AIB Why the Central Bank allowed AIB to set the prevailing rate retrospectively

[Brendan Burgess]

Here is the report of the Oireachtas Finance Committee meeting with Governor Lane

Deputy Michael McGrath: On the prevailing rate issue that applies in both AIB and Permanent TSB, AIB included in its December update an additional 4,000 customers and AIB is proposing that they receive compensation of €1,000 plus €615 towards independent advice. My understanding is that this is a cohort of customers who were never on a tracker rate but were on a fixed rate of interest for a period and under their mortgage contract, at the end of the fixed rate period they were entitled to go on to a tracker rate at the prevailing rate, which is the term that was used in the mortgage contract. When they came off the fixed rate, however, they were not offered such a tracker rate because the trackers no longer existed or were not being offered by the bank at that time. Nonetheless their mortgage contract entitled them to a tracker rate at the prevailing rate. A tracker, as we all know here, is the ECB rate plus a margin. The margin remains fixed. The ECB varies in line with the ECB base rate. Will Professor Lane talk us through that issue?

Professor Philip Lane: I think it is important to be clear about this. Those contracts specified that when one rolled off the fixed rate, the mortgage holder was entitled to a tracker loan at the prevailing rate. They were not offered a tracker mortgage. That is why they are receiving this flat rate compensation because the option of the tracker was not offered. This is why they are included and they are receiving a payment because they should have received the offer of a tracker and they did not. The second point is - and we have looked at the issue very closely because we appreciate there are many people who are very concerned about this and we are aware of different interpretations of what "prevailing" might mean to different people. Ms Rowland might wish to add to my remarks, having been to the front of concluding an agreement with the banks. There are all sorts of tracker contracts out there. Deputy McGrath mentioned the fact there is a fixed margin. That is not the case for all tracker mortgages. The margin in some of the tracker mortgages could be linked to the cost of funding to the banks. The trackers were not offered, when they should have been offered and then the question is, at what rate would the bank have offered a tracker under these contracts at that time, if they had made the offer? This is where the calculation the Deputy is seeing is that they are being offered trackers at more than 3% because that reflected the cost of funds to the banks after they shot up after the crisis. By the autumn of 2008, if the bank were to offer tracker mortgages at the prevailing rates, they would have offered trackers at significantly higher rates. The point is that these were not trackers that promised a fixed margin over ECB. We went through this in great detail because we were always looking to make sure that from a consumer's perspective we had checked every angle, looked under every corner of this. When we looked through this with our experts, the conclusion was that was what would have happened if they had been offered a tracker. It would have been an expensive tracker. These were not fixed margin over ECB. These were trackers where the margin could vary. This is why we have ended up in this situation. I will make one more point and then I am sure Ms Rowland can add to this. The fact that they are in the examination, are being contacted by the banks and are receiving this offer means that the independent appeals mechanism is open to them. If they believe that this is not adequate, they have the full access to the independent appeals mechanism to challenge it if they believe this is not sufficient or appropriate. As with all mortgage holders, the ombudsman and the courts remain open. It is essential that we put them into the examination because they are receiving this payment because they should have been offered a tracker and they were not. In addition, if they believe this is not appropriate to their individual case, they can bring forward an appeal. Ms. Rowland led this work and maybe she will elaborate.

