# Governor Lane appearing before Oireachtas Finance Committee this morning



## Brendan Burgess (19 Dec 2016)

He will there at 11 am. You will be able to watch here:

http://www.oireachtas.ie/parliament/watchlisten/watchlive/committeeroom3/

*Central Bank Governor to appear before Finance Committee *
*Central Bank Governor, Philip Lane, will appear before the Finance Committee tomorrow as part of the Committee’s discussion of matters relating to the banking sector.*

_19th December 2016_

The meeting will commence at 11am in Committee Room 3, Leinster House.

Committee Chairman John McGuinness TD, said, “The Committee has invited Central Bank Governor, Philip Lane, to appear before the Committee in order to engage with us on a wide range of issues relating to the banking sector. Some of the issues members will be keen to address are likely to include the overcharging controversy involving Bank of Ireland, the current banking environment, redress schemes and the supports available for those in mortgage arrears.”


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## Brendan Burgess (20 Dec 2016)

Accompanied by Ed Sibley

Philip Lane

Low interest rate environment has a negative influence on banks' margins

Reduction in lending outstanding also a problem

Some signs of increased competition
- welcome subject to prudent lending

Continuing to work out non-performing loans. Irish banks ahead of EU banks.

Retail mortgages are 50% of NPLs  (non performing loans)

pre provision profits too low for some banks

*Mortgage NPLs
*
The scale of mortgage distress means that Irish banks are riskier

Higher Loss Given Defaults.

Longer recovery times lead to higher interest rates


*ECB is reviewing the sustainability of banks' business models 

Mortgage market has seen fundamental improvement in recent years 

Mortgage measures*
3.5 times LTI is the anchor of the framework

*Weaknesses in lending practices *
better oversight from boards needed
strategies for increased volumes not considering the risk.  League tables for staff to generate new business.

*Tracker mortgages*
Since 2010 - we have pursued lender specific issues
Admin sanctions procedure has been used

too many cases where fair treatment of customers was not practiced. 
Firms and individuals will be held to account
Process is exhaustive, so it will take time.


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## Brendan Burgess (20 Dec 2016)

*Senator Kieran O'Donnell *

Why have you given so little time to tracker mortgages in your statement?

*Lane*
We are signalling that our enforcement powers will be used against institutions and individuals involved.

ptsb court case delayed us starting review

We had a lot of planning before that. During 2015.

*O'Donnell*
How many of the 15 institutions have updated you with a complete due diligence done?

*Lane *
Yesterday's update gave the amount of information we can give public.

*Sibley*
We are getting regular updates from every lender

*O'Donnell*
Why is it taking so long?
Do you accept that the Central Bank has failed?
I thought that you would have been able to put an end date for the different lenders
What are the deadline dates?

*Lane (O'Donnell keeps interrupting him) *
We had considerable engagement...
We did take supervisory actions in 2011 and 2010
2012 - 2015 was delayed by the court case
We will deliver redress

Had we been aware of the pervasiveness, we would have...
The ultimate responsibility is on the banks to deliver on their contracts

We have told the lenders to prove that in every case where a tracker was lost, it was justified. 

A lot will be done by Mid 2017.  Some banks have not worked out the compensation and redress schemes


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## Brendan Burgess (20 Dec 2016)

*Michael McGrath 
*
you said that 8,200 accounts were

summarise What is on the public record  for the 2010,2011 period


*Sibley *
BoI  -
a couple of other banks on communication issues
another was asked to stop offering fixed rates to tracker
5,000 I think  (seems very high?)

There were no other significant numbers put back

*McGrath *
I don't understand that 8,500 figure
Boi 4518 
UB 2000
AIB 2600

that's over
ptsb
back to 2010, that is over 15,000

*Lane *
We will reconcile the figures

*McGrath *
Ptsb was going through the courts
Nothing in that case meant you could not investigate the other lenders

*Lane *
What we learned from BoI and ptsb should have resulted in a more comprehensive review earlier
A more systemic approach could have been taken

*Sibley*
Our ability to require the banks to do stuff was impeded by the ptsb case.

*McGrath*
This was a wilful practice of customers being denied their contractual rights
Some customers are getting their tracker back at 3.67%
That is a joke

*Lane*
I don't want to preview the enforcement actions. We can come back to you after they are completed. The issues you have raised are the types of issues we are reviewing.


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## Brendan Burgess (20 Dec 2016)

Suspended for 10 minutes so that the Central Bank will reconcile the figures. 

Brendan


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## Brendan Burgess (20 Dec 2016)

*Lane *
BoI in 2010          2,100     (preventative measures for other banks) 
ptsb 2015            1400      ( outside scope of exam) 

The 8,200 are additional  - this is a lower band.  because banks have not completed their reviews. We expect to see a significant increase. 

*McGrath *
The 5,000 was an error . WE should not have disclosed that.   It was 2,100 

*Lane*
The 8,200 are verified
The figures you have anticipate some more than already verified


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## Brendan Burgess (20 Dec 2016)

Pearse Doherty

Does that include the 3916 BoI guys who were overcharged by 0.15%

*Lane*
My understanding is that they are included in the 8,200

*Doherty *
Probably around 15,000 in total

This happened before your watch.
And in 2010, when the CB was fire fighting other issues

In 2009, the FSO asked you to do an industry wide review of tracker mortgages.

