Matters Relating to the Banking Sector: Ulster Bank

We are dealing with item No. 6, which is matters relating to the banking sector. I welcome Mr. Paul Stanley, Mr. Eddie Cullen and Mr. Ciarán Coyle to the meeting, along with their colleagues. I will read out the privilege note and then ask Mr. Stanley to give his opening statement.

I advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

Mr. Paul Stanley

I thank the Chairman and members of the committee for this opportunity to discuss matters relating to Ulster Bank. I am the chief financial officer and interim chief executive officer of Ulster Bank Ireland DAC. I am joined by my colleagues Eddie Cullen, managing director of commercial banking, and Ciarán Coyle, managing director of retail banking. Mr. Coyle has just moved into that role in the last few weeks. He was previously chief administration officer of the bank. In my opening statement today I would like to update the committee on some of the developments in our business since we met last. I know that some of these are areas the committee specifically wanted to cover today.

Our focus remains on ensuring that Ulster Bank is best positioned to compete and grow for the benefit of our customers, economy and shareholders while seeking to regain customer trust by addressing mistakes of the past. At our full year results in February we showed progress across a number of key areas. We had an adjusted operating profit of €109 million. There was an operating loss of €151 million, which reflected conduct and loan sale provisions we took at year end. We continue to reduce our cost base and to increase our lending to customers and we have reduced our risk-weighted assets. We paid a €1.5 billion dividend to our parent and made improvements to our net interest margin, reflecting our work to build a safer, more efficient and sustainable bank. We continue to innovate in digital banking, with Apple Pay and Android Pay and our market-leading mobile banking app. We have also been working hard to resolve the mistakes of the past. We recognise that full and timely resolution of these issues is essential for customers and in building trust in Ulster Bank.

I will briefly cover our non-performing loan strategy. Consistent with the industry-wide regulatory requirement to reduce non-performing loans, we included an impairment provision in our 2017 results to allow for potential sales of loan portfolios that are in long-term arrears. This difficult decision comes a decade after the financial crisis began and the continued extension of forbearance cannot be maintained. Not all mortgages are sustainable and we are obliged to reduce the level of non-performing loans on our balance sheet.

For mortgages that are not sustainable, additional forbearance will not bring them back to a performing position. The portfolio for sale that we have announced comprises Republic of Ireland mortgages, split into approximately 45% buy-to-lets, BTL, and 55% personal dwelling house, PDHs, by value. The face value of the loans is currently €1.6 billion, but that will continue to change as we move towards completion of a sale, and engage with customers as part of that process as well.

Table 1.1 breaks down the loan portfolio. There are 3,600 PDHs and 2,900 BTL accounts in that, worth €900 million and €700 million, respectively. The average arrears of customers in PDHs is €52,000, while for BTL customers the average is €31,000. The average missed payments in the PDH category is 43 and, for BTL, it is 15. The average number of forbearance arrangements that a customer has been in is three for PDHs and three for BTLs. The average number of months spent in arrears is 44 for PDHs and 45 for BTLs.

In the PDH category, some 73% first went into arrears between seven and nine years ago, and all are currently in arrears. In the BTL category, 75% have been in arrears for more than 12 months during their lifetime. It is worth noting that the Deputy Governor of the Central Bank made the following comments recently on loan sales:

[On the impact of non-performing loans on the economy] the continued high level of non-performing loans makes banks highly vulnerable to future economic downturns, from both the existing non-performing loans, and potentially new defaults. While all the Irish retail banks are significantly better capitalised than pre-2008, they are more vulnerable than those without this legacy to future economic shocks.”

In this context, the Central Bank also noted: "Portfolio sales are a legitimate and necessary approach for banks to use to address non-performing mortgage loans."

I will briefly cover the tracker mortgage examination, as we will go into more detail later. Of the 3,490 customers identified in our phase 2 report, we remediated 2,500 by the end of quarter one 2018, in line with our commitments. We will meet the deadline for remediation for the vast majority of the remaining customers in this group by the end of June, with a small number completed in July as they require manual calculations and, therefore, additional levels of assurance. There will be an exception for approximately 100 additional customers whom we have as yet unable to locate, despite our best efforts. Every effort is being made in that respect.

Following a further file review, we confirmed in April 2018 that up to 2,000 additional customers are impacted by the examination. The exact number is subject to completion of the bank's internal file review process and assurance by the external, independent third party, KPMG. The majority of these customers retained their tracker mortgage but because of various different administration errors were on wrong rates. The remediation payments will be of a significantly smaller magnitude than for those customers who should have been on a tracker rate but were on another product types. We are currently working to correct the rates of these newly identified customers, and this will be complete by the end of quarter three 2018. We expect to substantially progress the redress and compensation payments to these customers by the end of quarter three, with all of these customers to be completed in quarter four.

While we are working to conclude the remediation phase of the examination by year end, the appeals process will be available to customers beyond that point and for 12 months following receipt of remediation. We fully acknowledge the time it has taken to put this right for customers and apologise unreservedly for it.

On business lending interest rates, we have been conducting a review of business practices, processes and customer journeys with a view to ensuring that any legacy issues are put right for customers. As part of that review we have identified inconsistencies in documentation relating to 18,000 commercial loan accounts. In summary, in March 2012, the bank advised customers via letter and in the national media that it was changing its definition of "cost of funds", a variable component of the interest rate charged on their accounts. At the time we believed the documentation applied to every account and that it allowed for this change. However, in conducting our review, we have since identified that the facility documentation of these 18,000 customer accounts potentially did not allow for this change in definition and they were, therefore, overcharged. The overcharge is less than 0.3% per annum over the lifetime of the overcharge, and the average refund due is less than €2,000. However, the amount of overcharge will vary depending on the time a loan has been outstanding, and the amount of the loan itself.

The calculation of the overcharged interest is a complex exercise, but we expect to complete remediation for the majority of customers by the end of 2018, with the most complex cases completed by quarter one 2019. Customers are not required to take any action; we will write to all impacted customers and provide remediation in due course. Should customers have any queries, we have a dedicated customer helpline and team in place to respond to queries from customers which is available on our website.

With regards to GRG, we have provided the committee with detail on this issue previously. I would like to emphasise that there are a number of avenues open to customers who believe that they were treated unfairly in any way. This involves the normal complaints process of the bank and a separate independent process. We would encourage any customers with concerns about their treatment in GRG during the relevant period, including any matters relating to Republic of Ireland banking regulations at the time, to get in touch with our helpdesk, details of which can be found on our website. Following a review of customer files to establish whether they were charged complex fees - an issue which has occurred within GRG - Ulster Bank identified 17 customers eligible for a refund of the complex fees they paid to us. We have also received 63 complaints and these are being assessed through our complaints process.

On the recent customer transaction issue, on 24 April customers reported that debit and credit transactions with a date of Monday 23 April were no longer showing on their accounts. These transactions had previously been visible from 6 p.m. on 20 April onwards. We will speak about this in more detail during the rest of the session, but to clarify, this issue occurred as a result of human error and was not related to an IT systems failure. The affected accounts were unfortunately impacted for 24 hours. While working to resolve the matter as quickly as possible, we put in place support for our customers, making emergency cash available in our branches or via telephone. The next priority for us was to ensure that all impacted customers were remediated as quickly as possible. To ensure no customer was left out of pocket due to this event, we refunded all fees and charges applied on all customer accounts for the day the issue occurred.

On our retail transformation programme, over the last few years we have seen huge change in the way our customers are choosing to do their banking. We are seeing more and more customers using online and mobile applications for day to day banking as opposed to the more traditional branch-based transactions. All of this behaviour is driven by the desire for quick and convenient access, when and where customers want it. Importantly, we expect this type of change to continue. That is not to say that branches and counter service do not have a role to play. They remain an important part of our customer service offering and approach, which is why we are taking the opportunity to invest in an improved look and feel in our network. While we are not closing branches in 2018, as I have previously indicated, this remains under constant review.

On mortgages and mortgage products, we launched our First Five mortgage campaign with a range of benefits tailored to meet the specific and practical needs of first-time buyers. It offers five key benefits, including €25,000 life insurance cover at no cost to the customer; 50% off home insurance so that customers have the right level of cover to protect their home and family; low fixed rates from 2.85%; a €1,500 contribution towards legal fees; and free valuations. We have also reduced the rates on a number of our fixed rate mortgage products, offering the lowest rate in the market, at 2.5%; simplified our mortgage loyalty offering; and, increased the interest rate on our one year fixed term deposit account.

We remain committed to our ambition to serve our customers and attract new ones by becoming number one in customer service, trust and advocacy. Reflecting the ongoing Royal Bank of Scotland, RBS, commitment to Ulster Bank and the work we have done to strengthen our business, Standard & Poor's upgraded its long-term credit rating for Ulster Bank to BBB+ or positive outlook. This follows the recent affirmation by the other credit ratings agencies, including Fitch's credit rating at BBB with the outlook revised to positive on 18 May, and Moody's upgrade to BAA1 or stable outlook on 1 May. All three major credit ratings agencies have taken positive action, reflecting the progress we are making on our strategic priorities, particularly the strength, sustainability and the simplification of the bank and supporting our growth. We also reached an important milestone in building a more sustainable bank, raising €1 billion from a recent sale of mortgage-backed bonds which will provide more funding to lend in to the Irish economy. Our focus remains on ensuring that Ulster Bank is best positioned to compete and grow for the benefit of our customers and shareholders, while seeking to regain customer trust by addressing and learning from the mistakes we have made in the past.

My colleagues and I look forward to members' questions.

Rather than allow this to continue through the meeting, I want to draw Mr. Stanley's attention to the fact that despite what he says about the tracker mortgages and how Ulster Bank is dealing with them, we have substantial correspondence indicating that customers have not been dealt with. I ask members to review their files, wherein they should have this correspondence. Customers must continue to fight the bank merely to get their cases recognised. This is despite the fact that some customers have been told they are part of the review, while others have not. I ask members to raise this matter with Mr. Stanley, particularly as it is important.

I thank Mr. Stanley for his opening statement. This is a bit of a sorry tale. It starts with an adjusted operating profit, which is actually an operating loss of €151 million, followed, in turn, by a non-performing loan strategy, the disposal of a load of loans, the tracker mortgage debacle, the establishment of the global restructuring group, GRG, and further customer transaction failures. I am not saying that I feel sorry for Mr. Stanley, but what he has been describing to us is a fairly sorry tale. The Chair pointed out what would otherwise have been my first point. I have more than ten different items of correspondence that were sent to all members via the generic email address for the Joint Committee for Finance, Public Expenditure and Reform, and Taoiseach. Those who wrote the correspondence say they have received 60-day holding letters, that their experience has been very frustrating and they want to know the bank's stance on former First Active customers. They also provide updates on their own situations, saying that they have been given certain amounts of compensation but are very unsatisfied with the response. They refer to loopholes affecting people who have gone to the Financial Services and Pensions Ombudsman, FSPO, and come back to Ulster Bank. Can I get a commitment from the witnesses that each of these items of correspondence will be examined and responded to directly by someone on their team, with feedback forwarded to the committee? It is not good enough for the witnesses to keep coming before us with a particular story while we keep getting correspondence from people who are clearly very unsatisfied with what is going on.