Ms Derville Rowland: The Governor has described it as it is. Deputy McGrath asked in particular about the AIB case. AIB will be in a better position to tell the Deputy more than I can from its point of view, but there was contractual right to have a tracker offered and that did not in fact happen. We call that a breach of contract. The compensatory payment is for that. Then a second question arises, which is the actual tracker rate. It may be said that some contracts are watertight on these issues because they actually have in print in the contract what that rate is to be and then it is beyond discussion or dispute. They are often called a price promise tracker, where one has a number in the contract document and there is very little argument about those types of contracts. When one has a phrase such as "the then prevailing rate" in a contract, there is a question of interpretation from different points of view. Whether one agrees or not, there is a question of interpretation about what that means. In this instance, not all contracts are as watertight as other contracts but it is very important for customers who are included in the scheme. By being included in the scheme, it means that all the benefits of the framework are available to be used in the scheme. There may be individual circumstances or information people have had in their own sales experience that may not exactly be systemic or it may be peculiar to their own experience when they are entering into the contract that they can bring forward to the appeals mechanism. In fact, the framework was designed precisely to deal with issues where people may have particular information that they can bring forward. That certainly is the case here. These are inside the benefit of the framework and they can bring forward any information that they wish to about that prevailing rate issue if they have extra information.

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.

 

[Brendan Burgess]

Deputy Pearse Doherty: ... The prevailing rate issue. It will be a huge disappointment for hundreds, if not thousands, of customers who are arguing that the bank has put them back on the wrong rate. Other members and I have asked the Central Bank to examine this and Professor Lane has informed the committee that he is satisfied that the prevailing rate the banks are putting their customers are on is correct.

Professor Philip Lane: We put a lot of time and resources into this. Throughout our attitude has been, and we have said previously, that, number one, we want to make sure all customers that have been harmed are redressed and compensated and, number two, we want to take an expansive definition so that it is not just an issue of a narrow contractual interpretation. We want to ensure a broad range of documentation, a reasonable interpretation and so on. Even with that lens, we put a great deal of effort and expertise into this, but the conclusion was that these contracts are, indeed, different from the fixed margin tracker products and our analysis of them was that, at a systemic level, they would be priced by the banks at the prevailing funding conditions when the fixed rates expired. What happened at the end of 2008 is they just withdrew trackers. We do not think that was appropriate and that is why there is this conversation saying that even if they were going to offer a customer an expensive tracker, they should have offered it. However, the prevailing rate trackers, given the conditions at the time, would have been expensively priced. That is what we think.

Deputy Pearse Doherty: If a prevailing rate tracker was offered by bank X in June 2010 or June 2011, does the Central Bank have a model that says this was appropriate?

Professor Philip Lane: Yes, we have.

Deputy Pearse Doherty: However, is the Central Bank willing to publish that or ask the banks to publish it? It is crucial that people know what the rate is or what the Central Bank and the bank believe.

Deputy Pearse Doherty: However, is the Central Bank willing to publish that or ask the banks to publish it? It is crucial that people know what the rate is or what the Central Bank and the bank believe.

I will give an example and I will ask the Governor to answer that question. I want to pick up on something Mr. Sibley said. He talked about the ambiguity in the contracts. There is no doubt that there is ambiguity in the contracts and they should never have been allowed to be authorised. The Central Bank at that time should not have allowed this. I will give an example of a contract and a letter of offer with a particular bank. The letter of offer states clearly that it is a tracker rate of the ECB interest rate plus a maximum of 1.1 percentage points. It continues to offer a three-year fixed-term contract. The individual took out the tracker mortgage which was on the letter of offer at 1.1 percentage points above the ECB interest rate and fixed it for three years. However, the contract contained the following terminology, "a tracker mortgage loan and the rate applicable will be the rate appropriate to the balance outstanding at the time of expiry of the fixed-rate period". According to the bank that means what was stated in the letter of offer has no standing whatsoever and that it will apply whatever it wants after the expiry of the fixed-rate period.

I am making a point about ambiguity in contract. Is there not an issue in contract law? If there is ambiguity in a contract, it has to come down in favour of the customer in this case. If somebody has a letter of offer which stated at the top a tracker mortgage of the ECB interest rate plus 1.1 percentage points and allowing them to fix it for three years and then finds this terminology in the terms and conditions of the contract that they signed, it is hard for anybody to understand what that really means. Should the Central Bank not come out and state that that interpretation is not right and that the letter of offer should stand in these cases? This is one of the issues under examination. This is one of the issues the Central Bank has dealt with. I am sure this customer would be disappointed at today's comments from the Central Bank that it believes that what the bank is doing on the interest rate is correct.

