Governor Lane appearing before Oireachtas Finance Committee this morning

Brendan Burgess

Brendan Burgess

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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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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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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
 
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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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
 
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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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...
 
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.
 
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
 
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.
 
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
 
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
 
Brendan Burgess said:
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
Click to expand...

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

Instead the rate should be resolved by this review.
 
mister32 said:
I said, when questioned about the ridiculous ptsb rate, he said customers could appeal!
Click to expand...

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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