Mr. Paul Stanley

Absolutely. I will certainly look at those. We have remediated the 2,500 in respect of which we made a commitment. We are on track. In the process of remediating the remainder of the 3,500, some elements will drift into July. Indeed, we have gone out and identified other instances where customers have wrong rates and accounts in particular, cases which we will be looking to remediate and rectify. By the way, correspondence will be sent out shortly to those customers with wrong rates and to the extra 2,000 to whom I referred to advise them of that.

At our previous meeting, the figure was in and around 3,500. We are now saying it is up to 5,500, albeit I acknowledge that Mr. Stanley says these involve smaller amounts.

Mr. Paul Stanley

They are smaller amounts. Correct.

Mr. Stanley references an average figure. He just said it was a smaller amount. Does he have an average?

Mr. Paul Stanley

We are still working through that. I am not going to quote averages. We are still working through those details.

I refer to the 3,490 customers. Ulster Bank remediated 2,500 of these people's cases by the end of the first quarter of 2018. What was the largest amount of remediation and the largest amount of compensation?

Mr. Paul Stanley

As I mentioned on the previous occasion, there have been cases of remediation. They are exceptional, but they are in the region of €300,000 or so. That includes redress of balances and interest payments.

As such, the total payout, including giving people back their own money and providing compensation, is in and around €300,000 or €400,000?

Mr. Paul Stanley

They are exceptions.

Mr. Paul Stanley

There is quite a range there. The Senator is asking me for the largest amounts I have signed off on.

What was the largest amount involved? Was it €300,000, €400,000 or €500,000?

Mr. Paul Stanley

It was north of €300,000. I cannot remember the exact amount.

Perhaps Mr. Stanley could provide details of the largest amount-----

Mr. Paul Stanley

Yes.

-----with a breakdown in respect of remediation, which is obviously the customer's own money, and compensation, being the additional compensation for the suffering that they went through. Can Mr. Stanley take us through the opening figure? Operating profit is stated as €109 million, but in brackets operating loss is listed as €151 million. What is the reason for the big difference there?

Mr. Paul Stanley

The difference concerns the two items I have called out. First, there are the provisions that we took at the year's end for additional conduct items. Moreover, because we had identified a portfolio for potential sale, although we had not designated it fully for sale at that point in time, we were required by the accounting requirements to increase the provision on those based on estimates of further loses that we would take in sales.

Is this a project that is still up for sale as such?

Mr. Paul Stanley

This is a project that is up and running and that we have announced. The Senator will have seen us announce it.

The bank is looking for bids on this.

Mr. Paul Stanley

Correct.

Obviously this is commercially sensitive to a certain extent. What is the typical discount the bank ends up-----

Mr. Paul Stanley

We do not quote those to the press or public until we have completed the process.

Will the bank disclose it at that point?

Mr. Paul Stanley

We have not done so in the past.

Private dwelling house accounts appear to be valued at approximately €250,000 each and the buy-to-let accounts at approximately €241,000 each. There is a slight difference in Mr. Stanley's description. One is that 73% of accounts first entered arrears between seven and nine years ago, and the other is that 75% have been in arrears for more than 12 months. I am not sure why different terminology is used for one rather than the other.

Mr. Paul Stanley

We have focused very much on narrowing the private dwelling house pool we are dealing with. To be clear, there is a difference in the definition of a non-performing loan and an account in arrears. As the Senator is well aware, we are required by the European Central Bank to bring down our levels of non-performing loans. Non-performing loans include accounts that have been through two forbearance arrangements but, in theory, may never have been in arrears. We are taking a more narrow view on private dwelling houses in terms of those we are putting into the pool. I am conscious of the sensitivities of this, but we are taking a wider view of buy-to-lets.

Of the total number of private dwelling houses in arrears or non-performing, how many will be placed in the project for disposal? A total of 3,600 private dwelling houses are being considered. How many more houses or dwellings on the bank's books are not being considered?

Mr. Paul Stanley

Aside from that?

How many others are in arrears or non-performing? Is 3,600 the-----

Mr. Paul Stanley

In terms of private dwelling houses, the figure does not include all mortgages that are in arrears. I have separately given the level of arrears in private dwelling houses. If I can find the figure, I will work it out for the Senator. There are other accounts in arrears which are not included in that category.

Many people are asking why the bank will not deal with these mortgages as opposed to selling them to vulture funds.

Mr. Paul Stanley

We had this discussion at a previous meeting of the joint committee. To date, the view of the bank has been that this creates a moral hazard issue for us, as to why we are giving some customers a discount or write-down on the loan and not giving a discount to other customers who have done their utmost to make repayments on and keep up to date with their loans. This has been the view of the bank. I know other banks take a different approach, but the view of the bank to date has been that we have not been prepared to do write-downs on loans. To be clear, just because a loan is sold does not mean a house is lost. When those loans are sold on to other parties, whose servicers must operate under the same regulatory standards as we do, the other parties in many cases will work out transactions with customers.

It is fair to conclude from Mr. Stanley's statement that the bank is in this market for the long term. Vulture funds tend to want to get into the Irish market, take possession of an asset and sell it for more than what they paid for it.

Mr. Paul Stanley

What we are seeing with the information imparted by the Central Bank is that the level of activity in terms of repossessions being carried out by vulture funds, given the challenges in repositioning the market, is not untoward when we look at the levels of repossessions taking place in banks.

Mr. Stanley is saying the bank would not entertain examining these 3,600 cases, or the 2,900 cases, one by one. He is saying the bank has done the restructuring already and has now moved beyond that.

Mr. Paul Stanley

There is still the opportunity for customers to contact us prior to sale, and if we can enter a sustainable forbearance solution with them, they would not be part of that sale.

Would that involve a write-down?

Mr. Paul Stanley

As matters stand, it would not involve a write-down.

Is the bank's position likely to change?

Mr. Paul Stanley

We are looking down our lists. We are working through the forbearance solutions we will apply not just to this customer base but to the full customer base. There may be opportunities to do small levels of write-down. The Senator is aware that if somebody qualifies for social housing and enters a voluntary sale of a property that is in negative equity, we do not go after that negative equity. In effect, we do write-downs in that category already.

Some people are frustrated because they hear stories of 60%, 70% or 80% write-downs while their loan is sold for a fraction of what they might be able to pay for it, their home is then repossessed and they are put out on the street. The State then ends up having to rehouse them in some way or other. The vulture fund gets the property and flips it for double or triple what it paid the bank for it and everybody seems to lose, apart from the vulture fund. The bank loses because it may have got more money from the individual householder than it got from the sale of a loan at a discount in a large portfolio.

There is less grief and fewer individual transactions but is it not worth considering these one by one or at least allowing people to know they are in a portfolio sale? Are they told in advance of the sale?

Mr. Paul Stanley

We have not yet been advised of that because we are still working through it. Those are the indicative numbers but they will be advised prior to the sale.

Is the project for sale at this stage? It is under preparation for sale but is it out there yet?

Mr. Paul Stanley

The prospective buyers have had sight of the indicative portfolios through the data rooms we have in place.

If they have had sight of the indicative portfolio, there must be a list for the portfolio.

Mr. Paul Stanley

There is but we will continue to filter the portfolio with regard to certain customer circumstances changing. If customers want to come to us in advance of the sale, or post-sale within 90 days, we can still remove them from those portfolios.

What would they need to do?

Mr. Paul Stanley

There would need to be a sustainable forbearance solution that would work for both parties, the bank and the customer.

I am not saying they could or they would but if every one of the 3,600 parties said they would enter such agreement, the bank would be willing to enter into an arrangement.

Mr. Paul Stanley

If all those customers can enter a genuinely sustainable forbearance solution, we would take them out of the portfolio. All of them will not do so.

There would be a loan write-down to value if the bank sold to a vulture fund.

Mr. Paul Stanley

We have already taken that into account.

The bank would be willing to do that for individuals.

Mr. Paul Stanley

No. I am talking about a sustainable solution that meets the debt outstanding to the bank.

Is that after the write-down or before the write-down?

Mr. Paul Stanley

It is before the write-down, with the exception of those qualifying for social housing, which I believe are not in this group.

The bank has made provision in its own accounts for a write-down.

Mr. Paul Stanley

Correct.

It is effectively willing to give the vulture fund a write-down.

Mr. Paul Stanley

We are willing to sell at an appropriate price to a third party that will buy the portfolio.

The bank would not be willing to sell it to the loanee for the same price.

Mr. Paul Stanley

I have discussed this before and the reasons behind it. There is a moral hazard created for those customers doing their utmost to pay down their individual loans. Why should one portion of customers get a write-down just because of their particular circumstances. I am not focusing on individuals. Another portion of our customer base would have made every effort, in very difficult circumstances, to continue to repay their loans so why would they not be entitled to a write-down. That is where this would end up.

I accept the moral hazard argument and many people are making huge sacrifices. They are not changing their cars, they are changing their children's schools and they are not going on holidays in order to make repayments. Others are certainly in a position where it is not a case that they will not pay but they cannot pay. The bank is going to take the hit and sell the loan to a vulture fund. It will lose much in that process. If these people sought to get loans in a sustainable way, either from a family member or elsewhere, in order to make a payment, the bank still would not entertain those payments.

Mr. Paul Stanley

It would if the payments resulted in a sustainable forbearance solution that addressed the outstanding balance. We can do term extensions and capitalisation but in the forbearance solutions we list, the outstanding balance would be cleared. Of course we would deal with such customers. It would not be a write-down value.

The average refund due with respect to the tracker matter is less than €2,000 on the new cases. Is that correct?

Mr. Paul Stanley

These are not tracker mortgages.

It is the miscalculation on trackers.

Mr. Paul Stanley

They are commercial loans.

Is there a maximum and minimum with those figures?

Mr. Paul Stanley

We are just completing work on that but that is the average. If a loan is very large and 30 basis points is the difference, having existed for two, three, four or five years, there will be different figures.

Okay. The customer transaction issue was a result of human error. What was that error? Did somebody unplug something from a socket?

Mr. Paul Stanley

It was not quite like that. We addressed the matter as quickly as possible and we had it fixed within 24 hours.

Mr. Ciarán Coyle

I thank the Senator for the question. I can give some context. As the Senator might imagine, we are constantly updating and upgrading our systems across RBS and Ulster Bank. We typically tend to do it over the course of a weekend. The weekend preceding this customer issue, a change was made in RBS in the UK that was specifically for the UK. It was linked to a regulatory change there that was different from our regulatory environment.

The change was confined to the UK. A UK operator was involved in the change over the weekend. There is a schedule of events that take place over the two or three days or the over the course of the weekend. At one point, in that change over the weekend, the operator made a genuine human error that inadvertently impacted Ulster Bank. I shall explain the error to the committee in order to help members understand what happened. The operator, even though he or she should not have done so, inadvertently took down a part of the process within Ulster Bank that transmits files in our overnight batch system. I am happy to answer follow-on questions on that point but I shall keep it at this level for now. The operator inadvertently took it down but did not re-enable it properly. Due to that specific act an issue unfolded from early morning on Tuesday, 24 April. As Mr. Stanley has said, once we became aware of the issue our priority was to respond as quickly as possibly but first we tried to understand the problem. As one can imagine, the environment is complex so one must first understand the extent of the issue. All of our other systems, such as branch and mobile systems, behaved normally that morning. We quickly set about understanding and containing the problem. Once we had done so we knew what we had to do to fix the problem over the course of that evening. We discussed whether to fix it intraday, during the business day, or fix it overnight. Again, I am happy to explain all of that to the Senator.

