# Are we likely to see Central bank insist on redress scheme ?



## zxcvbnm (18 Apr 2020)

Hi Brendan 

You mentioned the central bank still has it in its remit to force AIB to implement a full redress scheme like last time. 

Do you have any general info on this process works ? 

For example, 
Can we expect an official announcement from the central bank saying they are or are not getting involved? 
Why would / Would not the central bank  get involved? 
Do they look for some specific  criteria to be fulfilled? 
Would that mean they simply overrule the ombudsman’s solution?


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## Brendan Burgess (18 Apr 2020)

I hope I didn't say that.

The Central Bank is actually limited in its legal powers. It could not force AIB to implement a full redress scheme.

However, they could use moral suasion to encourage them to do so.

I have absolutely no doubt that the CB persuaded, I might have mistakenly said "forced", AIB to send out the €1,615.

The Central Bank will not discuss the affairs of a regulated entity in public.

Brendan


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## zxcvbnm (18 Apr 2020)

Hi Brendan

It was from a post you made earlier this morning. I have pasted your line below.

_"Of course, the Central Bank could insist that AIB  apply the Central Bank redress scheme to those impacted which would go further than the Ombudsman ruled."_


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## Brendan Burgess (18 Apr 2020)

Thanks.

I will edit that. That is too strong. They can't insist.

Brendan


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## zxcvbnm (20 Apr 2020)

I'm just revisting this one again after further thought as I think it is important.

So what is exactly the central banks role from here on in? 

Going by press articles it seems AIB will be liaising with the CB somewhat in coming to an appropriate solution. But going by Brendan's statement above, the CB have no legal powers other than moral suasion. (I'm not sure moral suasion is all that effective with a body who seems to have no moral compass in the first instance)

So while their legal powers may be imited, in a practical sense, what role if any will the central bank have from here on in?

I'm assuming extrapolating to v simiar cases to Karens will be straightforward. Where it may be get trickier is how do AIB extrapolate to cases that are not as clear cut? (I'm thinking where people lost their property)

Would the CB have an input in those kind of scenarios? Or does AIB have free reign to make any extrapolation they want that suits them for cases that are non-identical to Karens?


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## Brendan Burgess (20 Apr 2020)

zxcvbnm said:


> I'm not sure moral suasion is all that effective



Well let me tell you that it is extremely effective.

36,000 or so borrowers who got material tracker redress - without the Central Bank it would have been about 3,000.

We would not be where we are today without the moral suasion of the Central Bank.  AIB point blank refused to do anything for this cohort until the CB persuaded them to admit to a service failure and open up the opportunity of going to the courts or the Ombudsman. 

Every one of the management team and the non-executive directors are subject to approval by the Central Bank and Fitness and Probity regimes.  The CB could well refuse to approve them for their next position. 

And don't forget about the fines.   The Central Bank could say "OK, Mr Hunt,  we can't force you to treat these customers fairly.  Now as part of our Sanctions Regime we are including your personal behaviour in the investigation.  May we remind you or the possible outcomes?" 

_An individual, meanwhile, may be subject to:_

_A caution or reprimand_
_Disqualification from managing a regulated firm for a specified period, and / or_
_A fine of up to €1m._
_Under the Fitness & Probity regime, the Central Bank also has the power to suspend individuals or prohibit them from working in regulated financial services._






zxcvbnm said:


> does AIB have free reign to make any extrapolation they want that suits them for cases that are non-identical to Karens?



I really can't see how AIB could hope to get away with offering something less than Karen's deal, even if the CB allowed it.  Think about it. If they offered you 6%, you would just go to the Ombudsman and get 12%. 

They might offer an alternative.  A refund based on a margin of 1.5%. 

My own view is that they should simply say "We are offering you 12% of the balance and a further 5% in cash".  If you have suffered extreme stress, we will listen to your application for compensation for that. 

This could be done and dusted for 95% of their customers within  2 months.  

But they will probably do something very complicated which will require an army of staff to process.

Brendan


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## zxcvbnm (20 Apr 2020)

Brendan Burgess said:


> Well let me tell you that it is extremely effective.
> 
> 36,000 or so borrowers who got material tracker redress - without the Central Bank it would have been about 3,000.
> 
> ...



Ok. Interesting. Looks like I underestimated the moral suasion of the Central bank, which is good news.

I was coming from the angle that if the CB had no legal power over AIB then would they simply have to hope AIB get on board with their recommendations. I didn't fully appreciate the other tools which in practice the CB could use to influence AIB.

I certainly agree  AIB will have no option but to extrapolate the ombudsman's decision for broadly similar cases to Karen. I guess my concern was how much free reign will AIB have to take "creative" extrapolations  for cases that are quite different to Karen's (namely loss of property). 

But by the sounds of it, it seems the CB is there to police it to a degree.  So that is good news.


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## misstealeaf (20 Apr 2020)

I’d say discussions between the CBI and Aib are at an advanced enough stage otherwise I would be surprised that Aib went public so quickly
With a defined timeline for paying redress. Particularly in current covid 19 circumstances where delays are being exacerbated. Aib would want to be fairly confident that they have things near a conclusion before going public. I don’t think the CBI will interfere too much for the basic cases but I think they would have an expectation that they will be treated and afforded the same protections as Karen. I wouldn’t be expecting any major deviations from the Karen case for the vast majority of the cohort.


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## Brendan Burgess (20 Apr 2020)

misstealeaf said:


> I would be surprised that Aib went public so quickly



They had little choice

The 35 day time limit for appealing to the High Court was up, so they had to appeal or pay Karen.

Brendan


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