# Central Bank appearing at Oireachtas Finance Committee now



## Brendan Burgess (4 Apr 2017)

http://www.oireachtas.ie/parliament/watchlisten/watchlive/committeeroom2/



Apparently it's a quarterly engagement and not just trackers.

I will just note the comments relating to trackers in this thread.


Trackers
Motor insurance
Brexit


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## Brendan Burgess (4 Apr 2017)

Governor Lane accompanied by

Bernard Sheridan - Acting  Deputy Governor
Derville Rowland  - Director of Enforcement

*Examination of Tracker Mortgage Related Issues*

Let me begin by stating that I fully share the Committee’s concern about tracker mortgage related issues. Where these issues have arisen, it is clear that lenders have failed their customers. Moreover, I am acutely aware of the unacceptable impact that these failures have had on tracker mortgage customers, from the burden of paying more than they should, up to instances involving loss of ownership of mortgaged properties.

I recognise that Committee members are frequently dealing with such cases in their constituencies and acknowledge the Committee has heard powerful testimony about the effects that these failures have had on individuals and families. We too are aware of these cases from callers to our own public helpline and from our ongoing engagement with consumer representatives, and these important sources of information continue to inform the Examination. The Central Bank is pursuing a comprehensive industry-wide examination precisely to ensure lenders identify _every_ impacted customer, stop the harm, and pay appropriate redress and compensation.

The fair treatment of tracker mortgage borrowers has been a key supervisory and policy focus for the Central Bank over the past number of years.  In line with our mandate to ensure that the best interests of consumers are protected, the Central Bank intervened with a number of lenders over the 2008-2015 period on a range of different issues in relation to tracker mortgages. These interventions ranged from lender-specific supervisory and enforcement actions to, more generally, strengthening the statutory protections for tracker mortgage customers (specifically the Consumer Protection Code and the Code of Conduct on Mortgage Arrears).

During this period, we dealt with a range of lender specific issues resulting in approximately 7,100 customer accounts affected by various tracker issues being resolved prior to the commencement of the Examination. We also intervened in a number of additional cases to prevent detriment to tracker customers before it actually occurred.  Other issues were being actively investigated at the time of commencement of the Examination and are now being dealt with as part of the Examination or, where necessary, have been escalated for enforcement action.






Where appropriate, the Central Bank required certain lenders to offer affected customers the right to return to a tracker rate and/or payment of redress and compensation. The Central Bank also commenced enforcement investigations into tracker mortgage-related matters at Permanent TSB plc and its subsidiary Springboard Mortgages Limited. As a result, these lenders were required to implement a comprehensive Mortgage Redress Programme to address the issues identified.

Although the underlying characteristics of each issue differed, the Central Bank decided to launch a system-wide examination in 2015, due to the nature and potential customer impact of the issues identified. Importantly, the Examination’s scope also now requires a robust review to identify and deliver fair outcomes for all other affected customers, in addition to those cases known to the Central Bank at commencement.





The Tracker Examination is the largest, most complex and significant supervisory review that the Central Bank has undertaken to date in respect of its consumer protection mandate. It has involved an initial review of the total mortgage book by lenders in the relevant period which amounted to more than two million mortgage accounts._[There are only 600,000 mortgage accounts, only half of which are on trackers - Brendan ]_In line with our commitment given at the commencement of the Examination, we have been publishing regular status updates in respect of this ongoing supervisory work, the most recent of which was published last month and has been provided to the Committee.

The aim of the Examination is to ensure that all relevant lenders conduct a comprehensive and robust review, which delivers fair outcomes for all customers.

I note that several lenders have recently apologised to the customers whom they failed. Let me be very clear on the Central Bank’s position: a lender’s apology is meaningless unless the lender both stops the harm to all impacted customers and provides appropriate redress and compensation for the suffering caused.  Lenders now need to demonstrate that they are doing everything possible to ensure this happens.

For our part, this is precisely what the Central Bank is determined to ensure.

