Redress and compensation were made by the end of last year to 12,900 customers who paid too much for their loans. They were identified by a Central Bank review and Mr Donohoe warned that banks should make further progress by March or face action.
The minister said: “This examination has laid bare the fact that very poor cultural and governance issues still exist within lending institutions in Ireland post the banking crash, and that if banks are to regain the trust of customers then they must be prepared to change their attitudes significantly.
“Customers of these lenders have been treated appallingly and in some severe cases have even lost their homes, either directly or indirectly, due to the shameful behaviour of their lenders. This behaviour is simply unacceptable.”
The minister added: “As at end December, approximately €250m in redress and compensation has now been paid to 12,900 impacted customers as identified from the industry-wide examination, and this includes payments to 3,700 impacted accounts identified since last September.”
This is on top of €47m paid before the start of the Central Bank’s industry-wide examination of 15 lenders two years ago. The mistake affected major financial institutions including Ulster Bank, Bank of Ireland and KBC.
All the banks have offered apologies.
Mr Donohoe told a meeting of the Joint Committee on Finance, Public Expenditure and Reform and Taoiseach that he expects a further update from the Central Bank on the basis of data at the end of March: “If further sufficient progress regarding the payment of redress and compensation to impacted customers has not been made at that point, the Government will be prepared to consider further possible actions.”
Customers have been treated appallingly due to the shameful behaviour of lenders, Mr Donohoe said.
“The prompt payment of remaining redress and compensation payments to outstanding impacted borrowers is now a key requirement, and indeed it will be a practical demonstration of the regret that banks are now expressing for the harm they have inflicted upon their impacted tracker borrowers.”
Meanwhile, the Government has agreed a process to appoint representatives on the boards of state-owned banks. Public interest directors were appointed to banks during the recession, in part to act in the consumers interest. The Public Expenditure minister will now use the public appointments system to set up a panel of new directors, who may be placed on the boards of AIB, Bank of Ireland and PTSB.
No new appointees have been made since 2010.
Government partners the Independent Alliance said the changes would result in more consumer-type representatives for boards.
The final two ministerial nominees on the boards of these banks retired at the end of last December (Michael Somers (AIB) and Tom Considine (BoI)).