Fast-and-loose finance industry
The Central Bank’s (CB) deputy governor Ed Sibley yesterday called for bank executives and directors to be held to account for overcharging at least 20,000 mortgage customers over recent years. Speaking in Dublin, Mr Sibley said the bank is doing the groundwork so it might open an enforcement investigation into the State-owned AIB as part of an industry-wide examination of the tracker mortgages. That statement, on the face of it and by Irish standards of accountability, seems plausible and as much as might be expected. However, what it really shows is how detached from Seán Citizen’s world our financial watchdogs remain. Remember, Mr Sibley said he expects “all the main banks to be subject to CB enforcement investigations”. In a world where financial regulators — and their political masters — took the job of protecting citizens as seriously as they should those investigations would have ended years ago. Effective sanctions would have been imposed and maybe, just maybe, the toxic culture unearthed at our banks might be on the wane.
The reality is that over the last decade those caught up in the 27,500 cases of tracker extortion were as likely to get help from the Lifton Sea Scouts had that group kayaked from West Devon to try to resolve the issue as they did from consumer protection laws. Until very recently they were left high-and-dry no matter how dire their circumstances were made by the banks. That the 27,500 figure, offered just this week and one that may not be final, is just the latest in a continuum of exploitation shows how very loose, how very haphazard Central Bank supervision and banking ethics must have been.
That there is no Central Bank or Pensions Board investigation into how so many private-sector pension schemes collapsed in the last decade or why Irish variable rates are so far above ECB rates hardly suggests our regulators have the necessary enthusiasm for confronting the sector either.
Equally, details of the Registrar of Credit Unions investigation into Charleville Credit Union (CCU) published in recent days show that sector is as capable of rash lending as the banks. Lending policies at CCU have been a cause of concern for over a decade and led to an investigation that meant a liquidator was appointed. At one point the credit union’s top 100 loans accounted for 42% of borrowings. An independent review in 2007 uncovered a list of “large business/property-related loans” to 10 members which amounted to €4.1m,
almost 10% of the loan book. Exacerbating the exposure of members’ funds, most of these loans were not repaid as was scheduled. Though almost historic now this contributed to bad debt provisions of €7.1m made in 2010 which reduced the credit union’s reserves from 10.1% to 0.4% in 2009. Credit unions have a 10% reserve requirement but CCU has not met that obligation since then. Just as was the case when Ireland’s banks fell off the cliff it is fair to ask what CCU’s
auditors PwC were doing during this free for all.
The recurring theme in all of these issues is deference. We may imagine ourselves independent but any republic that does not have the confidence — or gumption — to police the financial sector firmly almost deserves what it gets.