Professor Philip Lane: Transparency and reasonable interpretation have been absolutely part of what we have looked at in assessing these individual situations. These different types of legal arguments have been factored in, which in the case of ambiguity is deferring to what is in the consumer interest and so on. If the individual in her interaction with a bank, broker or whatever was guided differently and if there was not sufficient explanation, then that remains an individual case which can be tested through the appeals mechanism or the ombudsman or the courts. However, at a systemic level the fact that these contracts indicated that at conclusion they would revert to the tracker rate being offered by the banks at that time, that we do see as different from ones where the fixed-----

Deputy Pearse Doherty: I understand that. The issue is with the calculation of that rate.

Professor Philip Lane: Let me come back to the calculation. Basically the banks would have a model showing how they would have priced it given funding costs and so on. We have checked that model. It is the banks' model but we have checked it. I ask Mr. Sibley to expand on that.

Mr. Ed Sibley: As the Governor said, it is the banks' model. They have provided us with details as to how they would have calculated in that period. We have run our own separate independent assessment to check reasonableness. It is not saying we are coming up with a precise number that this should have been the prevailing rate at that time, but it is to check that the banks' model has come up with a reasonable number. Does Ms Rowland want to come in?

Ms Derville Rowland: What the Governor is saying about the Central Bank is really important. I do not want any view that we have taken a decision in support of the banks and against customers on prevailing rates. It is not to be weighted to the benefit of the banks. It is that we did not find enough for us to tip us into systemic action, but that is not a black mark against a consumer who has been put inside the redress and compensation scheme being able to bring their own case forward to say, "This is my prevailing rate. I don't agree with that for my personal reasons and I want you to hear what I have to say." We did not feel able to tip into action to change the scenario, but that is from a systemic perspective, which does not interfere with breach of contract or anything else that a customer would quite rightly want to say on their own part, for example, what he or she believed from his or her customer experience when he or she purchased the product from the bank. We would be a stranger to that and we would not have anything to say, nor could we.

People have every right to bring forward their own information about their view of the correct prevailing rate from their perspective, which may not have a systemic consideration for us, but because they are inside the redress and compensation scheme, they are entitled to do that, and where they feel it is right to do so, they should do that. However, it is from our perspective. We looked at this from systemic action and we did not feel able to tip the balance into interfering with that decision. However, it is not against the consumer, nor is it for the lenders.

Deputy Pearse Doherty: I appreciate that.

Ms Derville Rowland: It was just the regulatory consideration.

 

[Brendan Burgess]

Deputy Michael McGrath: I will stick with the issue of tracker mortgages as I have a few follow-up questions. I would like to revisit the issue of the prevailing rate, about which a number of members, including me, asked questions. I gave Ms Rowland an extract from a contract during the break, which I do not expect her to have read yet. I have some questions on how the Central Bank approaches this issue. The contracts I have seen, including the one I shared with Ms Rowland, do not appear to feature a definition of the prevailing rate. Is it generally the case that the prevailing rate is not defined in mortgage contracts?

Professor Philip Lane: In the work we did on this there was considerable discussion on what is a sustainable interpretation of prevailing rate. I keep making the distinction that the prevailing rate is generally interpreted as the rate the bank would offer at the conclusion of the fixed rate period. To repeat, in any individual case there may be additional documentation and evidence that any individual could bring forward to state it had been conveyed to him or her that prevailing rate meant something different. In general, the interpretation is the rate prevailing at the end of the period of the fixed rate. However, that does not rule out how an individual case might be heard under appeal or to the ombudsman.

Deputy Michael McGrath: We heard that earlier. To repeat my question, is it the case that the prevailing rate was generally not defined in the mortgage contract?

Professor Philip Lane: Yes, that is correct. This is why it has left so much confusion.