I want to clearly point out the following to the committee and our customers. It is totally unacceptable that this happened. I understand the impact it had on our customers and their concern about balances being moved. My friends and family asked me what happened so I genuinely understand the matter. I am sorry that this incident happened to our customers. I thank our staff who are located up and down the country in various branches, telephony centres and business centres who worked diligently to deal with the issue over the course of 24 hours.

We set about resolving the issue and resolved it that night. As the Senator would expect, we commenced a review subsequently. The review is ongoing because we want to thoroughly examine this matter. We have put in place specific controls that will ensure that if such an error occurs in the future it will be caught, or we would be alerted to same, before it had an impact on our customers.

I shall pause there, if that is okay. I am happy to answer follow-on questions.

I remind Senator Horkan that we are working against the clock.

I am nearly finished with my questions. Did a UK operator flip the switch to cause a batch to falter?

Mr. Ciarán Coyle

Our technology is provided to us by RBS.

Does that originate in the UK?

Mr. Ciarán Coyle

Yes. An operator that acted in the UK inadvertently impacted Ulster Bank.

Should he have just left that bit off for the Republic of Ireland division?

Mr. Ciarán Coyle

Yes.

Some aspect was touched by accident.

Mr. Ciarán Coyle

I shall explain the matter further. As one can imagine, he gave an instruction, that he should not have given, to a part of our process. The instruction was valid but it should not have been applied to us that weekend.

Mr. Coyle has addressed the matter enough.

I ask the Senator to move on.

Finally, I want to discuss the retail transformation programme. Earlier Mr. Stanley stated, "While we are not closing branches in 2018 this remains under constant review." As he also pointed out, people increasingly use mobile phones, technology and the Internet and, therefore, no longer need to use branches. Will the branch network differ in the future from what it is now?

Mr. Ciarán Coyle

Before we consider additional branch closures it is important that we have alternative service channels, be it digital and mobile, up and working and such that customers use them sufficiently. That is why we have not done anything in 2018 because we believe we have more work to do in that space. Overall, the journey is a less physical presence or the physical presence doing different activities from what they do today. I mean less cash activity but more sales and advice activity. That is the direction in which we are moving.

How many branches are there?

Mr. Ciarán Coyle

We have 88 branches.

Does Mr. Coyle envisage that number will fall?

Mr. Ciarán Coyle

I would see it falling over time but I shall not speculate as to the number.

I welcome Mr. Stanley and his colleagues to the meeting. I thank them for completing the very detailed questionnaire in advance.

I shall start with the tracker mortgage issue. Overall it seems that progress in resolving the issues has been painfully slow. A total of 5,500 Ulster Bank customers were impacted in different ways and 2,500 cases have now been remediated. Is that correct?

Mr. Paul Stanley

The number, as of last night, is approximately 2,900.

It is approximately 2,900. There are about 600 left of the original cohort, as well as an additional 2,000 identified more recently.

Mr. Paul Stanley

Yes, that is correct.

That gives a total of about 2,600; therefore, close to half of the overall number identified as being impacted on are still to be remediated.

Mr. Paul Stanley

That is correct.

Does that mean that in many cases people are still on the wrong rate?

Mr. Paul Stanley

For the 3,490 or 3,500, stopping further harm and putting them on the right rate has taken place. We are now working on the 2,000 to have them fixed by quarter three of this year. I refer not just to putting them back on the right rate but also putting remediation measures and compensation in place by quarter three. An element will be at the end of the year.

All 3,940 are now on the correct rate.

Mr. Paul Stanley

They should be on the right rate.

None of the additional 2,000 is yet on the correct rate.

Mr. Paul Stanley

No, not yet.

Therefore, they continue to be overcharged. People who have been in this system for about two years are contacting us. They are receiving pro forma letters every 60 days or so, telling them that the bank is looking at the issue and will be in touch. In some cases, they are still being overcharged. When can Mr. Stanley say Ulster Bank will have completed its work as part of the tracker mortgage examination and everyone will have received his or her their back?

Mr. Paul Stanley

It will be between the last quarter of this year and the first quarter of next year.

Is Mr. Stanley acknowledging that it will go into 2019?

Mr. Paul Stanley

It will because of the 2,000. On the figure of 3.940, there those we cannot contact, which may seem a little strange, but customers have moved on, moved their accounts elsewhere and left the country. We have had a tracking company trying to track down the 100 and are going to hand the task to a second tracking company to try to track them down. The money for those we cannot find will go into an escrow fund. Ultimately, if nobody claims it, it will end up going to appropriate charities. It will not be left with the bank.

To clarify, of the initial batch of 3,500 - to round off the figure - how many are no longer customers of Ulster Bank?

Mr. Paul Stanley

I will check and get back to the Deputy. Those who are not customers-----

In the past we had a figure of about 1,000.

Mr. Paul Stanley

I will check and get back to the Deputy during the meeting.

On the last occasion, certainly, it was not the case that the bank did not have much success but that it had not even started the process of contacting former customers.

Mr. Paul Stanley

All have been contacted, except the 100 for whom we cannot find proper addresses.

Is Mr. Stanley satisfied-----

Mr. Paul Stanley

The Deputy was correct; the figure was 1,000.

Have all of the 3,500, bar 100, been contacted?

Mr. Paul Stanley

Yes, but we have not yet contacted the incremental 2,000. That process is just starting.

The bank has not contacted any of them yet.

Mr. Paul Stanley

No, not to the best of my knowledge. That is why there are customers in the group of 3,490 who have been contacted, but it will be the end of June and early July when they will receive their remediation and compensation cheques through the post. They are receiving a holding statement. To be clear, it is not far away for the 3,490. We have not written to the 2,000 yet to inform them that they have actually been captured.

How come the extra cohort of 2,000 was discovered so late in the day? It was two years plus into the examination.

Mr. Paul Stanley

There were two elements. We were in discussions with the Central Bank on a number of issues when I came here the last time and had not fully resolved them. We did know about them and they were included in our phase two report, but we needed to work through them. They were not identified late in the day; we needed to discuss whether they had been impacted on. The second element was other work that needed to be done. We looked across wider mortgage books and did find issues, particularly with wrong rates. They are the second part of the cohort of 2,000.

The majority, about 80%, are on the wrong rate.

Mr. Paul Stanley

They are on tracker mortgage rates but not at the right rate. By the way, we found customers whom we were undercharging, as well as overcharging. If we were undercharging them, we are leaving them as they are.

The fact that it took so long to identify the extra customers and the length of time it is taking to resolve cases do not inspire confidence in Ulster Bank's systems. That is particularly the case given the issues the bank has had with systems.

We went through this the last time and I think the bank had something like five legacy mortgage systems.

Mr. Paul Stanley

That is correct. We had five legacy systems. We are down to two. We have simplified the world, but it has been one of the challenges Ulster Bank has faced as part of the examination. I refer to going through five systems. Customers also took a journey through them.

Mr. Ciarán Coyle

As Mr. Stanley said, our technology strategy is to simplify the estate. Last year we migrated from one of our largest legacy mortgage systems to the two we now use. We only use one of them for all new business. It is a function of our history - from First Active Ulster Bank to National Westminster Bank to NatWest and Royal Bank of Scotland. That is the reality we are managing our way through. To be clear, we have invested a lot of money, on which I am happy to take questions, in getting down to two systems, one of which we use for new business.

To try to bookend the issue for people, when will all of the original 3,500 customers be remediated?

Mr. Paul Stanley

Subject to the 100 whom we cannot contact, they will all be remediated by the middle or end of July.

It will be next month, or within a month or so.

Mr. Paul Stanley

The vast bulk to be cleared will be remediated by the end of June.

Is Mr. Stanley saying the extra 2,000 cases will extend into 2019?

Mr. Paul Stanley

We are endeavouring to have the bulk of them dealt with by quarter three, certainly by the end of the year, but there will always be some complicated cases that will run. The other thing is there is an appeals process available to customers. It runs for 12 months from the date of advice; they could, therefore, continue the process for longer than the date that we will initially remediate or compensate them.

I imagine some of the 2,000 customers have been on the wrong rate for many years, perhaps a decade.

Mr. Paul Stanley

They could have been, but the amounts are relatively small. We are talking small numbers of basis points.

Are there further groups of customers in dispute between Ulster Bank and the Central Bank?

Mr. Paul Stanley

No.

Mr. Paul Stanley

The Senator mentioned First Active which has come up here before. To be clear, we have gone through that cohort with the Central Bank which has not found an issue with how we treated First Active customers. We treated them in the same way we have treated all other customers and the same underlying reasons or rationale in terms of impact have been applied. We do not see them as a separate cohort.

On the cost involved, Ulster Bank's latest provision is €298 million.

Mr. Paul Stanley

That is correct.

I want to clarify what that figure covers. It covers the cost of redress and compensation. Does it also cover staff costs?

Mr. Paul Stanley

It covers staff costs, external costs and an estimate for enforcement costs. They are from the Central Bank.

Does it include an estimate for a potential enforcement fine?

Mr. Paul Stanley

Yes, it does.

How much has been provided for?

Mr. Paul Stanley

We are not disclosing that figure.

Is the enforcement investigation under way?

Mr. Paul Stanley

It is.

On the planned portfolio sale and to clarify Mr. Stanley's discussion with Senator Gerry Horkan, is Ulster Bank still open to agreeing restructures on individual mortgages currently lined up for sale? That would be in spite of the customers not having been told that their loans are being sold, although many of them can assume or guess that they are.

Mr. Paul Stanley

We are still open to agreeing a sustainable forbearance solution with those customers.

At what stage is the proposed sale?

Mr. Paul Stanley

We do not have a fixed date, but quarter three or four of this year is the likely date.

Has the bank narrowed the sale down to certain bidders?

Mr. Paul Stanley

I am not going to comment on that matter. We have been going through a process with bidders, but I am not going to comment in any detail on it.

If the bank does sell the portfolio, to what will it bring the NPL ratio?

Mr. Paul Stanley

Our NPL ratio is around 17%. There are various moving parts, but I estimate that it will come down to around 11% or so. We still have a journey to travel in achieving the guidance ratio from the ECB of around 5% which can be achieved in other ways. As I said, we are going through the book again to find sustainable forbearance solutions for customers. It is a ratio; naturally, therefore, as the balance sheet grows, as thankfully it is starting to do, in part it resolves itself.

Turning to the GRG, the numbers involved for the number of people bringing complaints and the number of refunds so far seem low.

I note there is an independent appeals mechanism as such, but when a complaint comes into Ulster Bank on GRG, who adjudicates on it?

Mr. Paul Stanley

It is adjudicated on internally and if the customer appeals that adjudication, it feeds through to the independent third party. Its remit is under Project Scariff in RBS, which is with regard to customers treated incorrectly or unfairly. The complaints we have received range from customers in this category to people who have had a cheque bounce or something else that does not necessarily relate to the substance of what Project Scariff is about. That 63 covers a number of different types of complaints.

When a complaint comes in that relates to GRG, a panel of executives from within the bank-----

Mr. Paul Stanley

Will look at it internally and a customer does have the right of appeal.

Question No. 71 states customers who wish to appeal the outcome of their eligible complaints can appeal directly to the independent third party, Sir William Blackburne. Is that avenue not open to everyone who has a grievance about GRG? Is there a filtering process first?

Mr. Paul Stanley

Absolutely that avenue is open to them but, to be clear, it is with regard to customers being treated incorrectly or unfairly. The complaints listed there contain a range of different complaints within them.