We have put in place a comprehensive framework for lenders to conduct the Examination and provide appropriate redress and compensation to impacted customers. The framework also requires each lender to appoint an external independent party to oversee the conduct of its examination.

The framework for the Examination is a phased approach. Phase 1 involved the development and submission of detailed plans by relevant lenders. This phase has been completed.





Phase 2 requires lenders to conduct the review of their mortgage loan books in line with our framework. These reviews are extensive in that lenders must review the underlying loan documentation and customer files for the in-scope accounts to determine their specific contractual obligations, and also to determine if the documentation that each customer received had the potential to confuse or mislead the customer, both on a stand-alone basis and when read in conjunction with other communications – be they written or verbal – made to the individual customer.

In this respect, the Central Bank invoked its powers under Section 22 of the Central Bank (Supervision and Enforcement) Act 2013 to set specific timelines for lenders to complete Phase 2 of the Examination, the last of which will be completed by no later than end September 2017. The timelines have necessarily taken account of the size of the relevant lender’s loan book, the scale and complexity of issues in the lender, and the complexities associated with completing a thorough review, in line with the key objectives of the Examination.

By this date, the Central Bank expects all lenders to have identified all affected accounts, stopped further harm, and have commenced engagement with most impacted customers. The Central Bank is rigorously monitoring the completion of this work.


Phase 3 of the Examination relates to the calculation of redress and compensation for customers identified as having been affected by tracker mortgage related issues.

Phase 4 relates to the implementation of a redress programme in respect of these customers.

Phases 3 and 4 may run concurrently with Phase 2 and, as such, the Central Bank expects lenders to commence Phases 3 and 4 as affected customers are identified.


In that regard, and in accordance with our recent update, approximately €78 million has now been provided in redress and compensation to circa 2,600 impacted customers identified as part of the Examination. Separately, sums of €36.8 million and €5.8 million in redress and compensation have been paid by PTSB and Springboard Mortgages Limited in respect of 1,374 accounts impacted as part of the aforementioned Mortgage Redress Programme announced in July 2015, which predated the Examination.


Due to legal requirements which restrict the degree to which I can discuss individual firms, I cannot provide a detailed breakdown by lender as to precise numbers of customers and redress and compensation paid to date. I can detail aggregate amounts, however, and for the benefit of the Committee, I have provided the relevant tables in this statement.


It is also important to note that the Central Bank does not have the statutory power to compel lenders to implement redress and compensation programmes in respect of failures that occurred prior to the introduction of the Central Bank (Supervision and Enforcement) Act 2013. We were granted such powers, having sought them, in the 2013 Act.



However, I believe the Central Bank’s robustness of approach in this matter is evident from the Principles of Redress we have laid down and published, and with which we expect lenders to comply.


Our robustness of approach is also evident in the fact that it is not only our Consumer Protection Directorate, but our separate Enforcement Directorate, which is actively involved in the Tracker Examination. Where regulatory breaches are suspected, cases may be referred to Enforcement. We are committed to taking robust enforcement action aimed at promoting principled and ethical behaviour by and within regulated entities.



To date, the Central Bank has concluded an enforcement investigation in respect of tracker mortgage failures identified at Springboard Mortgages Limited and imposed a monetary penalty of €4.5 million on that entity in respect of the failures.  The monetary penalty paid by the entity is the highest penalty ever collected by the Central Bank. This penalty is in addition to the figure of approximately €5.8 million which Springboard Mortgages Limited paid to affected customers as part of the Mortgage Redress Programme.



In addition to the investigation into tracker mortgage-related matters at Springboard Mortgages Limited and Permanent TSB plc referenced above, the Central Bank has also commenced an enforcement investigation into tracker mortgage-related matters at Ulster Bank Ireland DAC. We may also commence other investigations, as appropriate, into other lenders and persons concerned in the management of such entities where there is evidence of non-compliance with regulatory requirements. In this regard, enforcement activity will be influenced by the outcome of the reviews currently being conducted as part of the Tracker Examination.