Deputy Michael McGrath: That is, therefore, the case. I will take, by way of example, the contract I shared with the witnesses before the meeting resumed. The extract I provided is from an Allied Irish Banks mortgage contract with one of the 4,000 customers in the category identified by AIB as being within scope. I understand the customer in question will receive the compensation offer of €1,000. I just want to give my interpretation of it. When I read clause 3.2 in the contract which deals with what happens after the fixed rate period has expired, it states that at the end of any fixed interest rate period the customer may choose between (a), (b) and (c), where (a) is a further fixed interest rate period, (b) is conversion to a variable interest rate mortgage loan and (c) is conversion to a tracker interest rate mortgage loan. Relating to all of them, it states it is at the bank's then prevailing rates appropriate to the mortgage loan. If the customer does not exercise this choice, the mortgage loan will automatically convert to a variable interest rate mortgage loan. There is no definition of what the prevailing rate is. Professor Lane has given us in broad terms the Central Bank's interpretation of it, which is supportive of the bank's interpretation. I put it to him that that completely ignores clause 3.6 which provides a very explicit definition of what a tracker interest rate mortgage loan is. If one takes clause 3.6.(i), the tracker interest rate is made up of two parts, the ECB's main refinancing operations minimum bid rate which is variable and the tracker margin as stated in Part 1 of the particulars of offer of mortgage loan subject to clause 3.6.(iii). Professor Lane does not have Part 1, but in this case, Part 1 states a margin of 1.1%. Clause 3.6.(ii) states a tracker interest rate applicable at any time will change within five working days of a change in the ECB rate, while clause 3.6.(iii) states the bank may adjust the tracker margin upwards if the valuation report values the property at less than the property price estimated value shown in the particulars of offer of mortgage loan. That is not the issue in dispute as that does not apply, but we have very clear definition on what a tracker mortgage is. In the context of this mortgage contract, the tracker interest rate is the ECB rate plus the tracker margin which is stated elsewhere in the mortgage offer and which in this case was 1.1%.

If we go back to clause 3.2, it is very clear what the options are for the customer at the end of the fixed-rate period, namely, a further fixed rate period, conversion to a variable interest rate mortgage loan or conversion to a tracker interest rate mortgage loan. It goes on to state "at the bank's then prevailing rates appropriate to the mortgage loan". There is no definition of what the prevailing rates are, what they mean or what can be interpreted from it, but there is a very clear definition in clause 3.6 of what a tracker interest rate mortgage loan is. I put it to Professor Lane that the interpretation the bank - AIB in this case - has put on the contract - this is replicated across a large number of the 4,000 customers - which the Central Bank seems to support has no regard to clause 3.6 which defines explicitly what a tracker interest rate mortgage loan is.

Professor Philip Lane: When we looked at this - there is a big body of work to be done to sort this out because it did affect a lot of customers - the assessment we made was that the interpretation was the one we have gone over several times today. If we make an alternative decision, our regulatory decisions can be challenged on appeal. In other words, if we make a regulatory decision in the belief it will be successfully appealed by the regulated firm, of course if we do not think we can stand over it based on the evidence and advice we have received, that means there is that interpretation. I recognise the confounding nature, but the Deputy can be assured that throughout we have always had a consumer focus. We push as far as we can in favour of the consumer, but it remains the case that it must be within the bounds of what is permitted by regulation. I will hand over to Ms Rowland who led the work.

Ms Derville Rowland: I stand over everything we said this morning. We made the decision on a particular set of facts with the particular benefit of the document and all of the surrounding material. I have a document in my hand, but I do not have the benefit of Part 1. When we look at something, we look at all of the information available to us in making the decision. As I do not have the benefit of seeing all of the information, I cannot say if it is identical to the other contracts and pieces of information at which I have looked, together with many others. I note what Deputy Michael McGrath said about what Part 1 states and the way at which he would look at it. I do not wish to gainsay him. I accept his point of view, but for me to express a view on it, I would need to see all of the material, as I am sure he understands.