Yes, but the bank is not preventing people from taking an appeal which goes before an independent party.

Mr. Paul Stanley

No, we are absolutely not but the process is that we will look at it internally. The customer may not like the outcome and he or she has the right of appeal and that can go to the independent third party.

Has the Central Bank signed off on this approach?

Mr. Paul Stanley

The Central Bank certainly has been made fully aware of this approach, yes.

How does it compare with the approach of RBS in the UK?

Mr. Paul Stanley

It is the same. In effect, we voluntarily took on the approach of RBS and that is what we have applied in the Irish market.

Is there any explanation as to why the numbers are so low?

Mr. Paul Stanley

I know this is a dialogue we have had in this forum to some extent before. We believe we have contacted relevant customers. We have put up on our website that customers should contact us. I am very open, and if any of the Deputies or Senators here have particular customer instances they want to bring to me I am very happy to go through them as well. We are not trying to shy away from this in any way. I really do not have a view as to why the levels are so low.

How many branches does the bank have currently?

Mr. Paul Stanley

We have 88 branches.

Are they in the Republic?

Mr. Paul Stanley

Yes.

Is the bank committed to its branch network? Are there any plans to rationalise? What is the position?

Mr. Paul Stanley

Per the previous question, we have no plans for branch closures in 2018. We still need to stand up some of our alternative channels to work better from a customer perspective before we would consider whether it is appropriate to close any, or not, as the case may be.

In terms of the mortgage market, how is Ulster Bank doing at present? What is its percentage market share of new mortgage drawdowns?

Mr. Paul Stanley

New mortgage drawdowns are for 10% of the market we share and are in the region of 12%. That is somewhat below our stock, which is around 14%, which is the overall book we already have.

I want to ask about €36 million in overcharging, which is the latest scandal to hit the bank. It affects 18,000 accounts and 15,500 account holders. Will Mr. Stanley explain how for the past six years the bank was overcharging its business customers in the Twenty-six Counties?

Mr. Paul Stanley

We apologise for that. What has happened is not right. We found this out as we were going through the wider examination as part of the tracker mortgage examination of our book. I will let Mr. Cullen go through the details of it. In essence, what has happened here is customers were informed the rate was changing on their accounts, and as we went through the tracker mortgage examination and investigated wider customer documentation it became apparent that with regard to a cohort of customers, even though we advised the rate was changing, and it did change, contractually we did not have the right to do so. We did with regard to other customers, to be clear, but we did not with regard to that cohort.

Mr. Eddie Cullen

That is simply it. We made a change to the definition and calculation of cost of funds in 2012.

We discovered last year that we did not have the full contractual right to make that change across the entire customer base, as the Deputy has said. It has an impact on up to 18,000 customer accounts and we are now in the process of putting that right for customers. We have already fixed the matter from here and customers have been put on the right rate. We are moving into the refund and remediation phase of the project in the next couple of months.

Did any of the 15,500 affected individuals raise any concerns about the fact that the bank neither had contractual nor legal rights to change their rate?

Mr. Eddie Cullen

When we did this in 2012, as Mr. Stanley noted, we wrote to all the customers and put advertisements in the press. When rates are raised, there is some level of customer query and complaint but we had no particular spike in complaints at that time. We are looking at that and at the entire matter with the regulator. We are going to explore the root cause.

Of the 18,000 accounts where Ulster Bank increased the rate without legal permission to do so and against the contract signed with customers, did any account holders bring this to the bank's attention or query what it did at that time?

Mr. Eddie Cullen

As I said, we are looking at this entire matter from top to bottom with the regulator. There was a level of complaints at the time, as I said, but it was nothing out of the ordinary. There was not a significant volume of complaints.

Did any of the complaints originate because of this?

Mr. Eddie Cullen

I do not have that information and as I have said, we are looking at the entire matter from top to bottom. We are looking at how it happened, why and what led to it. Our priority is to fix the issue for customers and refund them.

Is it correct to say Ulster Bank is not aware of any of the 18,000 account holders raising a query?

Mr. Eddie Cullen

I am saying we are in a dialogue with the regulator about how this happened, why it happened and how we can fix it.

Is the bank aware or is it not aware? Other people want to ask questions. The simple question is whether the bank is aware or not. There are 18,000 accounts where there was overcharging as the bank changed the rate without a contractual right to do so. Is the bank aware of whether any of those 18,000 account holders raised a query or complaint with the bank at that time?

Mr. Eddie Cullen

I am saying we are aware there were complaints at the time.

Was it from that cohort?

Mr. Eddie Cullen

Yes.

How were those complaints dealt with?

Mr. Eddie Cullen

I do not have that information as we are looking into the entire issue. Part of the next phase of this project is to establish exactly what was the root cause. It is information I do not have.

The bank had a nice wee press release for the public at 4 p.m. last week saying, by the way, that Ulster Bank identified this by itself. The reality, as described by Mr. Cullen now, is that at least some of the individuals overcharged for the last six years, including business people who tried their best in very difficult economic times to keep their businesses afloat and employ individuals, raised issues with the bank as it took away their contractual rights.

Mr. Eddie Cullen

To be clear, we said this entire matter emerged as part of the tracker mortgage examination and it caused us to look back-----

Did it emerge like that? Would it not be factual to say it emerged in 2012 when the customers being overcharged brought it to the bank's attention or raised questions with the bank but the bank decided to do as it did with the tracker mortgage scandal? It hunkered down and went on as it liked for six years anyway.

Mr. Eddie Cullen

I am saying there was no particular evidence emerging at the point that gave anyone that indication, at least that we can see. We are now looking back six years to establish what happened but at this point we have not established exactly what information was available to people and what people could have known. It does not appear to be the case that there was sufficient information to allow that knowledge to have emerged at the time.

I presume the bank had those contracts. If I was a person being overcharged and asked Mr. Cullen what he was doing by increasing my rate, I would have suggested looking at my contract. I am sure the first thing the bank would do is look at the contract and figure out, as the bank did six years later, that the bank did not have the legal right to do as it did. The bank should have realised that were it to carry on what it was doing, its actions would be illegal and would amount to overcharging by approximately €36 million, or €2,000 from each customer on average, without a contractual right to do so.

Mr. Eddie Cullen

We acknowledge that was clearly a mistake; we should not have done it. We have overcharged customers during that period and we have apologised for doing so. We are moving as quickly as we can to fix the issue and to give our customers as much information as we can. We will write to all of the different cohorts of customers over the next couple of months. As I said earlier, we are working very closely with the regulator on how we are resolving it and on what happened in 2012.

In terms of complaints or queries from a cohort of customers who queried the new rate, at what level was it dealt with in the bank? Were these issues escalated to a more senior level? At what level were decisions made?

Mr. Eddie Cullen

To the extent that there were complaints, they appeared to have been dealt with through the normal complaints process. I do not have visibility or knowledge of an escalation of those complaints.

Mr. Paul Stanley

We need to finish our root cause analysis, which we will share with the Central Bank. When we have the facts, we will go through the details with the committee and, indeed, with the Deputy personally.

I am not satisfied for Ulster Bank to give a little presentation stating that it identified this matter when, as has just been admitted, some customers identified and queried it with the bank six years ago.

Mr. Paul Stanley

For the management team that are in the bank dealing with this issue today, this was news to them that we turned up as part of the tracker mortgage examination.

I know there are different individuals involved. I am talking about the bank, as an entity.

Mr. Paul Stanley

For those on the management team in the bank, this was new news as part of the tracker mortgage examination. We put the matter on the table and are addressing same.

There are others in the bank who may not be on the management team. First, we have ascertained that this issue was brought to the bank's attention by a number of customers in the first instance. Second, it was not just a case that the bank uncovered this issue without being prompted in 2012, although the bank did not acknowledge or correct it at that point. Why will it take until 2019 for the money to be returned to the accounts of customers?

Mr. Paul Stanley

We have been told that most of it will be returned at the end of this year. It will not take that long.

Mr. Eddie Cullen

We will have 80% of the refunds processed by the end of the year. A large number of these cases are overdraft accounts. We have to reconstitute an overdraft profile over six years and there is quite an element of complicated work involved in doing that properly. We are working on building the process to do so. That cohort of customers - 20% - we expect at this point will flow into quarter 1 of next year. We expect to have that work completed before next March. We prefer to say that rather than a specific date that we cannot meet. We hope to have the work completed within quarter 1.

Mr. Paul Stanley

To be clear, the process is up and working and is focused on getting money back to customers. It is not something that we are just starting now.

The witnesses have told the committee that the bank wrongly took over €7 million - approximately 20% of €36 million - from its customers and that it is unlikely to return the money to these business accounts until 2019 because the issue is a bit complicated.

Mr. Eddie Cullen

That is correct; it is complicated. As the Deputy will appreciate, overdrafts move weekly and monthly. That profile must be reconstituted, which will take some time.

How many people are working on this project?

Mr. Eddie Cullen

Approximately 100 people, excluding external consultants.

There are 100 people working on this.

Mr. Eddie Cullen

Yes.

There is an issue with the bank's systems so I presume this is-----

Mr. Paul Stanley

No.

Mr. Eddie Cullen

It is not a systems issue at all. We will quickly calculate the refunds for those customers who have relatively straightforward term debt. When it gets into the issue of overdrafts, where the profile continually moves on a regular basis, that is more complicated to calculate. This has nothing to do with systems. It is just about building a robust spreadsheet with the correct adherence.

Do the witnesses think anyone will be held to account for this scandal valued at €36 million?

Mr. Eddie Cullen

That is a matter for the discussion that we have ongoing with the regulator at the moment. It would not be right for me to comment on that now.

Has anyone been found accountable for the tracker mortgage scandal for which the bank has made a provision amounting to €250,000?

Mr. Paul Stanley

We are in enforcement with the Central Bank. That is part of the engagement we have with the Central Bank. We are not in a position to comment on it here.

What happened on 24 April when payments were not made? I am not referring to the occasion on which money disappeared from people's accounts but to that - it was a couple of weeks later - when payments were not made. Did the bank's systems think it was a bank holiday? Will our guests explain that matter?

Mr. Ciarán Coyle

If I am correct, the day the Deputy is referring to is 1 May. By way of understanding, 1 May is a bank holiday across Europe, or at least in most countries across Europe. Since the Single Euro Payments Area was brought into place in 2013 or 2014, any payments have to go via the European Banking Authority, EBA. For example if I was to transfer money from bank A to bank B, from Galway to Limerick or from Mayo to somewhere else in the country, the payment would go to the clearing system and come back in. That is the way it operates. The European clearing system was not operating that day. Any inter-bank payments were delayed by a day - direct debits, mortgages, etc.

I believe the Deputy is referring to the fact that on that day there was a problem on one of our specific channels. It did not arise on all of our payment systems, to be clear. There was a problem on the mobile app that day, which arose if an Ulster Bank customer made a payment transfer between Ulster Bank accounts on that app - not a mortgage transfer, but a transfer from one account to the other. The app was behaving in the same way for intra-Ulster Bank transfers as it was for inter-bank transfers, if that makes sense. Clearly, that should not happen. It should not behave that way. That issue arose specifically on 1 May, specifically on the mobile app. All the other channels, including branches, Internet banking and telephony, were all behaving in the way one would expect.

