Central Bank Governor at the Finance Committee next week

B26354

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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.
 

B26354

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254
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.
 

Bikini Widow

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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/central-banks/governance/3504891/philip-lane-on-systemic-risk-transparency-and-brexit

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

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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.

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Best wishes,

BW
 
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