the supervisory board of the ECB, said it is up to the Irish Central Bank to take enforcement action. She says there is no indication the issue may pose a systematic risk, but the ECB may still intervene.

“At the same time, any failure by credit institutions to comply with their obligations towards their customers may have prudential implications, which would raise supervisory concerns for the ECB,” said Ms Nouy.

“The financial implications for credit institutions that may be required to pay compensation for the damage suffered by their customers, or that may be subject to sanctions imposed by the Central Bank of Ireland for breaching their contractual obligations towards their customers, would raise supervisory concerns, as would whether banks hold sufficient capital against operational/conduct risk, as well as the adequacy of banks’ governance and internal controls for preventing misconduct.”

Mr Hayes said the scandal could raise supervisory concerns. which would force the ECB to act against banks.

“There is rightly going to be heavy fines for Irish banks and compensation will have to be paid to customers who have been wronged,” he said.

“The ECB has confirmed that it is ready to deal with the fallout if the fines becomes so substantial for banks that they would not hold enough capital against their operational risk.”

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