If a customer had a direct debit going from an Ulster Bank account to another bank, for example an AIB account, to pay their mortgage on 1 May, did that go through?

Mr. Ciarán Coyle

It would not have gone through. Direct debits would not have gone through because of the EBA clearing day. That had nothing to do with the mobile app I have just described.

How many customers were affected by the mobile app fiasco?

Mr. Ciarán Coyle

I will give approximate numbers. I will be happy to follow up with specific ones. I recall that the figure was roughly 7,000. That means that about 7,000 customers made a payment from their Ulster Bank mobile app to another Ulster Bank account, and the money did not move that day. It would have taken until the next day.

Was that to allow for a payment coming out of their account that day to be made?

Mr. Ciarán Coyle

It may be.

What is Ulster Bank doing about the missed payments? Does the bank waive all the charges?

Mr. Ciarán Coyle

Absolutely. Again, I hesitate to give specific numbers but we have them, as the Deputy can imagine. In that case, if a customer was moving money into the account to cover a payment that was coming out the next day, as the Deputy says, we have made sure that all those refunds and charges are waived.

It is one thing after another, is it not? Seriously. Money disappeared two weeks before that. Then customers transfer money in the Ulster Bank app and the money does not transfer because the app thinks it is a bank holiday though the bank holiday is next week.

Mr. Ciarán Coyle

If it is useful to the committee, I can address those points. I understand the point. As I said earlier, I understand the inconvenience this caused to customers. However It is really important that I say on behalf of Ulster Bank that the money in question did not disappear from Ulster Bank. I am talking about the 24 April issue now. At all times the content and the information regarding those transactions were within Ulster Bank. The problem was that it did not process that night for the reasons I explained earlier. I am happy to go into more detail on that if the Deputy wishes.

I think it is important-----

It did not show up in customers' balance accounts. Somebody went to the bank and they looked-----

Mr. Ciarán Coyle

The way we would describe it is that the available funds they had seen over the weekend were changed on Tuesday morning. If €500 came in on Friday evening at 7 p.m. or 8 p.m., on Tuesday morning customers saw it leaving. It was no longer visible. The Deputy is absolutely correct. Before I say this, I want to be really clear that it was unacceptable that this happened on Tuesday, 24 April. I really am genuinely sorry that happened. However, it is important for me to give this committee the context of what we are actually doing. If I may talk about that for a moment-----

Mr. Coyle is apologising for the incidents on 24 April and 1 May. They are two separate incidents.

Mr. Ciarán Coyle

Of course. As the Deputy knows, our technology is provide by the Royal Bank of Scotland, RBS. I am going to share this with the committee so that it is on the record, so that members can understand how much investment we are making to resolve these issues. From 2014 to the end of 2017, RBS spent £8.5 billion on technology.

That is about €10 billion. Because we use RBS systems, we benefit from that capability. In the same period of time we also invested close to €1 billion in things that are needed in this jurisdiction. Within RBS and Ulster Bank we effectively had a complex technology estate. To give a sense of that, there were probably more than 5,000 applications. We have halved that in the last two years. We are investing a lot, as Mr. Stanley said, to simplify our estate. We are investing significant moneys to keep it secure. The committee will respect the challenges around cybersecurity. We are investing in order to continue to deliver innovation in new services for our customers. This is not a defence of what happened on 24 April or 1 May. Those incidents should not have happened. However, I hope to explain to the committee that we are investing large sums of money to improve and update all the time.

I hear that, but the problem is not just the incidents on those dates. I can go back. Here are some tweets from the Ulster Bank Help account: "We are aware that some transactions previously applied to accounts for ROI customers since 20/04 are no longer showing"; "The delayed payments sent from Ulster Bank ROI on Friday 23rd March have now been applied to all accounts. Thank you for your patience and we apologise for any inconvenience caused."

Mr. Ciarán Coyle

Are those from April?

They are from March. We can go back further. The current trend is that the bank keeps on apologising. I will move on from this.

Mr. Ciarán Coyle

I would like to address that particular point. Due to the nature of technology and the nature of the complexity that I described earlier, there will be issues over the medium term. I do not want to be apologising. What I am saying to the committee is that we are making extensive progress. Allow me to explain.

The Deputy referenced issues mentioned on the Ulster Bank Help Twitter account. I recognise them all. To show that the investment we are making is making a difference, I could go through the period from 2015 up to the present day, examining the incidents where we had issues that have a material impact on customers, if members understand the spirit of that comment. There has been an 84% reduction in such incidents. I recognise and accept that in the last few weeks we have had specific issues, which the Deputy has referenced. However, if one goes back beyond that, operations have probably been clear since the beginning of 2017. It is not a defence. I mean to say that we are investing, we are taking it very seriously and we will continue to do that.

I hear that. I am pressed for time. The number of buy-to-lets that are in arrears of 90 days or more is 1,775. Is that correct?

Mr. Paul Stanley

The number is 1,775, that is correct.

What is the number of buy-to-lets the bank is selling as part of the portfolio?

Mr. Paul Stanley

The number in arrears is 1,775. In the portfolio, the figure is-----

Mr. Paul Stanley

It is 2,900. To be clear, arrears and non-performing loans, NPLs, have two different definitions. In the case of buy-to-lets, we have really focused on the wider definition of non-performing loans when including loans in the sale. In the case of private dwelling home mortgages, PDHs, we have not done this. Regarding those loans, we have very much focused on those accounts within the arrears definition. If an account has been in arrears, or has been through two forbearance solutions and may not have been in arrears, then it is classified as an NPL.

As such, there are 1,125 buy-to-let mortgages which have not been in arrears for more than 90 days that are going to be sold off by Ulster Bank.

Mr. Paul Stanley

However, they have been through two forbearance solutions-----

They may be meeting their contractual obligations.

Mr. Paul Stanley

They have been through two forbearance solutions, and are therefore classified by European Central Bank, ECB, definitions as being non-performing loans. Those are the loans we are being asked to reduce. We are being asked to reduce-----

Does that definition only apply when considering buy-to-lets?

Mr. Paul Stanley

No, it applies to PDHs as well, but in the sale we are not-----

I understand that. Mr. Stanley is saying that the definition at a European level is that if a loan has undergone two forbearance procedures it is deemed non-performing.

Mr. Paul Stanley

Correct.

Will it always be deemed non-performing in that scenario?

Mr. Paul Stanley

My understanding is that it will be. Certainty if it has had two forbearance treatments, yes, it is considered non-performing.

I will come back to the Deputy on the matter and confirm this with him, but my understanding is that if it is the second forbearance solution and one has been performing for a certain period - I think it is two years - one will come out of the non-performing loan category.

This again goes to the point that more than 1,000 of these loans are not in arrears of over 90 days yet-----

Mr. Paul Stanley

I have have been through that definition. That is because they are classified as non-performing loans. Those are what we are required to reduce.

May I ask just one final question? I apologise. I will try to be brief. The Chairman talked about other emails, but I am inundated with emails from First Active account holders who tell us very clearly that they fixed. Although the witnesses claim that a letter that was sent at that time stated it was a tracker removal letter, at no time was it stated in any of those letters that if customers fixed, they would lose the option to avail of a tracker in future.

Mr. Paul Stanley

We have been through this with the Central Bank as well as part of phase 2, and our classification of those customers as being not impacted stands.

Can Mr. Stanley provide the committee with the documentation regarding the letters Ulster Bank sent out-----

Mr. Paul Stanley

To customers?

Mr. Paul Stanley

Yes, we can certainly do that.

What Mr. Stanley has said about Ulster Bank's role in respect of the Central Bank is fine. Representatives of the Central Bank will come before the committee and tell us to deal with Ulster Bank if we ask them about this. Can Mr. Stanley explain to the public the following? Someone has a tracker mortgage. It is stated in his or her conditions that in order to transfer from a tracker mortgage product to another mortgage product, the borrower must, among other things, first redeem the tracker mortgage loan, which should not happen in any of these cases. The customers in these cases fixed. It was never stated in any of the letters - Mr. Stanley may contradict me if I am wrong - that they would lose the option of a tracker mortgage at the end of the fixed period. At the end of the fixed period, Ulster Bank withdraws the tracker mortgage option, but Mr. Stanley believes they do not have a right to a tracker mortgage.

Mr. Paul Stanley

We have been through this. Along with all the other instances and impacts, I will go back and look at this again and send the documentation to the Deputy with our rationale for classifying these customers as not impacted.

I ask Mr. Stanley to send it to the committee in order that we can-----

Mr. Paul Stanley

Yes. I will send it through the Chairman. We have that document. I know Mr. Kissane has raised this on a number of occasions as well. We have had these discussions with him also.

Is Mr. Stanley aware of any legal cases pending in respect of these cohorts?

Mr. Paul Stanley

We have, I think, three legal cases overall. I cannot recall whether they apply to these cohorts.

I thank Mr. Stanley for his opening statement. At this stage I have really grave concerns that Ulster Bank has neither the capacity nor the competency to deal with the tracker mortgage issue. I will give Mr. Stanley a few reasons I say this. He has been before us time and again, yet there are people affected whom Ulster Bank is ignoring. I will tell him about one such case. Does he think it is acceptable that someone would send 15 letters and make 20 phone calls to Ulster Bank and that the bank would not even respond to that person other than to say it cannot give them a deadline as to when their mortgage will be sorted out? These people are almost certain they are in the category of people to whom the bank owes money and from whom it took money. If Mr. Stanley were to try to contact a customer and had to make 20 phone calls and send 15 letters to them, what would his opinion be of that person?

Mr. Paul Stanley

To address the initial question, we have a process. For the entirety of that process, we will have the 3,490 customers to whom we initially made a commitment remediated and repaid by the beginning of July. I do not know whether the customer to whom the Senator refers is among those potential extra 3,000 customers. If she would like to send the details to me, I would be happy to look at the case, as indeed I do with many of the cases sent to me.

It is the same thing. We are here month after month, all of the time, and we get the same thing: apology after apology.

Mr. Paul Stanley

We are getting close to closure at this point, as I said.

Mr. Stanley told us that months ago.

Mr. Paul Stanley

No. I told the committee when I was here the last time that we would deliver remediation for 2,500 customers in the first quarter. We delivered that. We are marginally behind what I committed we would do for June but we will have that done for July. We do not just talk about it; we do it.

Ulster Bank does not do it for the people to whom we talk.

Mr. Paul Stanley

If the Senator has an individual case - and I have taken individual-----

It is not just an individual case; it is so many cases across the board where Ulster Bank will not communicate with the customers. There is no point in having a helpline when no one can tell these people anything. Mr. Stanley told us 200 people were working on the tracker mortgage situation.

Mr. Paul Stanley

Correct.

As a finance committee, we have been overly patient with how this has been dealt with. Mr. Stanley told us Ulster Bank has fully settled 2,900 of these cases.

Mr. Paul Stanley

Correct.

There are 200 staff. Over what length of time was this done?

Mr. Paul Stanley

Two hundred staff? Sorry, I do not understand the question.

Mr. Stanley told us 200 staff were working on the tracker mortgage situation to reassure us that it was being dealt with in a timely, speedy, competent manner.

Mr. Paul Stanley

There were more than 200 at a point in time for over two years.

That is 14.5 cases that have been settled for each member of staff working on this.