In short, all possible enforcement angles, including potential individual culpability, will be thoroughly investigated and analysed in the context of the legal framework. Enforcement measures will be deployed as appropriate, including investigating issues and taking cases under the Central Bank’s Administrative Sanctions Procedure together with the use of our fitness and probity powers.

Boards of lenders are expected to ensure appropriate control, governance and management in those firms. In line with international regulatory standards, we operate a risk-based framework for the supervision of regulated firms. In its regular supervisory work, the Central Bank cannot pre-approve every single commercial decision taken or contract entered into by a regulated firm.

Supervision entails challenge of firms, judgment of the risks they pose to the economy and to the consumer, and mitigation of those risks we judge to be unacceptable. Targeted enforcement action against firms whose poor behaviour risks jeopardising our statutory objectives, including financial stability and consumer protection, underpins this framework. Consumers are further protected by the other relevant State bodies in this area: the Financial Services Ombudsman, the Competition and Consumer Protection Commission, and the courts. These form part of the State’s protection for individuals.

I acknowledge the Committee’s reflection that the Examination has taken some time and it will take some further time to complete, but I will reiterate that lenders are working to the specific timelines which we have imposed, and are required to examine all relevant individual contracts.

Given the harm that the actions of some lenders have caused, it is essential that the Examination be both comprehensive and robust.

The Central Bank, for our part, is determined to ensure that_ every_ impacted customer is identified, and appropriately redressed and compensated.


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## Brendan Burgess (4 Apr 2017)

Michael Mc Grath

I welcome the update published recently. It answered a lot of questions, but not all of them.

Do you believe it was systemic across the banking system?

Governor: There is a systemic and widespread issue . The complication is that it manifests itself in different ways.

McGrath: How many have identified issues

Sheridan: Of the 14, 10 have identified issues.

McGrath: We expect the Central Bank to not only bark, but bite. 

Governor: Absolutely. Twin track. Supervisory and Enforcement. 
In 2010 - we told people that breaches of the codes were subject to enforcement. 

McGrath : cost €78m for 2,600 so you are looking at a bill of €300m for 10,000 

Add in the pre review figures, and the cost is €500m? 

Governor:  Some are very large sums, some are at the low end. That average will conceal a lot. 

The compliance cost 
The redress and compensation 
The fines 

McGrath 
90% of identified customers have been put on the correct rate. 

On the question of "What is the prevailing rate" How do you approach that question.  The margin is not specified in the contract. What if there was no prevailing rate?  How do you approach this question. 

Governor: That is definitely one interpretation - the rate at which the mortage was drawn down
McGrath; That is not the bank's interpretation
Governor: That is one of the things we are engaging with the banks on.  I don't want to say too much at this stage. 
We have set out clear principles
These are live issues - so I don't want to go into more detail.

McGrath: Who is the ultimate arbiter? 

Governor: We engage with the bank.
But there is an independent appeals system built in.
But it does not compromise their right to go to the Ombudsman or the Court 
By accepting the initial offer, you are not compromising your rights to go to the courts or ombudsman.


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## DamC82 (4 Apr 2017)

So by end of September 2017, all customers will know if they are affected or not?


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## Brendan Burgess (4 Apr 2017)

Pearse Doherty 

I welcome the publication of Principles for Redress, and the Framework. Please do publish it more promptly.

I see that each bank had to appoint a consumer voice.  Can you tell us who these people are? 

Sheridan: We thought that was important. Someone who was not involved in the sales or in the contracts. It can be someone from compliance or from outside.

Doherty: Did you have any criteria.

Sheridan: No. But we know who the people are. 

Doherty: Can the victims contact the consumer representative? 

Sheridan: The Framework does not allow for it, but it doesn't prohibit it either. 

Governor: It remains the case that any individual 

I agree that one of the ways people should be represented is at this process. 

Doherty: I would encourage you to encourage the banks to publish it. 

What about IBRC? 29,000 cases. 

