Bank of Ireland set for multimillion-euro tracker fine

Lender has set aside €120m for remaining tracker issues

The Central Bank is set to impose a fine amounting to tens of millions of euro on Bank of Ireland on Thursday for the lender’s role in the State’s tracker mortgage scandal, The Irish Times has learned.

Bank of Ireland had €120 million set aside as of the end of June to cover remaining tracker issues, including money that was ring-fenced for a regulatory sanction. The lender has repeatedly refused to indicate how much of the provision related to an expected fine.

A spokeswoman for the Central Bank and spokesman for Bank of Ireland declined to comment.

The country’s largest bank by assets is the last of seven boom-era mortgage lenders that have been subject to Central Bank tracker investigations to see its enforcement case draw to a conclusion.


AIB and its EBS unit were fined a record combined €96.7 million in June for their respective involvement in the industry-wide overcharging controversy, bringing the total level of tracker-related fines to date to more than €178 million.

Permanent TSB (PTSB) and its former sub-prime unit Springboard Mortgages, KBC Bank Ireland and Ulster Bank had each been hit with penalties in recent years.

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 (ECB) 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 issue has so far cost Bank of Ireland almost €330 million since 2016 in refunds and compensation, legal fees and administrative expenses, and provisions set aside for a Central Bank fine.

The imminent closure of the Bank of Ireland case comes within days of the Government announcing last Friday that it had sold its remaining shares in the lender, making it the first to return fully to private ownership following the State’s crisis-era €64 billion rescue of the financial system.

Irish lenders stopped issuing new tracker mortgages — where interest rates are typically set at a 1 percentage point premium to the ECB’s main lending rate — in 2008 as their own funding costs jumped amid the global financial crisis.

While holders of tracker loans benefited as the reference ECB rate dropped from 3.75 per cent in late 2008 to zero in 2016 — and borrowers on other products faced higher charges — they have been automatically affected by the central bank’s recent rate hikes. The ECB has raised its main rate to 1.25 per cent since late July and is on track to increase borrowing costs further in the coming months.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times