Mr. Paul Stanley

There is a process that we have had to go through to meet the requirements and the phases that are set out. We have gone through those. The last time I came before the committee, there was not an acceptance that we would meet our targets for the 2,500. We have met it. We are close to meeting our targets for the 3,490 and we will address the residual 2,000 by the end of the year. For the residual 2,000 - and the customer to whom the Senator refers could be one such instance - we still do not necessarily know the finite amounts in terms of the extent to which they have been impacted. We are in the process of communicating with all those customers, starting this next week and into next week.

Why can Ulster Bank not give a decision to these customers?

Mr. Paul Stanley

Because there is a complexity-----

Why can it not engage with them? Mr. Stanley talks about non-performing loans and so on and says people have been given various opportunities to engage, but Ulster Bank does not engage with people. It sets up a helpline and sends out standard letters and this goes on for years.

Mr. Paul Stanley

We set up a helpline. The standard letters are sent until we work out whether the customer is impacted and what he or she is due. It is not a straightforward process but it is coming to an end.

What is the point of a helpline when it does not give any help?

Mr. Paul Stanley

The Senator is hearing of individual instances, and I appreciate that they are extremely infuriating from a customer perspective, but the helpline deals with an awful lot more than just that.

Mr. Stanley said earlier that no groups were in dispute. Is that what he said?

Mr. Paul Stanley

No. What I said was we are not in dispute with the Central Bank in respect of any of the cohorts deemed impacted.

There are no groups in dispute then. This is why I cannot get around why Ulster Bank cannot give these people a decision, even to tell them they are included in this, they have been impacted, and that the bank needs a little more time to work out the extent to which they have been impacted or to give them a figure. Why can the bank not give these people that information?

Mr. Paul Stanley

I will agree to go back and look at the messaging we are giving these customers, but it is not a simple process to work out the calculations of what they are due. There is a cohort of customers in that 2,000 that we need to bed down. We know about the 3,490 but we need to bed down that 2,000 and clearly identify that cohort. We will still be giving a message to some of those customers to the effect that we have not necessarily landed on their particular cases as to whether they are impacted or not impacted until we get through that before the end of this year.

It is not acceptable at all. I can accept complicated calculations in respect of the amounts owing but I cannot accept, given the bank is not in dispute with any groups, that after this many years it still cannot write to these people and tell them, "Yes, you are included in this. We will be back to you with a figure."

Mr. Paul Stanley

We will have all of that concluded by the end of this year. That is all I can say.

By the end of the year?

Mr. Paul Stanley

Yes.

That is totally unacceptable. How many more of these cases does Mr. Stanley think there will be on top of the 5,500 cases of people who have not been contacted yet and the people who are at the end of the process of getting no communication whatsoever other than a 60-day letter?

Mr. Paul Stanley

There are 2,000 customers whom we have not contacted yet and whom we are in the process of now contacting.

When will they be contacted by?

Mr. Paul Stanley

They will be contacted this week or next week.

Will they be contacted by more than just a standard letter stating-----

Mr. Paul Stanley

I would need to go back and look at the communication-----

-----"unfortunately, we cannot give you a timeline for correspondence".

Mr. Paul Stanley

I would need to go back and look, but the idea is that they would be identified as customers who are impacted and they will know that fact. However, they will not know the amount of the compensation or remediation at that point.

They will know that within the next couple of weeks, though.

Mr. Paul Stanley

Yes.

I will have to take Mr. Stanley at his word on that.

I may as well ask him about the branch closures. He says there will be no more branch closures this year.

Mr. Paul Stanley

This year.

Will there be reductions in the number of staff in branches?

Mr. Paul Stanley

There are some adjustments in staff in the branches. Some of them will be cashless locations and some will have changed opening times. There will be a relatively small reduction.

Mr. Ciarán Coyle

We are in the process whereby we are reducing some lunchtime openings, making changes to foreign exchange arrangements and introducing a number of other operational changes. At the same time, we are investing in the branch network. As we announced several weeks ago, as a consequence of this, we envisage a net reduction of 54 full-time, FT, staff.

How many staff will the bank be letting go by the end of the year?

Mr. Ciarán Coyle

It will be 54.

Will that be across all branches?

Mr. Ciarán Coyle

Some will be relocated. The actions we are taking will have the effect of necessitating in or around 98 fewer people. However, due to movements, backfills and the way we are managing it, we are trying to minimise the number of people who may lose their roles. It gets to a net reduction of about 54 FT staff across the network.

When people lose their roles, are they given the option of voluntary redundancy? Does their contract allow for their wages to be reduced in such a context?

Mr. Ciarán Coyle

They are certainly given the option of voluntary redundancy.

Mr. Paul Stanley

They will go "at risk" for a time. That gives them the opportunity to look for other jobs, as well as internally. Ultimately, at the end of that period of being at risk, voluntary redundancy will be paid.

Is it the case that anybody who is going to be let go will be offered a voluntary redundancy package?

Mr. Paul Stanley

Yes, that would be the norm if a person goes at risk.

How many redundancies will there be at the end?

Mr. Paul Stanley

There will be 54 voluntary redundancies if there are no other roles for those individuals.

I do not accept the bank's analysis that people, particularly in rural areas, prefer this new way of banking and that it is responding to people's tastes. The biggest thing in banking is that people need a relationship with their banker. They cannot have that with a machine.

Mr. Paul Stanley

I agree. We have community bankers and we recognise that relationship is what banking is about. We have to find a happy medium between physical locations, digital channels and relationships.

Mr. Ciarán Coyle

I was appointed recently to the role of running the retail bank. This is my 11th working day in the job. I am from rural Ireland and I absolutely appreciate the Senator's point. Equally, we have to get the balance right. I am coming into the job new and I need to look at our 88 branch network, the right distribution model and how it works. We are also seeing a change in behaviour. The committee would accept that in terms of the volume of transactions done digitally, etc. I do not say that as a simple throwaway to the realities in rural Ireland. We are also looking at our branch network and recognise it as an important asset for us. Our staff do a brilliant job in it, day in and day out, serving our customers. The general trend is that our branches are moving away from being transactional outlets to outlets which are actually more focused on helping people with moments in their life which matter, such as mortgages or more complicated scenarios. As a consequence, in tandem, we must invest in the digital challenge to allow people to apply for loans online if they wish.

There is, however, a situation whereby people do not have broadband in rural areas and many elderly people want a relationship with their bank. If Ulster Bank is reducing the number of staff in branches and has already closed some, that creates a real problem of social exclusion and exclusion for people in rural areas. That is the impact.

Mr. Ciarán Coyle

I accept that.

We are being told that this is all about people's tastes and that the banks are just following but that it has nothing whatsoever to do with the €1.5 billion Ulster Bank bank gave over in dividends to RBS or profit maximisation.

Mr. Paul Stanley

Can I address that point because it keeps coming up? The €1.5 billion in dividend we paid to RBS is because we have the highest capital ratio of any of the retail banks in this country. It is over 30%. It actually costs the bank money in terms of the returns we get on that capital and, ultimately, that has to be paid for. It makes perfect sense for us to pay those dividends back to the parent. We have become a far more efficient bank. It has nothing to do with branch closures or other actions.

The bank could have left some of the branches open and could leave the staff in the branches.

Mr. Paul Stanley

That has nothing to do with the dividend payment.

Mr. Ciarán Coyle

On rural Ireland and broadband, we are putting more community advisers into the area. We are also specifically identifying particular parts of rural Ireland. I recognise that it is not the same as a physical branch, but we now have mobile banks which stop in 67 different locations in certain parts of the country.

I think we had better cut the conversation here. I know about mobile banks - I accept that Ulster Bank is not the only bank that has them - with elderly and disabled people queuing up in the wind and the rain to get access to their own money.

Is Ulster Bank willing to supply the committee with a monthly report as to how each of the tracker mortgage cases has been settled?

Mr. Paul Stanley

I am not committing to it but I will certainly take that away and consider it. We are already reporting to the Central Bank on it regularly.

Could the bank give us a copy of what it is sending to the Central Bank every month?

Mr. Paul Stanley

I will take that away to consider it and come back to the committee.

I welcome Mr. Stanley and the staff of Ulster Bank. On the PDHs, are many of those houses tied up in larger business loans which have gone wrong?

Mr. Paul Stanley

Is the Senator referring to the sale or to general PDH arrears?

I am referring to the sale of the PDHs.

Mr. Paul Stanley

Particularly in terms of the farming community, these are all stand-alone PDHs.

Has it anything to do with any other business?

Mr. Paul Stanley

No.

Are there are any cases of that at all?

Mr. Paul Stanley

Not to the best of my knowledge. We are filtering that book through but there should not be.

Are there many legal cases taking place regarding Ulster Bank's GRG?

Mr. Paul Stanley

We have 63 complaints in. I would need to come back to the Senator on any specifics of any legal cases.

Why would there not be legal cases? Is it because it is developing slowly?

Mr. Paul Stanley

I am not saying there would not be. I just need to go back and check those 2,000 GRGs as to whether there are legal cases. I just do not have the information with me but I am happy to come back on it.

The bank had eight cases with the Credit Review Office. Why is that so low?

Mr. Eddie Cullen

It is difficult to say. We voluntarily became part of the Credit Review Office several years ago. The level of cases going through has been around that number for the years. Eight was the number for 2017. We would like to think it is because we are generally giving customers clear answers when they seek credit from our SME channel. It is clear the Credit Review Office is available to customers both through the publicity it puts out and the written advice we give customers if there is a credit decline.

Where does the decision-making relating to loans take place? Is it locally, regionally or nationally?

Mr. Eddie Cullen

Yes, it is taking place locally in Ireland. All the credit decisions that apply to SMEs take place in the Republic of Ireland. Our model is based on our local business bankers. We do not use credit committees but give discretion to our front-line people. That discretion is mapped into our second-line credit people. To approve a loan, one approval is needed from the business and one from the credit family. We actually have distributed some of our credit staff into the regions. For smaller and regional cases, some of those decisions are made locally but all decisions are made in Ireland.

Are some of the decisions made in local branches?

Mr. Eddie Cullen

Some are made in the local business centres. We have a credit person based in Cork in our local business team and that person can make decisions on the vast majority of cases that come through.

Does one area make the decisions for all the banks in the region?

Mr. Eddie Cullen

Yes. We have a credit person located in our Cork business centre. The person is available locally to support the team. We have not managed to achieve that in all our business centres. Some of the decisions from other business centres come back up to Dublin but that does not affect the time it takes to come to decisions.

The Chairman referred to letters. I have also received quite a number of letters. Those involved cannot get any answers. Quite a number received letters about closing their accounts. The letters state that the bank has closed their accounts and that cheques will issue. I find it hard to marry the two. I thought the priority would be the mortgage issue and that the bank would be concentrating on it rather than on closing down accounts and sending cheques to people.

Mr. Paul Stanley

Without knowing the specifics of the letters the Senator has received, I cannot answer. We have anti-money laundering requirements. It is not a reflection on individuals. In certain categories of accounts, unless we get information back, we have to move on the accounts. If the Senator wants to send some of the letters to me I am happy to have a look at them.

They are small accounts.

Mr. Paul Stanley

Maybe they are dormant accounts. I say that without knowing the detail. Perhaps they have not been active for a period.

They probably have not been active.

Mr. Ciarán Coyle

We have a dormant account policy so we can follow through on it.

Mr. Paul Stanley

If the Senator wants to send me some of the letters, I will be happy to look at them.

