# Central Bank Governor at the Finance Committee next week



## Brendan Burgess (4 May 2018)

*Thursday *

*09.30 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach CR2, LH 2000*
Scrutiny of EU Legislative Proposals: Schedule A: COM(2018)93 on Exposure in the form of Covered Bonds; COM(2018)94 on Covered Bonds public supervision;
Scrutiny of EU Legislative Proposals: Schedule B: COM(2018)126
Central Bank of Ireland - Quarterly Engagement
_Representatives from Central Bank of Ireland, Mr. Philip Lane, Governor_

The Governor is scheduled for 9.30. There will be a short private session first.

This would be a good opportunity to let your TDs and Senators know what issues to raise with him. 



Brendan


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## tonymac (6 May 2018)

Hi Brendan, just letting you know i have emailed both Michael McGrath and Peter Burke and asked them to question him on the central banks dealings with the EBS as theres been very little publicity about EBS issues, obviously because those are being hidden behind the AIB brand. I specifically asked them to raise the variable base rate issue.


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## Brendan Burgess (8 May 2018)

Here are the questions I would like to see asked
*
1) Have you reached an impasse with any of the lenders? If so, how many? What happens next? 
*
You have done a good job in persuading the lenders to go well beyond their legal obligations and give trackers back to some borrowers whom the lenders did not think had a legal right to them. But are there any remaining cases where you think that the lenders should restore the tracker, but the bank is sticking to their guns?   What happens next?  Is it just up the affected borrowers to go to the High Court?

*2) There are some groups who are expecting back their trackers, but you agree with the lender's refusal? Can you tell us which these are so that these borrowers know where they stand? *
The AIB Prevailing Rate customers- Central Bank agrees with AIB 
The ptsb then current customers
The ptsb discount trackers
The remaining BoI staff trackers
KBC trackers before a certain date
The  EBS home loan customers.

*3) Do you agree with the SSM's definition of a Non Performing Loan? *
Consider ptsb's 4,300 performing split mortgages.
Let's say a borrower has a mortgage of €200k, €100k of which is warehoused.
The borrower is meeting his repayments in full on the €100k active loan.
The mortgage rate is ptsb's SVR of 4.5%
This customer is paying 2.25% on the entire loan.
Which is around half a percentage point higher than the average mortgage rate across the eurozone.
Yet, you are telling ptsb to sell those loans as you classify them as "non peforming"

These loans are very profitable.


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## Gigi07 (8 May 2018)

Thanks for posting Brendan I have emailed Michael McGrath and asked him to raise the AIB prevailing rate issue.


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## Apples82 (8 May 2018)

Brendan by PTSB then current customers do you mean the PTSB prevailing rate customers?


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## Milo4444 (8 May 2018)

Hi Brendan

First active customers also.


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## Brendan Burgess (8 May 2018)

Gigi07 said:


> Thanks for posting Brendan I have emailed Michael McGrath and asked him to raise the AIB prevailing rate issue.



Hi Gigi

He did this very well in January and got absolute clarity  on this specific issue back in January 

*Deputy Michael McGrath: 

 

 Has the Central Bank approved the banks' approach to and conclusion on this issue?

Professor Philip Lane: Yes, this is an example.*

From our work, these are now receiving a payment for contract violation and they are in the examination so they have the right to bring forward appeals. I refer to someone in a situation with a prevailing rate tracker. From a systemic point of view, we have looked at it and said that these prevailing rate trackers did not have the fixed margin promise. If a hypothetical tracker was calculated based on market funding and so on, they would have been expensive trackers if they had been offered in autumn 2008. However, by virtue of being inside the examination, it depends on what an individual was told by his or her bank manager and it depends on what documentation he or she may have received. I am not going to rule out that an individual with a prevailing rate tracker may be able to show to the independent appeals mechanism that in his or her case he or she might have been assured that this meant a cheap tracker or something else. This is the balance that is being struck. In general, this type of tracker did not promise it was going to be at some low fixed margin. Some trackers are expensive. However, because they are in the examination, the individual's circumstances, and his or her individual understanding, can be explored within the appeals mechanism.