And tell us about the impact of loans which have been sold to vulture funds

Sheridan: IBRC is part of the process.  They are a different type of lender. The framework is a bit different. We are satisfied with the progress they are making [ I thought that Irish Nationwide did not issue any tracker mortgages????] 

The originator of the loan is responsible for the review. 

It's a concern we have had from Day 1. 

Doherty: But the new owner can't put them back on the tracker rate! 

Sheridan: That is actively been pursued. We are happy . 

Doherty: The Prevailing Rate issue. There is a huge amount of anger here. Now they are on the high rate, they are 

I understood that the redress programme has to be agreed by the CB.

Can you tell us if the Central Bank has signed off on that? Is the CB continuing to review that? 
Is there any hope. 

Sheridan:The CB has not signed off on this issue. It's one of many live issues. 
It's not just contractual. 

Governor: Let me just reinforce that.  Just because a firm says - This is what we think
, it does not mean we accept that. 

There will be waves of revision.


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## Brendan Burgess (4 Apr 2017)

Seán Sherlock. 

What happens when the FSO made a negative determination?  in particular, ptsb has not notified these people that their cases are being examined. 

Governor: All trackers are being examined. It's not the case that they customer receives a letter telling them t hat. All trackers are being examined.  It's a lot more concrete 

Sheridan: WE go beyond the FSO's requirements [ I missed the wording - it could be useful] 

Sherlock: Data Protection . Have you found gaps in how the Data Protection laws were applied.  When customers went back to ptsb, there were glaring inaccuracies.  They refused to acknowledge that phone calls took place. 

Sherlock: Criminal Prosecution - Section 33 AK 

Have you referred any cases to the Gardai 

Rowland: We have two investigations open into ptsb and UB.  We will consider opening further investigations as it proceeds. 
We want to get down to the heart of the matter. 
We always consider taking cases against senior officials 
Our priority is     enforcement sanctions and also fitness and probity. 
We have statutory responsibilities to make reports to the Gardaí. None has been made. But I have discussed trackers with the Gardaí.


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## Brendan Burgess (4 Apr 2017)

Senator Kevin Humphreys (Labour)

2010 - You refer to communication with BoI
In 2012 BoI commissioned a report from Red C to encourage people off trackers.  Several hundred letters went out to customers after that.
Were you aware of this?

Sheridan: We had interaction with all the banks.
The CPC 2012 was updated
All lenders had to comply with those communication. I can't comment on that specific BoI case.

Humphreys: The CEO denied it was happening. And then later it was discovered.
Those who were duped out of their trackers as a result of this letter.

Sheridan: Yes they are in scope

Governor: It's not just about the narrow contract. If any of this could have misled or put undue influence on customers to exit trackers, that is not appropriate.  If a plausible person says that this is distorting or misleading for a typical consumer, then it's not appropriate.

Humphreys: Are you looking at collusion between the lenders.

Governor: Until our investigation is completed, we would not rule out the hypothesis of collusion.  During a period of financial distress, banks did have a common economic incentive to get customers to pay higher rates.  They should have said "Although this opportunity is here, we won't exploit it. We are a consumer focussed bank"

Collusion is not impossible, but unlikely.

Rowland: They did not need an agreement with other lenders to do this. They had the contract. 

Humphreys: They could have spoken to each other about the interpretation of contracts.  

Humphreys
How much has Ernst and Young and Grant Thornton cost you?  And will it be charged back? 

Governor: It will all be charged back. 
Sheridan: The work is ongoing and intensifying. We are also using our own internal resources. We are getting to the critical stages now. 

We have 8 people in consumer protection and other resources in enforcement and legal.


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## Brendan Burgess (4 Apr 2017)

Michael D'Arcy  FG 
Can liquidators avoid paying redress ? 

Sheridan 
We are happy that they can stop the harm and pay the redress.  
There might be a problem with compensation.  It's not clear where the claim for compensation would rest. 

D'Arcy 
The current loan book owners - are they committed to compensation? 