*Lane*
I don't know. I would have to come back to you.
There is no contest between financial stability and consumer protection
Consumer protection is not an inferior mandate

*Doherty *
The Indo reports that you were aware of it since 2008
How did you miss it
If it had not been fixed, it would have cost customers between €500m and €1 billion
90k per customer

*Lane*
We have a focus on redress and on enforcement against the institutions concerned

*Doherty *
The customers deserve an apology from the CB
This is not just a systems error

It was policy not to offer a tracker rate to customers who were contractually entitled to them.

Are you going to look at whether there were individuals responsible?

*Lane*
Our enforcement covers action against institutions and individuals
I don't want to preview any enforcement actions,but will will hold individuals to account.

*Doherty *
Bank of Ireland 2,100 got restored in 2011. They got no compensation.
There was no redress scheme then
Will you ensure that they will be treated the same as they would today

*Sibley *
There was no compensation for the harm
We had no powers at that point
The 2013 Act changed our powers

*Doherty *
The 3916 people who were overcharged by 0.15% deserve compensation as well.

*Sibley *
We are engaging with all the banks, but there are limitations on our powers

*Doherty *
People are being restored at much higher rates by ptsb. They shuld have got 75 bps, but they are getting 325 bps.
Are you going to get involved in this?

*Lane *
The contract is the baseline in the review
Are you being restored to that?
If you want to share individual cases with us, please do.
The understanding of the consumer what their contract was is important. 

*Doherty *
You have the information. People like Padraic Kissane and the IMHO don't have this information. 
There were 80 live cases with the FSO which resulted in 15,000 restitutuions cases. 

*Lane*
There will be a phase where we will review the work they have done.
That will happen in early 2017


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## Brendan Burgess (20 Dec 2016)

*Rose Conway-Walsh*
Does it include staff mortgages as well? 

*Sibley 
Yes, *it makes no distinction between staff and non-staff. 

*RCW*
High SVRs. Do you still not want the powers to control rates 

*Lane*
There are problems in this approach. 
Caps on mortgage rates have problems 
Asking the CB to do it, adds an additional layer problems 
But it's up to the Oireachtas to decide 

Two issues 
1) Are interest rate caps good? 
2) If so, how do you go about it? 

*RCW*
You say the alternative is competition 
How many new lenders have applied? 

*Lane*
I am not going to discuss current applications 
You may see competition for low risk safe debtors 

The bigger problem is how do you satisfy the demand for credit from higher risk 

*Sibley *
If a european bank wants to lend in Ireland, they don't need authorization from us. 

*RCW*
ARe you comfortable with the way Bank of Ireland is encouraging people to fix 

*Lane *
Without commenting on BoI, it would be good if we could come up with a s ystem for reasonable long term fixed rate mortgages. 

If they were good well priced fixed rate mortgages, that would be good.

The particular strategy of BoI, that is a clear commercial strategy 

When there are alternative banks, if individual banks want to pursue market strategies. 

What lies behind Higher rates, significant funding costs and higher risk 

But the market is concentrated, they have the power to levy rates higher 

*RCW*
If the Oireachtas passes a law on flood insurance...


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## Brendan Burgess (20 Dec 2016)

*Senator Gerry Horkan *

How do people know if they are affected or not?

*Sibley*
They will be writing to people who have been affected.
They are not writing to every customer.


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## mister32 (6 Jan 2017)

I finally got around to reading the transcripts

http://oireachtasdebates.oireachtas.ie/Debates Authoring/DebatesWebPack.nsf/committeetakes/FPJ2016122000002


I thought the governor was extremely poor.

What did anyone else think?

He was unprepared and when asked about ptsb rate he actually said customers can appeal compensation via the appeals process.

Sounds way too much like a bank for my liking.

The questioning was good by

Kieran ODonnell
Michael Mc Grath
John Mc Guinness
Pearse Doherty
The governor got a complete pasting.
And his sidekick made some mistake about the Boi count from 2010


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## Brendan Burgess (6 Jan 2017)

mister32 said:


> he actually said customers can appeal compensation via the appeals process.



Can they not?


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## Freshstart (6 Jan 2017)

Point is Brendan if governor was asked about the rate he never answered the question. Of course customers can appeal compensation but the rate is a separate issue.


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## mister32 (6 Jan 2017)

People shouldn't have to individually appeal a complete travesty of justice 

What is the point of a central Bank review if they are toothless


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## Brendan Burgess (6 Jan 2017)

Hi mister

I am confused. You said "he actually said customers can appeal compensation" . 

I assumed you meant that he had made a mistake.  But he did say it and it's true

I have no idea why Freshstart is now talking about the rate.  You were talking about the compensation.

Brendan


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## mister32 (6 Jan 2017)

Brendan Burgess said:


> Hi mister
> 
> I am confused. You said "he actually said customers can appeal compensation" .
> 
> ...



I said, when questioned about the ridiculous ptsb rate, he said customers could appeal! 

Instead the rate should be resolved by this review.


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## Brendan Burgess (6 Jan 2017)

mister32 said:


> I said, when questioned about the ridiculous ptsb rate, he said customers could appeal!



OK, I see the confusion

When asked about the rate he said they could appeal the compensation. 

They can appeal the rate as well, although I think that those appeals had been rejected.

Brendan


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