Central Bank fine almost meaningless in era of consumer disempowerment

Analysis: Bank will almost inevitably end up passing the financial consequences of its failures onto its customers

Ulster Bank has been fined €3.5 million  after an IT failure prevented thousands of customers being able to use their accounts over a month.  The fine is the highest imposed by the Central Bank of Ireland and has been accepted by RBS-owned Ulster Bank. About 600,000 customers were unable to access cash at bank machines and make payments, and many saw delays in getting money into their accounts during 28 days in June and July 2012.  Bank. Photograph: Brian Lawless/PA Wire

Ulster Bank has been fined €3.5 million after an IT failure prevented thousands of customers being able to use their accounts over a month. The fine is the highest imposed by the Central Bank of Ireland and has been accepted by RBS-owned Ulster Bank. About 600,000 customers were unable to access cash at bank machines and make payments, and many saw delays in getting money into their accounts during 28 days in June and July 2012. Bank. Photograph: Brian Lawless/PA Wire

 

Anyone affected by Ulster Bank’s almost total failure to function as a bank for four weeks over two years ago might be forgiven for arching an eyebrow at the €3.5 million fine which has just been imposed by the Central Bank.

In June of 2012 the bank’s IT system collapsed for four weeks. Wages did not hit people’s accounts, direct debits went unpaid and mortgage payments were missed. The problem was not just confined to Ulster Bank as many thousands of customers of other banks were unable to make payments because money they expected from Ulster Bank customers never made it to their accounts.

And that is why the fine has now been imposed. Its size will be galling for many people but the reality is that the penalty is almost meaningless for a bank which will almost inevitably end up passing the financial consequences of its failures onto its customers.

Because that is what our banks routinely do either in the form sometimes spurious charges, higher interest rates or a greater tax burden.

First look at the tax issue. All told the reckless lending practices of our banks has cost Irish taxpayers €64 billion or €16,000 for every man, woman and child living in the Republic today. Consumers have no comeback here.

While tracker mortgage holders are protected for the most egregious excesses of the banks, those with standard variable rate (SVR) mortgages are not so lucky and hundreds of thousands of people in this cohort have has been hit with repeated rate increases in recent years despite the fact that ECB rates are at historic lows.

Consumers are also being penalised in the form of bank charges. Not long ago our banks were falling over themselves to give us free banking. Not any more. All the major banks - with the exception of PTSB - charge us anywhere between €80 and €200 to manage our money. The hit those who are worst at managing their money hardest which means those who can least afford it pay the most.

There is more - or should that be less. All our banks have dramatically cut their services in recent times. Bank of Ireland will not process large international payments at the counter and do not allow credit card payments or payments into non-Bank of Ireland accounts. It won’t sell bank drafts at branch counters unless they are worth more than €500.

But that bank is not alone. Irish banks are also moving people away from its frontline staff in a manner which might be considered unseemly. Stand in the queue for any teller with a cheque you would like cashed and you will be approached by a “customer service representative” who will strongly urge you to use an automated machine to cash your cheque.

Consumers are disempowered in many areas but it is more visible in the banking sector than elsewhere. Competition has shrunk in recent times as overseas players rushed towards the lifeboats. And it is largely impossible to escape charges. It is why so few switch in the sector. And it is why the Central Bank fine is largely meaningless.

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