Sheridan: The originator of the loan pays it.  We have no concerns that anyone will lose out.


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## Sarenco (4 Apr 2017)

Brendan Burgess said:


> We have 8 people in consumer protection and other resources in enforcement and legal.



8 people!  Surely that's grossly inadequate given the scale of the task?

No wonder the Governor predicts that there will be "waves of revisions".  If the Central Bank rolled up their sleeves and properly resourced this exercise it would be nearing completion.

I'm amazed the committee members aren't jumping up and down about how long this exercise is taking.


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## Brendan Burgess (4 Apr 2017)

Senator Burke (FG)

We have received a huge amount of letters and emails from those affected.

You told borrowers to go to the bank.

Where should all those who have been writing to us go?

Lane: It's very frustrating - the information gap. Because the review is so comprehensive.  They are working from the full universe of all accounts.

It's not just one complaint. It's all cases.

Burke: So you have no real comfort for those affected?

Lane:  Except that we are pushing the banks.
90% of those who have been identified have been put on the right rate. Not all have been identified yet.

We are in an intense phase.

Burke:  There was a culture in the banks of interpreting contracts in favour of the banks. Do you think that there was a cartel?

Lane: I wouldn't rule it out. But there was a common economic incentive.

Burke: Was any company sanctioned?

Rowland: Explains it again

Burke: Have you published any guidelines where trackers should be restored?

Lane:

Burke: Have you changed any of the schemes?

Sheridan: Yes, we have to approve them. and we have changed them.


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## moneymakeover (4 Apr 2017)

Bernard Byrne Aib said publicly Aib has 300 people employed


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## Brendan Burgess (4 Apr 2017)

Peter Burke (?) TD

Padraic Kissane was here who outlined the damage being done.

We get a lot of letters from people who say that the banks won't engage with them?

What can they do?

Sheridan: We have engaged a lot with Padraic Kissane and can I acknowledge the work he has done on this issue.

Even if lenders can't tell a borrower their individual story, they should be able to tell them what is happening overall.

Burke: There are thousands relying on you.  Don't let them down.


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## Brendan Burgess (4 Apr 2017)

Chairman John McGuinness

AIB Pre 2006 case. From 2010 to date, they have not received any approach from the bank.

In relation to this type of issue. How do you enforce the bank to acknowledge that they should deal with this type of customer.

Governor
It's very asymmetrical - the bank vs. the customer. That is why our process is designed to help people

This goes back to mid 2000, so all trackers are included.

Sheridan:

There are three elements to what banks must review:

Contractual
Transparency - What they were told then, since and now
Other influencing factors

Where the lenders say "people are not impacted" we have to verify that for ourselves. And we are employing additional resources to challenge the banks on these. When it ends up in a dispute, we are using all our powers.

McGuinness
What do you do when you get a letter like that.

Sheridan
1) We review our own review
2) We also escalate the letter to the bank involved.

McGuinness

Another letter: Ulster Bank who gave us a commitment in December to write to customers , but they didn't.

They ignored the customer - but they told us that they would write.

It might be time for you to name and shame the banks involved.

Padraic Kissane: The deception is happening on such a scale, that it is worse it's getting, not better.

Lane: this reveals why it's important to fix things on a group basis [my paraphrasing]


McGuinness: Reads a letter into the record:  As one of the original ptsb customers, it would be hard to portray the impact on me. The last two years have been terrible. The Appeals process makes me appear to be on trial.


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## SaySomething (4 Apr 2017)

Thanks @Brendan Burgess  you've done us all a great service by synopsising here.

Do you have any idea what this means? 

_"It is also important to note that the Central Bank does not have the statutory power to compel lenders to implement redress and compensation programmes in respect of failures that occurred prior to the introduction of the Central Bank (Supervision and Enforcement) Act 2013. We were granted such powers, having sought them, in the 2013 Act."
_​Is it a typo? Should it read 'did not have the statutory power'. Or is there another sting in the tail for affected customers do you think?