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## Spike67 (8 May 2018)

Hi Brendan 
I have also emailed Michael McGrath this morning asking for him to raise the Aib prevailing rate as it is an issue I feel needs more media attention to highlight the pathetic offer of compensation of €1615 offered to date and also for the central bank to look at these 4000 customers who had a contractual right to a tracker on expiry of there fixed rate but not at some rubbish rate of 7.9% as per Aib's most recent letter to customers. 
Have the bank not unilaterally altered it's commitment to the customer and misappropriated our funds as a result. Has there been due diligence in this action by the bank.


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## tonymac (8 May 2018)

To all who made numeroys submissions under the threads about EBS and "variable base rate "etc, i do hope im not the only one who has contacted their TDs, regarding our issue, especially TDs that are on the finance committee. The people i mainly refer to are RAzvanR, haveaniceday, bikini widow, B26354 and dguyo. Lads i dont blame ye if yere dissillousioned etc but i feel we need him questioned about all the issues but especially ours, might generate a bit of publicity. If yeve already done so fair enough but it isnt too late if not.


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## Bikini Widow (8 May 2018)

@tonymac all done, although I suspect answers will be restricted to something like .....   CB cannot discuss EBS as an enforcement action is underway / being applied.
But lets wait and see.

Best wishes,
BW


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## tonymac (8 May 2018)

My main fear is exactly what you highlight Bikini Widow and thanks for what youve done. The thing is if thats the case theres no point in having him in as theres enforcement action being taken against all of them if im right.


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## B26354 (8 May 2018)

I’ve mailed McGrath & a number of other politicians. McGrath responded and he assured me he would examine the issues I raised.


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## Brendan Burgess (8 May 2018)

*4) Have you looked into the way in which the lenders are charging breakage fees for fixed rate mortgages? 
*


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## RajR (8 May 2018)

I’ve also emailed McGrath & a number of others on the committee regarding EBS home loan customers and to raise this issue along with issues around subject data access requests and the documentation being provided by the bank.


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## Gigi07 (9 May 2018)

Thanks Brendan
I think the CB needs to be challenged more vigoursly here. This is total waffle. I accept that if tracker rates existed after Oct 08, they would have been significantly higher than 1.5%. However, they would have been nowhere near 7.9! Are the CB saying here that AIB have provided compensation on the basis of one size fits all? And that some of this cohort are entitled to further compensation, but need to lodge appeal before the Bank will consider same?


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## Sarenco (9 May 2018)

I would love to ask the Governor whatever happened to their proposed measures to help borrowers to switch mortgage providers?

The consultation period on the proposed measures (which were not controversial) closed over six months ago and there hasn't been a peep since.

https://www.askaboutmoney.com/threa...paper-on-switching-deadline-1-november.204538


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## RajR (9 May 2018)

Peter Burke and Michael McGrath responded saying they will raise the EBS issues, haven't heard from others.


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## Banking17 (10 May 2018)

Has started with Gov Lane giving opening statement on Tracker update.


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## Bikini Widow (10 May 2018)

https://www.centralbank.ie/news/article/introductory-statement-financecommittee-10-May-2018


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## B26354 (10 May 2018)

Bikini Widow said:


> https://www.centralbank.ie/news/article/introductory-statement-financecommittee-10-May-2018


So the Central Bank expecting further increase in affected numbers by the end of the examination/end of June. This statement doesn’t sound like there’s a few individual cases to be identified but more like a few thousand.


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## RajR (10 May 2018)

B26354 said:


> So the Central Bank expecting further increase in affected numbers by the end of the examination/end of June. This statement doesn’t sound like there’s a few individual cases to be identified but more like a few thousand.



That's not what they are saying in the session. They seem to suggest that there won't be any significant increase in numbers. Also, they are not providing any clarity or saying much on cohorts that are still not identified as impacted...


