Between 2019 and 2022, the Central Bank of Ireland imposed almost €275 million of fines on six banks for a total of 277 regulatory breaches following investigations into their roles in the tracker mortgage scandal.
By the time it concluded the last enforcement investigation into the lenders four years ago, more than €750 million had been paid to affected customers by way of redress and compensation – making it by far the biggest overcharging debacle in the history of the State.
Central Bank officials said while they investigated companies that they were also looking “at individual accountability”.
But to date, there is only one case that the Central Bank has pursued all the way to the end: that of David Guinane, the former chief executive of PTSB.
READ MORE
The one regulatory breach at the heart of this case was broad in scope. Guinane was alleged to have participated in the bank’s failure to act in its customers’ best interests – a general principle set out in the Consumer Protection Code 2006.
Yet the crucial evidence was remarkably narrow. It came down to three words: “OK with that”.
That was the response Guinane sent in an email at 2.19pm on Monday, January 19th, 2009, to a colleague who was chasing him up to sign off on a plan of how to deal with a certain group of customers who had taken out tracker loans during the 2000s property bubble.
Irish banks stopped offering new tracker mortgages, where rates are linked to the main European Central Bank (ECB) rate, in July 2008 at a time when banks’ funding costs on internal markets were spiralling at the outset of the financial crisis.
The Guinane inquiry centred around a special condition – known as special condition 706 – attached to some boom-era tracker mortgages.
This required customers who moved for a period to a fixed rate to instruct the bank afterwards to put them back on a tracker rate or another fixed product. Otherwise, they would default to a standard variable rate.
The wording of the condition was ambiguous. And it led to questions in early 2009 about whether customers opting to go back on a tracker were entitled to a rate set at the original margin over the ECB rate or a higher margin then on offer from PTSB.
A direct report to Guinane sent a proposal to the CEO in January 2009, on foot of legal advice and a discussion among other senior bank officials, to only put customers who requested the original rate – or complained – on the more favourable rate. It led to the “Ok with that” response.
Guinane testified during an inquiry hearing in early 2024 that while he did not remember events surrounding the decision, he understood the email to mean – based on having reviewed documents – that “any customer” coming out of the fixed rate would “go back to their original rate”. The email only contained a summary of the legal advice.
The original Central Bank allegation was that Guinane was “fully aware” of the impact of the decision. But by the end of public hearings, its lawyers were arguing he ought to have known what he was approving. This, his counsel said, essentially amounted moving the goalposts.
The chairman and sole member of the inquiry, UK barrister Peter Hinchliffe, concluded in his decision, published last October, that Guinane gave his approval to the proposal without seeking any additional information.
“By signing off on the proposal without taking due care over, or paying any attention to, the consequences for customers, despite being in a position to understand the risk that customers could be overcharged, and thereafter failing to take any steps to check that customers were being treated fairly and in their best interests, Mr Guinane’s conduct was culpable and blameworthy,” he said.
Hinchcliffe imposed an €80,000 fine and reprimand on Guinane last October.
However, The Irish Times reported on Thursday that the former banker had won an appeal, with the Irish Financial Services Appeals Tribunal (Ifsat) overturning the inquiry’s conclusion.
It is understood that the tribunal, chaired by former Supreme Court judge John MacMenamin, emphasised in its decision – issued in draft form in recent weeks to parties involved, and yet to be published – that there was a level of unfairness in how the inquiry proceeded.
The decision marks another big setback for the regulator’s post-crisis vetting and enforcement activities.
Ifsat was previously highly critical in 2024 of a Central Bank refusal to approve a board nominee for a fund, saying the decision-making process was “flawed” and denied the individual fair procedures “at every stage”.
The Central Bank was also found in a High Court ruling, published in April, to have badly handled an enforcement investigation into a funds industry executive, saying it was “irretrievably tainted” by errors. The bank committed to learning lessons and changing procedures following both embarrassing episodes.
Ifsat’s decision in the Guinane case may be appealed by the Central Bank to the High Court. But it raises questions about whether the Central Bank will still pursue other individuals to the bitter end – irrespective of how egregious their alleged conduct was during the tracker scandal.
PTSB actually reconsidered its position on the special condition 706 tracker cases – following engagement with regulators – in 2010 and remediated 234 customers who had been affected, at a cost of €1.3 million.
If only banks had moved as quickly to stop the harm to tens of thousands of others.
It would be late 2017 before the sector acknowledged most cases of people being wrongfully denied a tracker mortgage – or the right tracker rate. And only then after heel-dragging turned the matter into a major public and political crisis.
If there are other bankers still under investigation, the outcome of the Guinane case will surely embolden them.
Individuals are more likely to fight cases than corporations, because the consequences are personal.