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## jess82 (4 Apr 2017)

I also wondered what above meant??
Thank you Brendan for the summary. I have just watched it on oireachtas play back, an interesting watch!
Many thanks to the committee for their questioning. 
If anyone hasn't the three hours to spare, maybe tune in from 2.37  onward as John McGuinness surmises the customers views quite emphatically. Also nice to hear they are considering bringing each bank back to the committee for questioning.


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## Brendan Burgess (4 Apr 2017)

No, they do not have the statutory powers to compel them. 

The previous guys - especially the Financial Regulator -  used this excuse to do nothing. 

But I argued then that even without the statutory powers, they have the power to approve all senior employees on fitness and probity grounds and could disqualify people who did not act in a fit and proper manner. 

So they have "persuaded" the banks to behave properly, after a fashion.

Brendan


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## moneymakeover (5 Apr 2017)

Bernard Sheridan said the central bank escalates any letters they receive from customers to the relevant bank.


On that basis it may be worth emailing or writing to the central bank.


Of course the central bank won't reply with the outcome but still worth a try

Also worth quoting Governor Lane



> These reviews are extensive in that lenders must review the underlying loan documentation and customer files for the in-scope accounts to determine their specific contractual obligations, and also to determine if the documentation that each customer received had the potential to confuse or mislead the customer, both on a stand-alone basis and when read in conjunction with other communications – be they written or verbal – made to the individual customer.


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## nonie (5 Apr 2017)

I forwarded a pack with copies of correspondence to the CB last week which was forwarded to their supervisory team. The CB need to see how customer have been treated in this debacle.


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## SaySomething (5 Apr 2017)

@Brendan Burgess I think I'll have write to the Central Bank to clarify. If I'm reading that right then it means that for customers who received their trackers back prior to 2013 they won't get a chance for compensation or further financial advice payment now. Which could potentially have an impact for the likes of @notabene


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## notabene (5 Apr 2017)

@SaySomething @Brendan Burgess mine not adjudicated on til dec2014 think I'd be ok as after the act?


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## SaySomething (5 Apr 2017)

@notabene  phew! I thought you were pre-2013!!! My fault!!!


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## notabene (5 Apr 2017)

@SaySomething not at all, hard to keep track, thanks for watching my back though


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## moneymakeover (6 Apr 2017)

> _"It is also important to note that the Central Bank does not have the statutory power to compel lenders to implement redress and compensation programmes in respect of failures that occurred prior to the introduction of the Central Bank (Supervision and Enforcement) Act 2013. We were granted such powers, having sought them, in the 2013 Act."_




Just to clarify, is he saying that prior to 2013 they *have* the power to restore trackers just *not the power to obtain redress*?


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## skinnylegs (20 Apr 2017)

@moneymakeover. Did you get any clarification on this post?


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## moneymakeover (20 Apr 2017)

Nope
Never got a response


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## Brendan Burgess (20 Apr 2017)

It's an academic point. All of the lenders have agreed to ignore the statutes and restore trackers and pay compensation on a fair treatment basis.


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## corktim (22 Apr 2017)

If 90% of customers have been identified I'd be really worried about former FA customers as I have yet to hear of one getting their tracker back.


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## Milo4444 (22 Apr 2017)

Agreed I made my normal weekly call yesterday still on the same rate.


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## corktim (22 Apr 2017)

Honestly I can't believe it seeing as the CB seem to be taking enforcement action on these former FA accounts


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## Milo4444 (22 Apr 2017)

How do you know the CB is specifically taking action on these accounts.


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## corktim (22 Apr 2017)

Hi Milo 

http://m.independent.ie/business/pe...ainst-ulster-bank-over-trackers-34672938.html


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## Milo4444 (22 Apr 2017)

Thank you 2k including FA and yet UB seem to have identified 2k at this point and none of them seem to be FA. Perhaps they will deal with FA seperately!


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## skinnylegs (22 Apr 2017)

Hey Brendan, can you indicate where the lenders have agreed to pay redress for losses to the customer prior to 2013.


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