Deputy Michael McGrath: Yes, but it is the standard contract. It is the contract that I suspect governs a large number of the 4,000 cases AIB has now stated are included in the scoping exercise and in which it is offering €1,000 in compensation.

Professor Philip Lane: That is why we felt there was a layer of additional comfort, the interpretation that the dominant clause was the then prevailing rate in determining what the tracker rate would be when the customer rolled from the fixed rate. In other words, compared to a situation where any bank stated this type of contract was out, because there is no loss, we have included them, but the fact is they did not receive their contractual rights to be offered the tracker rate, whether it was more or less expensive. Because they are included they can use the appeals mechanism which is independent to test what they are saying that in their circumstances they interpreted the clause to which Deputy Michael McGrath is referring as the total guidance in this case. In other words, we have left the door open in order that this debate can continue through the independent appeals mechanism. As a matter of generality, the systemic issue is the definition of the then prevailing rate.

Our expert advice was that this would have led to an expensive tracker rate being charged from late 2008 onwards, but it remains the case that they are included in the examination. If they do not accept this offer or interpretation, the independent appeals mechanism is available to challenge it. On top of that, the ombudsman remains in place, as does the courts option. That is the answer we received and it provides the option to continue to pursue the matter. As regulator, we felt that at a systemic level, that was going to be in line with the regulation, but that does not prevent further action and we deliberately designed it in that way. Because they are included they can use the independent appeals mechanism if they want to test the interpretation. The people who are running the independent appeals mechanism may come to the conclusion to which Deputy Michael McGrath has come, that, essentially, in the individual case we have the evidence of what they understood the interpretation of the then prevailing rate to be; therefore, it remains a live issue for those who believe they were misled or that the full nature of the documentation they had was misinterpreted.

We are in the position where the initial offer recognised that they should have received an offer of a tracker rate, which they did not. In this case it is being stated the tracker rate the bank should have offered would have been expensive. It remains the case that the independent appeals mechanism, the ombudsman and the courts remain open to any of those concerned to challenge that interpretation. That is the built-in assurance mechanism that there are additional ways to test it. We felt that within the bounds of the regulation the dominant interpretation was that it was permissible to reset the price of the tracker mortgages in line with the prevailing conditions at the time following the roll-off from the contracts.

Our mandate is to protect consumers. That is the only criterion - whether we can protect consumers within the realm of the regulations. That pushes it as far as we think we can go, subject to the regulatory framework. It is not about siding with the banks but about making an objective decision, with the advice of our staff and external legal advisers.

Deputy Michael McGrath: I believe Professor Lane is wrong. That is my honest view. When I read through the documentation, I believe it is clear and that he is on very thin ice. He has selectively relied on one clause in the mortgage contract which refers to the prevailing rate. He is shaking his head. Will he, please, hear me out? There is no definition whatsoever of the "prevailing rate". The clause is very clear that the customer is entitled to a tracker interest rate mortgage loan. It goes on to mention the bank's prevailing rate which is undefined, but Professor Lane seems to have no regard to the corresponding clause that defines what a tracker interest rate mortgage loan is. The only variable element is the ECB rate, plus the tracker margin which is stated elsewhere in the mortgage documentation. This is common to the other mortgages caught up in this cohort. Professor Lane should let me finish. Kicking this down the line to the appeals mechanism, the ombudsman and perhaps the courts is a cop-out. The best chance customers have at this stage of having this issue dealt with is through the regulator. In AIB's case 4,000 instances have been identified. The delegates have said, perhaps ten times between all of them, that while this is at a systemic level, the individual cases will go through and that the individuals concerned will have recourse to all of the further steps. If the matter is not dealt with now, the chances of the ombudsman overturning it are quite slim because Professor Lane has given the Central Bank's endorsement in broad terms to the approach of the institutions to this issue. It has been signed off on.