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## TMH2017 (10 May 2018)

they said in Jan '18 that "the vast majority of customers have now been identified" yet they managed to "find" another 3,400 in the interim period so not sure even they know what the final number is - I would bet it is closet to the 40,000 that PK has outlined


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## Banking17 (10 May 2018)

Cant believe this still going since 10 am. Lots of waffle and talk of high level policy with members having little awareness .

Cant see any meaningful questions or additional insight into Tracker issue


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## RajR (10 May 2018)

TMH2017 said:


> they said in Jan '18 that "the vast majority of customers have now been identified" yet they managed to "find" another 3,400 in the interim period so not sure even they know what the final number is - I would bet it is closet to the 40,000 that PK has outlined



agree! and I hope it turns out that way come end June. When they were asked as to if they are in dispute with any lenders regarding any cohorts, they just said there are some issues but at the same didn't acknowledge there are new cohorts yet to be identified as impacted and accepted by the banks.


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## Brendan Burgess (10 May 2018)

Banking17 said:


> Cant believe this still going since 10 am. Lots of waffle and talk of high level policy with members having little awareness .



I was out all morning and so missed it.  Great to see your post that they are still going. 

That's 5 hours. But I presume that they took a break.

Brendan


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## Brendan Burgess (10 May 2018)

Derville Rowland: 

There are some issues still open. We know what they are. The banks know what they are

We have told the Ombudsman. They don't need to keep complaints on hold where we know the outcome. 

We don't know how many cases are outstanding. 

Chair: Is it hundreds or thousands? 

Rowland: I can't speculate 

We have 37,1000 - but it's possible that will adjust slightly


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## Brendan Burgess (10 May 2018)

McGrath: We need definitive answers on the following:

AIB prevailing rate
Ptsb similar issues
Boi Staff members
Former First Active 
EBS 

They might not like the answers, but they need to know.

Where you reach a conclusion, as you have done on the AIB prevailing rate issue,  you 

Rowland: Our view is not that we support AIB, it's that we could not interfere with their interpretatiion. 

We know and the lenders know where tehre are no issues. And we have told the banks to tell people that. 

ptsb matters are not closed yet. 

We don't propose to take any further action with Bank of Ireland staff issues.


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## tonymac (10 May 2018)

She said they know what issues are still open and the banks know so i wish the committee members would just open their mouths and ask her what are they so at least we know where we stand. I went to the trouble of emailing Michael McGrath and Peter Kelly and asked them to raise the "vsriable base rste" issue but unless it was raised later it wasnt raised at all. I did what you correctly suggested Brendan and it doesnt appear to have made any difference. It seems onwards to july when EBS appear in front of them but if nothing happens then theyll hear from me and hopefully a few more of ye on this site. Should have documents (at least some) back from AIB SARS by then to proceed to the next stage if not conceeded by then.


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## Brendan Burgess (10 May 2018)

They are finished. 

Brendan


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## tonymac (10 May 2018)

Sorry Brendan i just finished my post when i saw yours and at least Michael McGrath did mention EBS but without specific issues. Appears like i said we'll await that july appearance and take it from there.


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## Andy836 (10 May 2018)

Was Michael McGrath's contribution there toward the end, the only discussion of the AIB prevailing rate issue?


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## tonymac (10 May 2018)

Sorry Brendan when you say they are finised does that mean for today or that they are finished with the issues Michael McGrath mentioned including EBS. Appears if thats the case that EBS have got a very very easy time, im taking it myself like i said that itll be picked up again in july when MMcG has told me already that they want EBS in before them.


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## Lizzie007 (10 May 2018)

Did they answer anything on the former first active customers ?


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## todo (10 May 2018)

Derville Rowland, would not speculate on specific lenders, so little point in asking direct questions.

They took a 30 minute break at 1pm.

John McGuinness, was probably the best, he really pointed out to the central bank, that the consumer protection code is not being enforced (basically being ignored). They didn't seem to have an answer for it.

The whole thing could have been done in an hour easily, there was plenty of repeated labouring commentary.
Good information, but worthless in reality.

