Business

Behaviour of banks in mortgage scandal 'remnant of banking crisis'

Irish Central Bank governor Philip Lane
Irish Central Bank governor Philip Lane Irish Central Bank governor Philip Lane

IRISH banks involved in the tracker mortgage scandal have been accused of behaving in the same way as they did before the financial crisis.

TDs launched a scathing attack on the banks' culture after a report by the Central Bank into the tracker scandal revealed that executives were operating in a way that is a "remnant of the crisis".

It has also emerged that the number of people impacted by the scandal has risen to 38,400 with €580 million paid in redress and compensation.

Central Bank governor Philip Lane appeared before the Joint Oireachtas Finance Committee on Thursday and described consumer focus in the Irish banks - AIB, Bank of Ireland, permanent tsb, Ulster Bank and KBC - as "underdeveloped".

"To give a flavour of such patterns, we saw executives continuing to operate in a fire-fighting mode remnant of the crisis.

"We saw too much focus on short-term and legacy issues, with insufficient attention paid to consumer interests. We discovered some reversion to 'command and control' in leadership styles."

Out of the 38,400 affected customers, 7 per cent remain without an offer of redress and compensation.

Central Bank chiefs told the committee it is "exerting significant pressure" on one remaining lender to finish its compensation process.

Derville Rowland, Central Bank director general, said it is also checking the compensation and redress process to ensure it is in accordance with rules.

"We have been very strict with the banks to get on with it to the ability that they can," she said.

"Some of them have limitations in this but four out of the five banks are making substantial progress."

Ms Rowland said one bank is responsible for "the bulk" of outstanding customers who have not been compensated, but she would not reveal which one.

Fianna Fail TD and chairman of the finance committee John McGuinness said: "Given the fact that we are 10 years since the bailout, it is absolutely horrific that right now banks are behaving almost the same way as they did leading into the bust.

"Same arrogance, same method of operation and no changes to their structures.

"The report tells us that the banks are still getting away with it. They are still treating customers badly.

"Consumers would be utterly shocked that this report is now being presented and there is further work to be done in relation to sanctions."

Sinn Fein senator Rose Conway-Walsh said: "It's shocking to think that there are executives in the banking system who are paid hundreds of thousands and there's banks making billions and they don't even have clear lines of responsibility.

"We are not talking about a creche or a voluntary organisation, we are talking about a massive organisation, and it really speaks about the toxic culture where no one knew who was doing what or who was responsible for anything.

"It is bizarre to read a report like this of the culture.

"The language used does a disservice to the people who have been most impacted by the toxic behaviours and the lack of any type of management skills, even the most basic things.

"You talk of insufficient attention paid to consumer interest - the language in it is feeding into a culture of 'let's protect the institution'."

Mr Lane added that the bank culture "has to change", but action is being taken against the banks.

Sinn Fein TD Pearse Doherty called for the Central Bank to take action against the banks which are "dragging their feet".

It was also revealed that the Central Bank of Ireland has received more than 100 Brexit-related applications to operate.

The applicants intend to sell directly to Irish customers or sell from Ireland into the European Union.

The potential activities include banks, investment firms, trading venues, electronic money institutions, commercial insurance and retail insurance.