Professor Philip Lane: To repeat, we took this issue very seriously. We take the perspective of the consumer entirely, subject to the limits of the regulation. All of the terms and conditions included in the contracts were studied by us and our advisers. It is not a question of discounting or ignoring. They were studied intensely and a large amount of work went into the decision. We disagree with the Deputy. Our role as regulator is focused on solving the systemic element, but that does not rule out the fact that in an individual case there may be extra pieces of information. An individual may have additional correspondence with a bank or a broker. He or she may have recorded conversations or a record of interactions with members of staff. I know from other sources that many people might be unhappy with this outcome, but we have taken it as far as we think we can go, subject to the regulatory framework, and have left the door open, through the appeals mechanism, for those who want to bring forward additional information. I respect the fact that there are differences of view. It is clear that is the case, but we have pushed it as far as we can.

Deputy Michael McGrath: It is clear that is Professor Lane's view, but I do not believe it has been pushed as far as possible. This will leave a sting in the tail in the handling of the tracker mortgage issue. Professor Lane has placed a greater priority on a reference to the prevailing rate, which is undefined. Greater priority has been placed on one interpretation of an undefined element of the contract than on a very explicit definition of the tracker mortgage rate.

Ms Derville Rowland: With respect, it cannot be said that that represents the totality of our work or thinking. What I have been given is a two-page photocopy of Part 4 of a contract, with two parts placed in front of me and presented immediately as the defining moments, but that is not how the work was carried out. I do not have the complete information. This was given to me a few moments ago. The Deputy will understand why I believe this does not present me with an opportunity to give a full articulation or presentation. With this document, it appears to me that something important is not here, namely, clause 3.6.i in Part B. As it is not in front of me, I cannot say what it is or what it is not, let alone make a just comparison with the many long hours of work we put in in considering substantively the tracker margin issue.

Deputy Michael McGrath: It would be very helpful if the Central Bank wrote to the committee setting out its assessment of the prevailing rate issue and the factors it took into account in arriving at the broad conclusion that the approach of the institutions was to interpret the prevailing rate as being that which applied at the time a person came off the fixed rate.

Professor Philip Lane: That would probably be more effective. In a verbal two-way conversation on the issue we can only give a partial explanation, whereas if we lay out our explanation on paper, it can be studied by the committee.

Deputy Michael McGrath: We will have further engagement.

 

[Sarenco]

Personally I think it is very odd that the Central Bank is substituting its own subjective opinion regarding the parties' expectations for what was actually agreed in their loan contracts.

It seems to me that this approach is creating random cohorts of winners and losers.

In any event, we previously discussed the plausible interpretations of the "prevailing rate" phrase in these threads:-

https://www.askaboutmoney.com/threads/how-should-the-prevailing-rate-be-determined-when-trackers-were-no-longer-offered.199878/
https://www.askaboutmoney.com/threads/challenging-ptsbs-setting-of-the-prevailing-rate-when-no-rate-specificied.196770/

 

[EbsLoannotrafor]

This astonishes me ! Easy not to tackle it and so much time lost -all that delay by the central bank review and then to expect the individuals to sort it out themselves as it were . Perhaps as regulator , he should be given the job of mediation which is part of regulation and then see how the interpretation may vary . I agree what is clear in the contract should be followed , if points not clear it should not be given credence . This would be the normal way of working things out . In mediation documentation is key , here we have fluid interpretation purely subjective which he admits to on prevailing rate . He loses credibility as a result and so does the central bank and its review . Keeps saying the other person is responsible too for this decision , is he not the governor ? it is his decision and he may/ should have to face the consequences for it .

 

[Brendan Burgess]

It's not the Central Bank's role to interpret a contract.

I think that, overall, they have done a good job in persuading lenders to look at things through the consumer lens, rather than from a strictly legal point of view.

AIB are within their rights to insist on a particular interpretation as indeed are the consumers right to insist on theirs.

