AIB set for record Central Bank fine over tracker mortgage scandal

Bank has set aside €70m to cover fine flowing from mortgage investigation

The Central Bank is set on Thursday to impose a record fine on AIB and its EBS subsidiary for their roles in the State’s tracker mortgage scandal, The Irish Times has established.

While the size of the penalty is unclear, the banking group has set aside €70 million on its balance sheet to cover its “best estimate” of an expected fine resulting from an enforcement investigation that has been running since 2017.

“This is subject to uncertainty with a range of outcomes possible with the final outcome being higher or lower depending on finalisation of all matters associated with the investigation,” the bank said in its 2021 annual report.

The size of the provision dwarfs the regulator’s previous highest fine to date: a €38 million penalty was levied against Ulster Bank early last year to settle a tracker investigation against the UK-owned lender.

Spokesmen for the Central Bank and AIB declined to comment.

The tracker issue has so far cost AIB close to €600 million in refunds and compensation, legal fees and administrative expenses – in addition to the money set aside for a Central Bank fine.

More than 41,000 borrowers were affected by the industry-wide debacle going back to 2008, as Irish lenders wrongly denied customers their right to a cheap loan linked to the European Central Bank rate or put them on the wrong rate entirely. Irish banks have set aside €1.5 billion of provisions in recent years in relation to the tracker scandal.

The Central Bank has imposed almost €82 million of fines on four lenders in the past two years, including Permanent TSB and its former subprime unit Springboard Mortgages, KBC Bank Ireland and Ulster Bank, for their involvement in the biggest Irish banking overcharging episode.

AIB and Bank of Ireland have been the subjects of the last outstanding enforcement investigations. Bank of Ireland has never commented on the amount of money it has ring-fenced for an expected fine. However, it was sitting on €94 million of tracker-related provisions at the end of last year, including funds for an expected fine.

AIB chief executive Colin Hunt, who joined the bank in 2016 and took the helm three years ago, told The Irish Times in an interview in April that he wanted to see the regulatory investigation completed this year.

“My ambition is to do everything in my power to restore the reputation of AIB,” he said at the time, adding, that the resolution of the tracker mortgage issue was “critical to that ambition of mine”.