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Banking group given multimillion-euro fine over tracker mortgage scandal

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AIB Group has been fined over the tracker mortgage scandal (Julien Behal/PA) (PA Archive)
AIB Group has been fined over the tracker mortgage scandal (Julien Behal/PA) (PA Archive)

One of Ireland’s biggest banks has been fined almost 100 million euro for its role in the country’s tracker mortgage scandal.

AIB Group apologised for the distress and financial losses suffered by customers and described the matter as a “very large stain on the reputation of the bank”.

The Central Bank of Ireland announced that AIB – Allied Irish Banks – has been fined 83.3 million euro.

EBS, which AIB acquired in 2011, has been fined 13.4 million euro.

The fines came as Finance Minister Paschal Donohoe promised legislation on increased accountability in the banking sector would be published before the summer recess.

I have said in the past, and I reiterate today, this matter represents a very large stain on the reputation of the bank

AIB Group chief executive Colin Hunt

AIB is the second largest bank in Ireland with more than 170 branches and approximately 2.8 million customers.

The Central Bank said AIB withdrew its tracker mortgage offering without any “proper regard or concern for the impact on its customers”.

The regulator said a “litany of failings” followed, which saw customers wrongly denied their tracker entitlements while others “lost their tracker rates due to AIB’s deficiencies in its provision of day-to-day mortgage services”.

The Central Bank said the latest fines, announced on Thursday, take the total sanctions imposed on lenders for tracker mortgage failings to 174 million euro.

This is on top of 737 million euro paid to customers in redress and compensation under the Central Bank-initiated Tracker Mortgage Examination.

Underpinning AIB’s failings over a prolonged period of time was a culture of failing to properly consider and recognise the rights of its customers and its obligations to them

Seana Cunningham, Central Bank

AIB Group chief executive Colin Hunt said: “We are deeply sorry for the distress and the financial losses caused by the tracker mortgage issue.

“I have said in the past, and I reiterate today, this matter represents a very large stain on the reputation of the bank.

“It damaged not only the affected customers, but also undermined the bank’s efforts to rebuild public trust and confidence.”

The Central Bank’s director of enforcement and anti-money laundering, Seana Cunningham, said the fines had been imposed “in respect of serious and long-running failings in meeting its obligations to its tracker mortgage customers”.

She added: “Underpinning AIB’s failings over a prolonged period of time was a culture of failing to properly consider and recognise the rights of its customers and its obligations to them.”

The Irish Banking Culture Board (IBCB) described the fines as “unprecedented” and said they reflect the gravity of the Central Bank’s findings but stressed they should not overshadow the human cost of the industry’s failings.

The irony is that AIB and EBS will pass on these costs to their customers. The fact is that not one banker has been held to account to date in any of the banks in relation to the tracker mortgage scandal

Pearse Doherty, Sinn Fein

In a statement, the board said: “In many instances this human cost is impossible to quantify, particularly given the financial impact coincided with the wider national and global economic crashes with resultant negative income consequences for many.”

During Leaders’ Questions in the Dail, Sinn Fein’s Pearse Doherty accused the Government of a “lack of priority” in relation to publishing legislation to hold senior bankers to account.

He said: “The irony is that AIB and EBS will pass on these costs to their customers. The fact is that not one banker has been held to account to date in any of the banks in relation to the tracker mortgage scandal.”

Responding, Mr Donohoe said legislation on the matter had taken time to draft and required “pre-legislative scrutiny” and “much work” from the Attorney General and from his department.

He said: “I anticipate and know I’ll be bringing the final proposals to Cabinet next week, and the legislation will be published before the summer recess.”

The Central Bank said Thursday’s fines are separate to the sums both AIB and EBS have been required to pay to date in redress, compensation and account balance adjustments to impacted customers – 125 million euro and 105 million euro respectively.

The regulator said EBS had failed to properly manage its mortgage services to customers, resulting in breaches of customers’ consumer protection rights and/or contractual rights; failed to adequately warn customers of the consequences of their decisions relating to their mortgage; failed to provide clear mortgage documentation to customers; and failed to handle customer complaints in a fair and consistent manner.

It said AIB had failed to consider the entitlements of customers when it withdrew the tracker mortgage product; breached customers’ mortgage contracts and delayed in rectifying the breach; wrongfully excluded customers’ mortgage accounts from the regulator’s Tracker Mortgage Examination (TME); failed to handle customer complaints in a fair and consistent manner; failed to properly manage its mortgage services to customers; and failed to properly implement the TME’s Stop the Harm principles.

Ireland’s Central Bank began an industry-wide review of tracker mortgages – a type of home loan where the interest rate charged on the loan tracks that of another publicly available rate – in 2015.

The regulator had been identifying and pursuing some lenders in relation to tracker-related issues since 2010, including borrowers who switched from their tracker rate, or lost their right to revert to a tracker rate when they came to the end of a fixed-rate period on their mortgage.

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