Tracker scandal Q&A: What happens next?

So, is the tracker scandal over?

No, it's not. Most of those who had money wrongly (and possibly illegally) taken off them will be paid recompense by Christmas, the rest in the first half of next year. Or so the banks have promised, anyway. The Central Bank, which has the responsibility and the power to oversee, regulate and discipline the banks, will compile two reports for the Minister for Finance, Paschal Donohoe. One of them will examine the scandal itself, the other the culture within banks that gave rise to it. On the foot of those reports, further action may be taken.

Are the banks facing any penalties?

As of now, no. Donohoe has threatened them, rather than taken action against them. But they may face action in the future.

But if money has been taken wrongly by the banks, why haven’t the gardaí been called?

They may yet be. The Central Bank is conducting four enforcement actions against the banks on foot of the tracker scandal. If it discovers that there appears to be breaches of the criminal law, then it must call the gardaí in to investigate. The Central Bank inquiries are ongoing and they have had discussions with the gardaí, though nothing has yet been referred to them. The reasons are due to the complexity of the matter. Also the evidence of law-breaking by the banks is likely to be tied up with the interpretation of contracts.

Is that it? Complexity and the law of contracts?

Yes and no. The Central Bank has prioritised getting the banks to pay money back to customers, and it has now finally had some success in getting the banks to commit to that. Some people suggest that a heavy-handed legal approach or a Garda investigation would have dissuaded the banks from playing ball on refunds.

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So we’re relying on the banks to do the right thing? Isn’t that a bit naive?

It is a bit. If there’s one thing that we’ve learned from the behaviour of Irish banks it’s that they will do the right thing once they are left with no alternative. The Central Bank has extensive supervision and enforcement powers nowadays in the wake of the banking collapse; but the banks also have the right – and the inclination – to mount aggressive and time-consuming legal defences. What the Central Bank and the Minister for Finance have done is to put the banks in a position where they agree it is in their own interests to repay consumers and co-operate with the investigation.

Couldn’t the banks be ordered to comply or be fined?

The Government can’t just announce fines, any more than it can just tell gardaí to go after the banks. Sanctions have to be lawful, proportionate and procedurally correct. That is dull and it is frustrating. But is also the law. The Central Bank has very significant powers, more than any other regulator. But it has to exercise them carefully and correctly. In practice, that has meant it has done so painstakingly slowly.

But don’t we own the banks? Why can’t we tell them what to do?

We own some of them. The State has a majority stake in AIB and PTSB and a minority stake in Bank of Ireland, but Government policy is to sell these when it can, and it has already offloaded a chunk of its AIB shares earlier this year. But the relationship is governed by a "relationship framework" and the stake in the banks is managed by a shareholder management unit in the Department of Finance – specifically to avoid political pressure on the banks. Nobody would buy a bank that was the plaything of politicians, and it remains a priority for the Government to get its money back out of the banks.

Does that mean the Government and the banks are a bit cosy?

The Department of Finance and the Central Bank have a complicated relationship with the banks. On the one hand, they have to regulate them and are often held answerable for their failings. On the other hand, they have to protect the sector as the provider of credit and facilitator of the payments system. You can’t have a banking system without banks and, while the political storms caused by banking scandals will come and go, any minister for finance must also consider longer-term needs, too. That explains why the Minister and the Central Bank have been fonder of the carrot than the stick.