AIB I have called on the Finance Minister to veto the reappointment of the AIB non-executive directors

Brendan Burgess

Founder
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Statement from Brendan Burgess who has campaigned on behalf of 5,900 AIB Prevailing Rate cases


Late on Friday evening, AIB edited their tracker web page, to say that they will not be appealing the Ombudsman's upholding of a complaint on the Prevailing Rate issue.


In early February we announced that we had made an additional provision, primarily in relation to an FSPO decision on an individual case relating to a tracker complaint which was then at a preliminary stage. This case is now concluded with the FSPO. While this case involved a number of complex issues the Bank has decided to accept the finding in full, and to apply the finding to other customers within the same cohort. Customers do not need to take any action and will receive a letter and their payments in July and August.


This will bring to an end a 4 year campaign on behalf of these customers.


In July and August 5,900 customers, most of whom know nothing at all about it, will find their mortgage balance written down by an average of about €24,000 and they will get a cheque for about another €8,000. However, the Ombudsman did not rule that they should be put on trackers for the remaining term of their mortgage.


The behaviour of AIB has been appalling.


They have dragged this out for 4 years instead of facing up to the problem and redressing the customers.


While I hope that the Central Bank will review the fitness and probity of the management of AIB, I am today calling on the Minister for Finance to veto the appointment of the non-executive directors of AIB who appear to have never questioned the strategy of AIB's management.


This is not just an academic issue. Lives have been destroyed by the failures in AIB.


It is meaningless setting up banking culture boards and it is meaningless talking about putting customers first, while the banks continue to behave as they have always behaved.


The Minister for Finance owns 71% of the shares in AIB on behalf of the taxpayer. I am today calling on him to vote against the reappointment of the non-executive directors at the AIB AGM on Wednesday 29th April.





Brendan Burgess
 
Brendan Burgess​

Mr Paschal Donohue
Minister for Finance



By email to pressoffice@finance.gov.ie

19th April 2020



Dear Minister



It is very clear from the manner in which AIB has handled the Prevailing Rate issue that most of the non-executive directors have not done their job properly. Under the circumstances, I would ask you to use your voting power at the upcoming AGM to vote against their reappointment.

AIB will dismiss the prevailing rate issue as a legacy issue which they want to draw a line under.

It is nothing of the sort. The error made in the 2008 -2011 was an error which, although regrettable, was understandable. We all make errors.

But the behaviour of AIB since this error came to light 4 years ago has been appalling.

They tried to sweep this error under the carpet instead of facing up to it and redressing the impacted borrowers.

And they have fought this tooth and nail ever since.

  • First, they insisted that as these customers were never on a tracker that they were not impacted. They refused to even write to these customers telling them that they were not impacted.
  • Then they were forced kicking and screaming by the Central Bank to admit to a “service failure” thus enabling the impacted customers to complain to the Ombudsman.
  • They fought all these complaints.
  • In January, the Ombudsman issued a preliminary decision against AIB. Despite making a €300m provision for the cost of this and giving the impression that they were going to resolve it quickly, they lodged a lengthy legal challenge to the Ombudsman’s preliminary finding.
  • When the Ombudsman issued a final decision on the 12 March, they still had a chance to accept it and limit the damage.
  • But they waited the full 35 days time allowed to appeal to the High Court until last Friday, when they edited their tracker news page on their website to say that they have accepted the decision.
So the preliminary decision was issued on 12th January. The impacted customers will not be getting their redress until “July or August”.

With 5,900 impacted customers and their families, this is the single biggest cohort of tracker mortgage cases.

But it’s not just a statistic which will cost AIB €300m. These are real citizens with real lives

  • Many of these customers had to make huge personal sacrifices to meet their excessive monthly mortgage payments
  • Around 20% of them went into arrears, of whom about half would not have been in arrears if AIB had offered them the tracker mortgage to which they were entitled.
  • Many of these customers in arrears have been subject to totally unnecessary repossession proceedings
  • And worst of all, some lost their family home through court order or voluntary sale
The first principle of the Central Bank Redress Framework is “stopping further harm to impacted customers.”

The board of AIB should have faced up to the error 4 years ago and stopped the continuing harm. Instead, they are now saying that they will write to the impacted borrowers in “July or August” with the redress payment.

The Chairman said at the AGM last year that the tracker mortgage issue was on the top of the agenda at every board meeting. A non-executive director should be independent and sceptical. They should have exposed the executive management’s arguments for the nonsense that they were.

I want you to imagine the board meetings of AIB over the past 4 years.

Management: “There was no breach of contract, it was a service failure.”

Did none of the non-executives challenge that? When AIB management said this at the Oireachtas Finance Committee, the TDs and Senators made a laughing stock of the AIB team.

Management: “The mortgage contract said that they could choose a tracker mortgage. That did not mean that we had to offer them one.”

Did none of the non-executive challenge that?

Management: “There was no prevailing rate because the prevailing rate meant the rate we offered to new customers and we had stopped offering trackers to new customers.”

Did none of the non-executives challenge that? If they had asked whether the mortgage contract defined the prevailing rate as the rate on offer to new customers, they would have been told that there was no definition of prevailing rate in the contract, but that AIB was defining it now as meaning the rate on offer to new customers.

Management: “The customers did not lose out because if we had offered them a tracker, the rate would have been up to 12% which was over double the Standard Variable Rate.”

Did none of the non-executives challenge that? Did they not point out that up to 2008, the tracker rates were set to be equal to or to be below the SVR? Did they not point out that the Irish SVR was itself twice the average mortgage rate in the eurozone, but AIB was now claiming that the tracker rate would have been 4 times the average mortgage rate in the eurozone?

Management: “The method we used in 2017 to determine what the rate would have been in 2010 is commercially sensitive. But we got a top international firm of banking consultants to verify that the rate would have been 12%”.

Did none of the non-executive directors ask if that report would stand up in court or before the Ombudsman? If they had done so, they would have been told that the document was commercially sensitive and that AIB had refused to give a copy of this report to the Ombudsman or to the court. They even refused to identify which international firm of banking consultants compiled the report as they had a confidentiality clause in their contract.

The arguments put forward by the management of AIB lacked any credibility. They were clearly flawed from the very start. One does not need to have a Ph.D. in international finance to see them for the nonsense that they are. Putting forward arguments which lack credibility damages the credibility of AIB.

We need a thriving banking system in Ireland in which the public can have confidence. We will not be able to achieve that unless these banks have an independent board of directors who are prepared to question and challenge the management.

In conclusion, I would ask you to review the minutes of the board meetings where this issue was discussed over the past 4 years. If the minutes show that any of the non-executive directors challenged the groupthink behind AIB’s approach to the Prevailing Rate issue, then by all means, vote for them. But otherwise I would ask you to vote against their reappointment.



Brendan Burgess
 
Superb Brendan.

As an AIB account holder can I write to Paschal and the individual non-executive directors along the same lines or does being a mere citizen-account holder rule me out?
 
Great work again Brendan. About time there was some accountability in there.
 
Great letter Brendan, Will we write our own versions or should we all send the same letter to our local TDs and politicians. It would be a minimum amount of effort and being one of the cohort who was oblivious to all this I feel it the least I can do . I read a post earlier and it read true. Some of us will receive life changing funds of which we were totally unaware , if i won this amount on a scratch card I'd be jumping around the room. So to Brendan and all who have fought this battle I thank you, my wife thanks you and my 2 youngs boys thank you.
 
Fair play Brendan, very well.written letter and we are ever so grateful for all your hard work on this matter.
 
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