A belated act of atonement
Banks are meant to inspire trust and confidence in their customers, their borrowers and their depositors. Some mortgage holders with Permanent TSB (PTSB) have been left with no reason to retain confidence in their bank. Quite simply, the bank they had trusted duped them. The bank’s failure to inform borrowers fully of their rights has cost some – the number ranges from 21 to 61 – their property, while 1,372 mortgage holders were overcharged on their interest payments when their rates were incorrectly set. Nothing can excuse the bank’s sharp practice and deceit of its customers. The PTSB has now belatedly and unreservedly apologised for its actions, and by way of atonement offered inadequate financial compensation to those affected by its misdemeanours.
The bank, which is 75 per cent State owned, is now facing fines of up to €20 million from the Central Bank for the “very serious” failures by PTSB and its subsidiary company, Springboard Mortgages. In addition, likely compensation payments of €35 million or more to customers mean that this financial scandal may cost the bank more than €55 million in fines and payments. Taxpayers already paid €2.7 billion to help rescue PTSB in 2011 and this scandal will do little to enhance Ireland’s international banking reputation.
Jeremy Masding, the bank’s chief executive since January 2012, has said in his defence that he inherited a “badly broken” bank, one that had “major problems”. These problems included PTSB’s earlier failure to advise certain customers of their rights – notably, those who lost their properties – that from 2006 they could have availed of a cheaper tracker interest rate. Instead, these account holders were placed on a higher variable interest rate loan which, following the 2008 financial crisis, rose sharply as tracker rates, linked to the European Central Bank rate, declined rapidly. Domestic banks raised their variable rate loans to offset their heavy losses on tracker mortgages. This combination of higher rates and falling property prices resulted in 22 mortgage account holders losing their property, through no fault of their own.
Mr Masding has sought to draw a line between present and past standards at the bank: citing core values of accountability and responsibility and insisting that: “When mistakes are made, we put them right”. Mistakes were made by the bank, mistakes they have been reluctant to recognise and even slower to address – at least before the Central Bank’s enforcement investigation finally forced it to do so. The PTSB’s epiphany has come three years after the Financial Services Ombudsman ruled against the bank following complaints from account holders, a decision that the High Court upheld in 2012. PTSB must try harder if it hopes to regain what it has lost – the trust and confidence of some of its customers.