On the lending issue, the witnesses say that the average refund due is less than €2,000. Does that take into account the hardship some people may have experienced as a result of overcharging by the bank? Some of those businesses might have gone into financial difficulties and went bust. Does this take all of that into account?

Mr. Eddie Cullen

The €2,000 we have quoted includes compensation for the opportunity costs of the money that was overcharged to them for the period it was overcharged. On the second part of the Senator's question about whether it caused additional financial distress, that is difficult to say. We do not have evidence at this point. Clearly, during the period starting in 2012, any overcharging was most unwelcome to say the least and should not have been done. In that context, given its scale, we do not have any evidence that it pushed any customers further to the edge.

Have customers complained about the overcharging?

Mr. Eddie Cullen

I previously answered the question in reply to Deputy Pearse Doherty. There were a small number of complaints at the time. We did not see a particular spike in complaints. It did not lead to any further investigation at the time, which is something we do need to look into. It does not appear to have been the case.

Who is the CEO of Ulster Bank in Ireland?

Mr. Paul Stanley

I am the interim CEO of Ulster Bank in Ireland. Mr. Mallon is on gardening leave. I understand that he will be taking up his new appointment in July.

Am I correct in saying that Jane Howard is the incoming CEO?

Mr. Paul Stanley

There is a regulatory process to be gone through for the new CEO. When that concludes, the new CEO will be named.

I have no doubt Mr. Stanley will be going for it.

Mr. Paul Stanley

I did not put my name forward for the process.

I have a number of points to pick up on. Am I correct in saying that the total number of tracker accounts identified was 5,590, which is the 3,490 plus the 2,000 plus another 100?

Mr. Paul Stanley

It is 3,490 plus approximately 2,000.

Mr. Stanley said that the 100 cases are special cases.

Mr. Paul Stanley

The 100 cases of the 3,490 cases involve customers who we have not been able to contact.

They are included within it.

Mr. Paul Stanley

In the 3,490.

Am I correct in saying that approximately 2,500 have been remedied to date?

Mr. Paul Stanley

Approximately 2,900 as of last night.

We are looking at approximately 2,600 customers. The question has been asked before. Does Mr. Stanley think it is fair and reasonable for customers that Ulster Bank got so far behind the other banks? It is well in excess of 40% of the customers who have been identified by the bank. The number is approximately 5,500 in total.

Mr. Paul Stanley

I would love this problem to be sorted out tomorrow from a customer perspective and a bank perspective. It is taking us that long to fix it. I fully get that it is inconvenient to and unfair on customers. I apologise for that. We are endeavouring to get this finished. We can see the end in sight. We are endeavouring to get this finished.

For a layperson watching proceedings, whose neighbours might have been with one of the other institutions and have been compensated, what is the delay?

Mr. Paul Stanley

I do not know the full details relating to other banks. The reason for the delay, and I think we spoke about it the last time I was before the committee, is we have had to deal with five different mortgage systems when looking back on the customer journeys and working out the balances, payments, changes and compensation that is required. That has been the major complexity.

Is that within the RBS family? Is that the reason?

Mr. Paul Stanley

That is within the RBS family. Some of our systems were more legacy than RBS. We now have one new system for going forward and there is one small legacy system still left there for mortgages.

Would it be fair to say that, in the Irish context, the bank did not update its systems in line with the other institutions? We all use ATMs. I always found Ulster Bank ATMs to be the slowest. I put it down to the prudential situation and that it was associated with the UK. I thought that was the reason its ATMs gave money out more slowly. Was it a technological issue rather than a prudential one? I was looking very deeply to see if I still had money in the account.

Mr. Ciarán Coyle

The Senator's question was if the fact we had five mortgage systems suggested there was not the same level of progress or investment as other banks.

Our role is representational in nature. It appears illogical that there are large financial institutions and virtually all of the other financial institutions paid out some time ago. We are still looking at about 2,500 customers who are yet to receive any form of compensation or redress by Ulster Bank. We have to ask the simple question as to why.

Mr. Ciarán Coyle

To follow on from Mr. Stanley's point in respect of the system, given the period we are going back over, the fact we have five different mortgage systems has undoubtedly caused a delay. The Senator may have been out of the room when I said we have invested in excess of tens of millions to migrate to one mortgage system going forward. We cannot change our history. Our history is as a First Active bank. It is Ulster Bank, NatWest and RBS. We have to deal with those issues and move forward. That is different to the histories of the other banks.

The question has probably been asked before. What date will the 2,600 customers who have yet to receive any redress and compensation, the victims of the tracker mortgages issue, have closure on the issue?

Mr. Paul Stanley

To break it down, the 3,490, barring the 100 we have not found, will have closure during July. The remaining 2,000 will be closed by the end of this year or in the first quarter of 2019 for some of the more complex cases.

The bank is selling a loan book with a face value of €1.6 billion. What is the current book value in Ulster Bank?

Mr. Paul Stanley

I do not have that here with me today but-----

I have no doubt Mr. Stanley knows the value.

Mr. Paul Stanley

I am not going to disclose it because we are in discussions with buyers. We will not be disclosing those figures.

What is Ulster Bank's non-performing loan ratio?

Mr. Paul Stanley

It is 17%.

What will it be if the bank sells that loan book?

Mr. Paul Stanley

Approximately 11%, all other things being equal.

The European Commission wants to see a level of 5% or 6%. When does Ulster Bank expect to get to that level?

Mr. Paul Stanley

I would estimate it will be 2020 before Ulster Bank gets to that level.

Of the 6,500 non-performing loans on the bank's books, 3,600 are for homes and 2,900 are for buy to let properties. I would have thought that there would be more buy to let properties in this category but nearly 55% of non-performing loans are for homes. I would not put buy-to-let properties in the same category as homes. Is my assumption that there would be more buy-to-let properties in the non-performing loans category reasonable? In order to get to 5% by 2020, how many loans will Ulster Bank have to deal with and will they be dealt with in-house? Will they be restructured or will more of these loans be sold on to funds?

Mr. Paul Stanley

Our non-performing loan book is around €4.3 billion to €4.4 billion. This €1.6 billion is obviously-----

The bank is selling roughly a third of the book.

Mr. Paul Stanley

That is correct. As I said, there is still a journey to get to the 5% level. We have loans that are in forbearance at the moment and once they have proved themselves for two years, they will come out of the non-performing loan category. That will be part of that natural journey. There are some other loans that we want to look at again in terms of the appropriateness of forbearance solutions. When we go through all of that process, there may be a residual that we will have to consider for further sale but we have made no decision in that regard as yet.

What was the criteria applied to the 3,600 homes and the 2,900 buy to let properties? How much did they have to be in arrears?

Mr. Paul Stanley

They had to be heavily in arrears. A full 73% of those loans first entered arrears between seven and nine years ago. They have average missed payments of 43 in that book so they are heavily in arrears. A large portion, although not all of them, are non engaging.

When does Mr. Stanley expect this sale to go through?

Mr. Paul Stanley

I would expect the sale to go through in the third or fourth quarter of this year.

Will customers be made aware at the time?

Mr. Paul Stanley

Yes, in advance in fact.

Mr. Stanley expects that the bank will try to work through the remaining non-performing loans, valued at approximately €2.8 billion, in the period up to 2020, which is not too far away. Does the bank hope to be able to restructure within the system?

Mr. Paul Stanley

Yes, there will be some restructuring within the system. There will also be a natural rebalancing as the balance sheet grows because it is the ratio that is important. The balance sheets are growing as well which is helpful. There are also loans to be cleared that are in forbearance. They are working in forbearance but they need to prove themselves for two years.

Mr. Stanley will be aware that there are rumours circulating that Ulster Bank is up for sale. It has been suggested that the RBS group is getting the bank ready for the shop window. Is that the case?

Mr. Paul Stanley

No, that is not the case.

How can Mr. Stanley give that commitment here today?

Mr. Paul Stanley

That is the commitment that has been given to me by the CEO of RBS. We are part of the core bank of RBS. That is not to say that something may happen well into the future but we are part of the core bank of RBS and it is investing here. It wants to see business in this country growing. That is the challenge that it keeps putting to me every day. It wants to see growth in business.

Ms Howard, who may be appointed to Ulster Bank, has a track record of closing banks in the UK but the branch network for Ulster Bank is key. I am based in Limerick where Ulster Bank has a great branch network. It has very much put it up to the other banks in the business sector.

In the context of the 18,000 customers who were overcharged, who decided to carry out this review? Was it done on the instructions of the Central Bank?

Mr. Eddie Cullen

It was part of the tracker mortgage examination. The Central Bank asked us to conduct a review of non-personal, as well as personal loans.

Is that concluded now or is work ongoing to determine whether any other customers were overcharged?

Mr. Paul Stanley

We expect that to be done. We should be clear here about the fact that we have, in effect, stopped any further harm. We have removed those incorrect rates going forward for those customers and now we are into the compensatory-----

Is it possible, with a further trawl, that the final figure will be more than 18,000?

Mr. Paul Stanley

My expectation is-----

Mr. Eddie Cullen

We put 100 people on this who have spent a year going through all of the documents. Unfortunately, nobody can give the Senator an absolute assurance that we will not ever find anything again but we have a much higher degree of confidence about it now, having pulled all of the loan documents, reviewed the individual customer relationships and looked at the nature of the charging. We feel that we are now in a much stronger position, in terms of the probability of finding something, than was the case 15 to 18 months ago.

That is positive but the negative aspect is the rate at which the trackers have been sorted out. I welcome the commitment that Ulster Bank will continue as a force in banking in Ireland. Its branch network is vitally important.

I wish to go back over a number of points raised by Senator Kieran O'Donnell and others. Mr. Stanley has explained the position of the bank on these issues and has apologised, which I acknowledge. However, the people affected by all of this are customers of Ulster Bank. There seems to be a culture within the bank to disregard customers to a certain extent, which continues to this day. I would not clap Ulster Bank on the back for the numbers of customers retrieved from the system which the bank believes are owed compensation and so forth because the bank was in the wrong.

Mr. Paul Stanley

Yes.

When questions are asked here about individual cases or samples of cases, they are asked in the context of the bank being wrong. Customers want to feel that Ulster Bank is righting the wrong done to them but that does not come across in correspondence. Mr. Stanley may be tired of dealing with this-----

Mr. Paul Stanley

No, please go ahead.

-----but I am going to raise it anyway. In his opening remarks, Mr. Stanley said that in the context of the resolution of these issues that it is essential for customers to build trust with the bank. However, a sample of emails that I received since the last time Mr. Stanley was before us paints a different picture. Ulster Bank customers are telling the bank that its helpline is helpless and that despite communicating with the bank on numerous occasions, they are being told the same thing, namely, that the review is ongoing and that the bank will be in contact with them in due course. Some customers believe that it may be the end of September 2018 before they are contacted. The bank did wrong; customers are trying to work with it but they are not getting the sense that the bank is working with them.

In another example, Ulster Bank compensated a customer at Christmas time in 2017 but immediately went back to accruing charges in the old way in 2018. That case has still not been resolved. In another case, a customer went through a process within the bank whereby the original terms of a contract were changed, in terms of what was being offered now, and the bank refused to budge. My point is that the language that Ulster Bank customers are using to describe the bank paints a picture of an organisation that is dealing with these issues only reluctantly.

Last August this person was notified that they were impacted. The bank had previously told this customer they were not impacted. Since their initial correspondence they have not had a single contact from the bank despite them ringing the bank and trying to make contact with it.