From what I can see the tracker issue is slipping off the table.
The central bank is ready to give themselves a pat on the back with 37,100 redressed.

The remaining outliers will probably have to goto the courts or just move on...... Its depressing really...


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## RajR (10 May 2018)

Brendan Burgess said:


> Rowland: Our view is not that we support AIB, it's that we could not interfere with their interpretatiion.
> 
> We know and the lenders know where tehre are no issues. And we have told the banks to tell people that.
> 
> ...



In her response to McGrath's question, she said nothing about EBS & former FA cohorts. I can only hope, the "open issues" she was referring to could be related to these groups considering banks haven't told customers of their final position yet...


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## B26354 (10 May 2018)

RajR said:


> In her response to McGrath's question, she said nothing about EBS & former FA cohorts. I can only hope, the "open issues" she was referring to could be related to these groups considering banks haven't told customers of their final position yet...


I have been told by EBS that my case (fixed to variable base issue) has not been resolved and remains open in the investigation. They said it would take a few months to give me an answer. I’m assuming therefore that the variable base issue is one of those “open issues.”


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## tonymac (10 May 2018)

B26354 said:


> I have been told by EBS that my case (fixed to variable base issue) has not been resolved and remains open in the investigation. They said it would take a few months to give me an answer. I’m assuming therefore that the variable base issue is one of those “open issues.”


At least you got that answer B26354, its the first time ive heard of anyone being told that by EBS, not satisfactory at all its taking so long and having to go further with our cases but maybe a little light at the end of the tunnel. Bar Michael McGrath i didnt see much light at the end of the tunnel today either. His comment to me in an email that they insisted on EBS appearing in july when AIB tried to hide them behind their brand was another potential sign of promise and hopefully they will give them the grilling they deserve.


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## B26354 (10 May 2018)

tonymac said:


> At least you got that answer B26354, its the first time ive heard of anyone being told that by EBS, not satisfactory at all its taking so long and having to go further with our cases but maybe a little light at the end of the tunnel. Bar Michael McGrath i didnt see much light at the end of the tunnel today either. His comment to me in an email that they insisted on EBS appearing in july when AIB tried to hide them behind their brand was another potential sign of promise and hopefully they will give them the grilling they deserve.


It is also positive that the Central Bank have an enforcement notice in place for EBS. As far as I know the Central Bank aren’t allowed comment on specific cohorts that could be identified or feel could be redressed in the future. They can only comment on issues that have been resolved or where a line has been drawn under cases such as the AIB prevailing rate.

It’s worrying that the Central Bank have a different opinion to AIB on the prevailing rate issue yet they can’t enforce their opinion. However it suggests those cases may have a good chance at FSO level.

The terminology I heard was that “a light is just turned on” when a test case customer (a case that is open & up for debate for redress) is deemed affected. There is no prior notification from the Central Bank or the bank in question that there is a chance that a group might have a good argument etc. Hence the lack of specific detail today I guess. It will be a much more forensic examination of EBS &/or other banks that attend future Oireachtas meetings.


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## Gigi07 (10 May 2018)

Hi B26354
Re your above post please can you let me know how Central Bank differs to AIB regrading prevailing rate? Thank you


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## RajR (10 May 2018)

tonymac said:


> At least you got that answer B26354, its the first time ive heard of anyone being told that by EBS, not satisfactory at all its taking so long and having to go further with our cases but maybe a little light at the end of the tunnel. Bar Michael McGrath i didnt see much light at the end of the tunnel today either. His comment to me in an email that they insisted on EBS appearing in july when AIB tried to hide them behind their brand was another potential sign of promise and hopefully they will give them the grilling they deserve.



I also receive a letter from EBS every 28 days (latest one received during last week) saying the questions we raised haven't been resolved, review is ongoing and could be few more months before they can issue their final response. I guess these are sent only to customers who lodged a formal complaint.

McGrath was good to send an email post the CB session this evening saying, there was a lack of specific updates concerning individual lenders so they will have to press the banks when they come before the committee in July. While it's worrying considering the very little focus the tracker issue got during almost a 6 hour long session and CB's position on AIB Prevailing rate issue, there's still hope...