It will be the Independent Appeals Panel, the Ombudsman and the High Court who will decide.

Brendan

 

[joe351980]

Are the CB not rolling over a little too easily on this matter. Should that not be saying, we're not happy with this and getting their own legal advice on same. Not relying on an individual to seek expensive legal opinion.

 

[Brendan Burgess]

It's a tough one for the CB.

They have pushed the banks, especially BoI, to go well beyond the contractual obligations.

Do they push every case? They assess the merits of each case and decide which ones to push.

Their approach to this is wrong though. They have argued that if AIB had a prevailing rate it would have been 3.67%. But that is not the correct argument. I would say that AIB did have a prevailing rate - the last rate on which they offered trackers.

Brendan

 

[joe351980]

Would this be similar to a betting slip/contract (I don't bet so not sure how it works). You can put money on a horse at certain odds prior to the race. Lets say fixed at 2 to 1, wrote on your slip. Or you can put money on a horse and not have the odds recorded on the slip. You receive the starting price odds. The odds can't however change during the race. Would theese be prevailing odds.

 

[Skippy1]

Good analogy.

But AIB saying we’ll have a race meeting when people take out their contracts. Few races with horse types a) fixed, b) svr and c) tracker.

Then few races AIB not taking bets on tracker c, because c is winning all races.

Then under duress AIB say, ok we’ll let you bet on c again as we promised, but this time c is actually not a horse, it’s a “commercially priced” donkey.

 

[Brendan Burgess]

This is what the Governor said at the Oireactas Finance Committe meeting
(post updated as transcript has become available)

Michael McGrath


On the tracker issue, this has been gone into earlier on but the outstanding issues which continue to be referred to us would include:
the AIB prevailing rate and
related issues in Permanent TSB.
Bank of Ireland staff members continue to report issues.
We are getting emails from former customers of First Active who are now customers of Ulster Bank.
Customers of EBS are also sending in significant complaints.

I know the Central Bank is continuing to focus on them. The point is coming quite quickly at which we will need to give people definitive answers and definitive conclusions. They may not be the ones they want to hear, but people deserve to know the final position pretty quickly so they can then take the matter further through the process if they so desire, whether that is through the Ombudsman or the courts. As the Chairman has said, some of the lack of engagement, lack of response and lack of information which individual customers are getting from lenders is not satisfactory.

The Central Bank owes it to them to reach a conclusion, as it appears to have done on the AIB prevailing rate. It is supporting the bank's interpretation in that case. The Central Bank should be up front and tell people so that they know exactly where they stand.

Derville Rowland

... It is true that in the case of AIB we already communicated that we reached a conclusion. It is not our view that we support the bank's interpretation, but that, from a systemic perspective, we could not interfere in the decision it had made about its interpretation of the customer journey in the contracts.

I completely agree with the Deputy that people deserve to know as soon as possible in cases where a matter is not going to be contested further. I said earlier that we and the lenders know where there are no issues between us and they have been instructed very clearly to get on with replying to people on those issues so that people can have their complaints brought forward. The Ombudsman is aware of that so that the system can work and so that complaints can be dealt with.

The matters with Permanent TSB are not yet closed. They are still under discussion and

we do not propose to take any action with any further or different staff issues in Bank of Ireland. I will be clear on that as well.

 

[Sarenco]

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

I find this attitude truly depressing.

It shows that the Central Bank has learnt absolutely nothing from our banking crisis.

They still seem to think that it is appropriate in a modern economy to regulate banks as though they were the captain of a golf club.

- "C'mon lads, play fair and give that lot back their trackers".
- "Eh, no. They can take us to Court if they want but they haven't a hope of winning. Francesca only caved to her staffers because she wanted some good PR".
- "Fair enough. Not that we support your position, obviously".
- "Ha, ha. Good one Derville. I'll get the round in."

Meanwhile resources are wasted on an over-engineered review process that produces arbitrary results that are literally life-changing for those involved.

Rant over.