Banks’ tracker mortgage fines may reach €350m

Central Bank fines PTSB €21m for the ‘unacceptable harm’ it caused customers

PTSB admitted 42 separate breaches of banking codes of practice, covering mortgages between the years 2004 and 2018. Photograph: Alan Betson / The Irish Times

PTSB admitted 42 separate breaches of banking codes of practice, covering mortgages between the years 2004 and 2018. Photograph: Alan Betson / The Irish Times

 

Banks in the Republic face fines of up to €350 million for the tracker mortgage scandal on the basis of the first case to be settled by the Central Bank with Permanent TSB, according to industry sources.

The Central Bank said on Thursday it had imposed a record €21 million penalty on PTSB for the “unacceptable harm” it caused certain tracker mortgage customers, including some who lost their homes, when it wrongly denied them a cheap loan tied to the European Central Bank’s (ECB) main rate.

The fine equated to about 5 per cent of PTSB’s total operating income last year – half of the maximum the regulator can levy under rules introduced in 2013. A similar level of fines across the industry would result in total penalties of €350 million. Still, the outcomes of the various investigations may vary.

A spokeswoman for the Central Bank said it was premature to comment on cases that were still ongoing. Spokesmen for the other lenders, including AIB and its EBS unit, Bank of Ireland, Ulster Bank and a spokeswoman for Belgian-owned KBC Bank Ireland declined to comment on what fines they face.

Refunds and fines

The six lenders have set aside over €1 billion in recent years to cover refunds, compensation and fines. Some €664 million has been paid out by the banks to most of the 39,800 borrowers caught up in the tracker mortgage debacle going back more than a decade.

Analysts say some lenders may have to set aside more money to cover fines, as they digest the outcome of the PTSB case. Irish taxpayers own 75 per cent of PTSB, 71 per cent of AIB and 14 per cent of Bank of Ireland, while Ulster Bank’s parent, Royal Bank of Scotland, is majority owned by the UK government.

Derville Rowland, director general of financial conduct at the Central Bank, has said that the regulator may still take action against individual bankers after it completes investigations into the companies themselves.

PTSB’s fine, originally set at €30 million but discounted by 30 per cent due to its quick agreement to the terms of a settlement scheme, is the largest ever issued by the State’s banking regulator. The fine was levied over PTSB’s treatment of more than 2,000 customers.

Trackers were commonly sold at the peak years of the Celtic Tiger housing boom, but the products proved heavily loss-making for banks during the crash.

PTSB admitted 42 separate breaches of banking codes of practice, covering mortgages between the years 2004 and 2018.

Some customers were put on higher rates than those to which they were entitled, while others were denied tracker rates altogether.

Among the customers affected, 12 lost their family homes and 19 lost buy-to-let properties due to mortgage arrears incurred.