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## B26354 (10 May 2018)

Gigi07 said:


> Hi B26354
> Re your above post please can you let me know how Central Bank differs to AIB regrading prevailing rate? Thank you


I don’t know how the CB interpretation of the prevailing rate differs to AIB’s but they said today they do not support AIB on this issue but they could not interfere with AIB’s interpretation.


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## B26354 (11 May 2018)

RajR said:


> I also receive a letter from EBS every 28 days (latest one received during last week) saying the questions we raised haven't been resolved, review is ongoing and could be few more months before they can issue their final response. I guess these are sent only to customers who lodged a formal complaint.
> 
> McGrath was good to send an email post the CB session this evening saying, there was a lack of specific updates concerning individual lenders so they will have to press the banks when they come before the committee in July. While it's worrying considering the very little focus the tracker issue got during almost a 6 hour long session and CB's position on AIB Prevailing rate issue, there's still hope...


That’s the same letter I get so even though we have differing cases. Hopefully both matters get resolved successfully for both of us before end of June.


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## Bikini Widow (14 May 2018)

Philip Lane interview of the Central Banking Website, part I find interesting in blue below, as for EBS cohort (and I am sure others) this is the major issue

https://www.centralbanking.com/cent...lane-on-systemic-risk-transparency-and-brexit

Website can only be accessed via subscription / trial  -- relevant section on trackers as per below.

*********************************************************************

*You’ve had some public criticism recently on the handling of tracker mortgage mis-selling. Do you think that the central bank has dealt with the problem correctly? Was it alert early enough to the dangers of tracking mortgage selling? That’s a multi-layered question. *

The central bank was quite aware of the tracker mortgage problem early on – it was very obvious. Basically, especially in the summer and autumn of 2008, the funding costs of banks totally changed. So they more or less withdrew tracker products in 2008. Most people who had trackers, they still had them because they were cheap. Remember: in 2006 and 2007, the ECB was raising rates. Various banks said: “If you would like a fixed rate, you can fix for a couple of years.” Where most of this arose from was that the wording of these contracts assumed the world was stable. So when the two- or three-year fixes were over, the customer would have to make a new decision. Essentially, a lot of this goes back to badly drafted contracts or banks not really fully taking the customers’ perspective about what was the appropriate rate when the fix expired. So, in 2008, 2009, 2010, the central bank issued warnings saying banks have to be careful in communication with their customers, they could not mislead them. And also in 2006, we brought in a consumer protection code that goes beyond the narrow mortgage contract, and says you have to put customers first. From that perspective, what’s happening now is basically a major victory for the consumer protection role of the central bank. The redress and compensation flowing to customers is mostly not about violating contracts. It’s mostly about the wider questions of: “Did you put the customer first? Was all the information as transparent as it should be? Was it reasonable for the customer to read the small print of footnote 29 in terms and conditions?” 

In the autumn of 2017, there was a period of uncertainty because, in terms of leading to a final finish line, in terms of the banks accepting that these were the number of cases that needed redressing, that was not concluded. This goes back to the trust issue. We were saying: “This is happening – it’s on its way through the process here.” The political system was, I think, nervous, until they saw what the outcome was. Whereas now we have 30,000-plus customers receiving significant compensation, there’s a greater awareness that this indeed would not have happened without the central bank. 

We all have to learn lessons from it. The counterfactual where we trigger this kind of universal exam [of tracker mortgages] at an earlier point is a reasonable question, and we have to revisit it. But, in terms of the overall process here, it’s showing the power of a central bank in delivering consumer protection that goes beyond just contract violations to the wider responsibility that financial service providers should put their customers first.

*********************************************************************

Best wishes,

BW


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## Brendan Burgess (18 May 2018)

The transcript of the Oireachtas Finance Committee hearing is now available. 

https://www.oireachtas.ie/en/debate...diture_and_reform_and_taoiseach/2018-05-10/5/


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