Another person tells us that in July 2017 they were told things would be resolved and the bank would be in contact with them in a few months regarding redress and compensation. Eleven months on and there has still been no update from the bank. They are not an appending cohort to be examined; they have obviously been examined. The list goes on and on.

Another woman has been waiting since 2016. They were told this week that they would not even know if they were impacted until the end of September. If these people write to us and say they are in regular contact with the bank, what is happening that there is no response? Why are they being left for 11 months?

Mr. Paul Stanley

I will probably repeat myself; apologies for that. We will have 3,490 customers out the door, bar those we cannot identify at the beginning of July. If those customers fall within that category, they will receive their compensation. Unfortunately we have further work to do. I am happy if the Chairman wants to share some of those with me. I know he shares individual cases, particularly those of a vulnerable nature. I do follow those up for him as I hope he understands. If the Chairman has cases he wants me to look at, I am happy to follow those up as well. However, the residual 2,000 need to be worked through. Those customers potentially are within that cohort and it is an end-of-year remediation.

Why would someone not have heard from the bank after 11 months? Why are there huge gaps in time in the bank delivering an appropriate level of customer service to the affected party? Why are phone calls not being returned?

Mr. Paul Stanley

That is not acceptable. I-----

I was in business and I know the importance of ringing customers and keeping them informed. When I see these, I wonder how the bank is in business. How can an entity as big as Ulster Bank remain in business? I listened to Mr. Coyle giving his piece in a sincere way, but the facts do not bear it out.

Mr. Paul Stanley

Every day 2,500 people in the bank come to work and they do a very good job for their customers. There are difficult circumstances, particularly with tracker mortgages. It is not easy. I have spoken about the timelines we are working through. If there are individual cases there, it is not acceptable that people do not follow up with phone calls. That is not acceptable to me. There is only so much we can tell until we have done particular pieces of work and that should be explained appropriately to customers. If the Chairman wants to send those to me, I am happy to take them up.

I am, but I am still making the overall point. For example, Mr. Stanley talked about phone calls - not one. In this particular case despite 15 letters and 20 phone calls to the helpline, the last letter received was on 10 October 2017 stating the bank was unable to give a timeline for compensation. Surely they must jump out of the system if Mr. Stanley is on top of his business.

Mr. Paul Stanley

It does, but some of those particular cohorts - I do not know the individual case - would still have been in discussion with the Central Bank as to whether those cohorts were impacted. That only concluded, as the Chairman is aware, at the end of March or the beginning of April this year, so we could not give a definitive answer on a number of those.

So they will just have to continue to wait.

Mr. Paul Stanley

No, not have to continue to wait. I have given the Chairman the timelines already. Just to restate it, for the 3,490 we will have those - bar those we cannot identify - out the door, compensation, remediation by early July. For the other 2,000 we are working through those in quarter 3. The process of compensation and remediation will conclude. I would hope it will conclude in quarter 4, but I can see some complex cases going into the first quarter of next year.

Mr. Stanley told us that he had spoken to Padraic Kissane or that he had been on about the First Active tracker loan.

Is there not one in that cohort who has been impacted?

Mr. Paul Stanley

For the basis on which an impact is defined or designated for those particular ones that are being argued about and the documentation referred to by the Deputy earlier, the answer is "No". I will go back and look at that documentation again. I will set out the rationale as to why.

In the context of the conversation with Padraic Kissane, who has appeared before the committee a number of times, does Mr. Stanley not accept any of the argument he puts forward on these cases?

Mr. Paul Stanley

Mr. Kissane and the bank have numerous discussions on numerous cases but on this particular one, we differ in opinion.

Even though he would point out-----

Mr. Paul Stanley

Even though he would point out, yes.

-----that by fixing the interest rate on a loan, the customer will lose the right to go back to a tracker, in order to transfer the transfer the tracker mortgage product and so on and it is referred to as tracker mortgage, all of this goes on, the bank has still-----

Mr. Paul Stanley

We have been through this and we have been through it with the Central Bank as well. I am happy to go back, look at it again and set out the rationale as to why. What happened through that was-----

Let me put down a marker on this. I would like Mr. Stanley to provide an explanation related to what we can call the First Active cohort. Relative to the case being made by Padraic Kissane, in general terms, and Mr. Stanley's explanation as to why that cohort given their introduction through First Active and how they were set up, the contracts and so on, I ask Mr. Stanley to give us the pointers within the-----

Mr. Paul Stanley

I am happy to share that with the committee.

I would be grateful if he could do that for us.

Mr. Paul Stanley

Yes, certainly.

I turn to the bank's sale. Mr. Stanley has said there are 3,600 PDH loans for sale and then buy-to-let mortgages. I was struck about his comment about moral hazard. I did not think any banker ever used the word "moral". It baffles me as to how he can say that and at the same time sell these loans to vulture funds which have absolutely no regard for the rights of the individual. I want to correct Mr. Stanley on this. He said that the rights around these loans travel.

Mr. Paul Stanley

Service provider at-----

Okay. They travel to the service provider. However, in reality that does not happen.

Mr. Paul Stanley

Those service providers are regulated by the Central Bank of Ireland.

I know that.

Mr. Paul Stanley

So they should be following-----

However, the vultures, the greedy group behind these agents, are not regulated. They dictate to the agents what they can and cannot do. Even though Ulster Bank has customers who could possibly afford their loan, should they be written down and perhaps not even by as much as the vulture fund sale price, the bank is not willing to talk to them. Mr. Stanley and his bank are presenting the argument that it is moral hazard.

Mr. Paul Stanley

To be clear, if those customers can avail of social housing and obviously social housing-----

No. Answer the question.

Mr. Paul Stanley

I would just like to finish, a Chathaoirligh. We said this before so I am not telling the committee anything new. If a customer can avail of social housing and does a voluntary sale, we will not go chasing after them for the negative equity part of their loan. We are in effect writing down for those customers.

Has Ulster Bank been in touch with iCare or with David Hall?

Mr. Paul Stanley

We are having conversations with a number of those parties, yes.

In having those conversations with that entity and perhaps others doing similar work that are charities, will the bank be in a position to take out some of those loans in order that such entities with charitable status might be able to take them on? Will the bank be going through that process with them?

Mr. Paul Stanley

We will be having those discussions and if we can end up with an appropriate conclusion with those parties, that is one forbearance option certainly; it is not the only one for those customers.

There are still options.

Mr. Paul Stanley

There are still options, absolutely.

In terms of the 3,600 and the 2,900 buy-to-lets, Mr. Stanley said to Senator Kieran O'Donnell that the bank would be notifying those people.

Mr. Paul Stanley

When we define the final population for sale.

Yes, but will the bank be telling them some time before the sale? In other words, will the bank be alerting them to this?

Mr. Paul Stanley

Yes, and after-sale as well, there is a period when they can still come back to us.

Before the sale is what I am interested in.

Mr. Paul Stanley

We will point out to them that they have a period before the sale but we will also point out to them that they have a period after the sale.

Will the period before the sale be generous enough to allow them either to engage directly with the bank or to otherwise engage with David Hall, iCare or whoever it might be?

Mr. Paul Stanley

Yes, when combined with the period after the sale that also applies.

Mr. Paul Stanley

They have a period before the sale and they have a period after the sale and it is those combined that give them an opportunity to come up with another solution.

I understand that, but will those periods of time be generous enough?

Mr. Paul Stanley

In our view, yes, but if one looks at the profile of those customers-----

I will come to that now.

Mr. Paul Stanley

-----and given previous experience as well, I think that would be challenging for individual customers.

What is the period of time before the sale?

Mr. Paul Stanley

I will confirm that date to you, Chairman, and the period after the sale.

Mr. Stanley said in respect of the principal dwelling house, PDH, loans that 73% first entered arrears between seven and nine years ago.

Mr. Paul Stanley

And all are currently in arrears as well.

Anyone would respond by saying he or she does not blame the bank for selling them but I would like to drill down a little and ask some more about the 73%. Were they all in arrears for nine years? How many years were they in arrears and for how much?

Mr. Paul Stanley

The vast majority of them, 73%, have been in arrears for seven to nine years. I do not have the breakdown below that with me.

I would like to see a breakdown of that figure if Mr. Stanley could provide it, and likewise for the buy-to-lets.

Mr. Paul Stanley

I will get it.

To give an example, I wish to tell Mr. Stanley about one of his customers who tried desperately to negotiate with the bank. The person thought a deal was done only to find out that was not the case. That is typical of banks, not just Ulster Bank. He allowed a person onto his premises to do a structural survey for what he thought was to be a loan and the sale of the property to him, only to find out that in fact, a valuation of the property was being conducted. It was not a survey at all, it was a valuation. The day before Christmas Eve in a particular year he was advised that the building had been acquired by a vulture fund, even though the individual believed he was in negotiations with the bank. He said the receivers and vulture funds are being allowed to rape and plunder decent, hard-working Irish companies that had no hand, act or part in the collapse of the Irish economy. That is the experience of one particular individual. He also pointed out that an offer to purchase was recommended for acceptance within the bank. He said the main reason for time dragging on was caused by the banks and, lo and behold, the next thing he was told was the property had been sold to a vulture fund.

The same thing happened with a client about whom I spoke to Mr. Stanley at one of the previous meetings. He had two buy-to-let properties and the rent from them was going to fund his home. The bank knew it. That was part of the deal that was done but the bank sold the buy-to-lets. The minute the bank did that it was game over for the person. Those are the types of stories about actions by the bank that cause me to believe that the underlying culture within the banks has not changed. I would like more evidence through this committee in order to reflect on it and understand where the bank is going. Between the GRG, business loans and so on, the banks collectively have ruined families and businesses in this country. The banks can say sorry all they like but the evidence exists that they have entered into interactions with customers that have led them nowhere but disaster.

That is just unforgivable, in particular when I think of the amount of taxpayers' money that went into banks. I have not changed my mind. I am trying to be fair to Mr. Stanley but I find it shocking that that culture is still there.

Mr. Paul Stanley

As you have done already, Chairman, if you have individual cases you need to come to me about, please do.

I understand.

Mr. Paul Stanley

I will do my utmost to get those sorted.

In terms of culture, the Central Bank has completed a culture review of the banks and that will feed its way back to the Minister so the committee will get some indication of it. I am not privy to what the overall outcomes on the banks are but the committee will get some view from the Central Bank and the Minister as to how they view the culture of banks and whether it is the same or whether it has changed. Despite what you say, a Chathaoirligh, it will acknowledge that there has been an improvement in the culture.

I hope at some stage in the process that the Central Bank proves itself to the public and that it has the bottle to kick the Irish banks in the ass up and down the country, because that is what they deserve. Senator Conway-Walsh has a query and then we will bring the debate to an end.

Does the bank have a problem with the loss of customers' deeds? Could Mr. Stanley furnish to the committee the number of people who have been waiting more than 12 weeks to get back the deeds of their houses? I know of people who have waited five years to get the deeds back once their loan was closed, and that is completely unacceptable.

Mr. Paul Stanley

I do not have the answer to hand but I will follow up on it.

Will Mr. Stanley furnish it to the committee?

Mr. Paul Stanley

Yes.

I look forward to getting the answer to that. The information I seek relates to people who have been waiting for more than 12 weeks.

I thank Mr. Stanley and his colleagues for attending.

The joint committee adjourned at 3.47 p.m. until 9.30 a.m. on Thursday, 21 June 2018.