Irish Banking Culture Board: Discussion

Today we are discussing the work of the Irish Banking Culture Board. I welcome Mr. Justice John Hedigan, Ms Marion Kelly and her team to the meeting. I see we have gone way beyond the required gender balance, so congratulations are due on that.

I draw the attention of witnesses to the fact 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.

I call Mr. Justice Hedigan to make his opening statement.

Mr. Justice John Hedigan

I thank members for the invitation to present information on the Irish Banking Culture Board. I am accompanied by my acting chief executive officer, CEO, Ms Marion Kelly. I am happy to answer any and all questions the members of the committee might have. Ms Kelly and I have been working closely on this project and she will intervene wherever appropriate. Our aim is to ensure that questions are answered fully and accurately.

The Irish Banking Culture Board was established to regain public trust in banking. The only way banks can regain this trust is to earn it. Rebuilding the confidence of wider society in the industry will require time, patience, courage and commitment. I believe the board can play a key role in this process, through our own activities and through supporting and partnering with other relevant organisations. I view the establishment of the board as a positive development and an opportunity not to be missed. It is notable that 85% of the public and stakeholders who contributed to our public consultation exercise supported the establishment of the board.

The board is a unique body. Nothing like it has ever been established in Ireland previously. The board is comprises individuals with very different perspectives and backgrounds. All of them are stakeholders in the banking sector who have, for the first time, agreed to work together to improve banking culture. We have created a structure that represents the best means to contribute to real and authenticate change in a way that delivers for the citizens of our country. The fact that the banks are represented on the board, but in a minority, represents, to my mind, the best of both worlds. The non-bank majority, who are representative of a cross-section of society, will ensure that the voice and perspectives of the public will be heard. I believe that the changes necessary in banking culture have a far greater chance of being delivered because of, and not in spite of, the five member banks having representatives on the board.

I am not of the banking world, so how did I come to be the chair of the Irish Banking Culture Board? I read an advertisement in the newspaper, almost exactly one year ago. It stated that the five retail banks in Ireland had resolved to establish such a board to act as a transformative influence on culture within the banking sector, focused on earning the public's trust. It sounded to me like a very good idea and one not before its time. I replied to the advertisement. My appointment was entirely independent of the banks. It was conducted by way of an open competition. A selection panel was chaired by Dame Colette Bowe, the then chair of the United Kingdom Banking Standards Board. She was joined by Sir Callum McCarthy, the former head of the Financial Services Authority, FSA, in the UK and our own Dr. Martin McAleese.

I was appointed and commenced in the role of chair in January 2019. My first task was to select and appoint the members of the board. This selection process was, again, entirely independent. The criteria, in my mind, as I was selecting and appointing the board included ensuring that its membership would reflect the feedback received during the extensive public and stakeholder consultations, while still remaining at a manageable size. I was clear at the outset that each of the five founding banks had to be represented on the board by the most senior bankers. Why did I take that view? It was because the banks own the problem and they must own the solution. I am convinced that it is through vigorous, open dialogue and concerted action between these senior bankers and the non-bankers of the board that true, lasting and meaningful change will occur.

The composition of the board was announced at our launch on 15 April 2019.

It comprises 14 members, and committee members have had biographies of these people circulated to them beforehand. Along with the five senior bankers, there are seven non-banking members, who represent a wide range of stakeholders in the banking sector. They reflect what we heard during the public consultation process. They are as follows, in alphabetical order: Ms Angela Black, chief executive of the Citizens Information Board; Professor Blanaid Clarke, a leading authority on corporate ethics from Trinity College Dublin; Mr. Padraic Kissane of Padraic Kissane Financial Services; Mr. Gareth Murphy, head of industrial relations at the Financial Services Union; Mr. Philip O’Leary, managing partner at FitzGerald Legal & Advisory, chair of the Legal Aid Board and a lifelong advocate for consumer protection; Ms Sue O’Neill, chair of the Small Firms Association and board member of Microfinance Ireland and; Mr. Martin Stapleton, chair of the national farm business committee of the Irish Farmer’s Association. Mr. Stapleton is a dairy farmer from Limerick. The five senior bank representatives on the board represent a range of different skill sets. I asked for that and I got it. This includes a chief executive officer, a chief risk officer, a chief operations officer with IT and artificial intelligence expertise, a head of human resources and a head of consumer banking.

I refer to what we intend to do and why. From the outset, we have been conscious that it was critical to ask for and, listen to, the views of societal stakeholders, including banking staff, and bank customers on current banking culture and how the Irish Banking Culture Board can work to change this for the better. During our establishment phase, we conducted the extensive public and stakeholder consultation I have referred to. We received 747 submissions from the public via an online survey, and we commissioned a survey of more than 25,000 bank staff. We conducted 38 face-to-face interviews with individuals and organisations from right across society, including consumer organisations, small and large business, farmers, charities, youth groups, students, trade unions, rural interests, older customer groups, media, politicians and regulators. Some of committee members contributed to these proceedings and we thank them for that.

Our objective in determining what the board should first focus on was to reflect the concerns and suggestions we heard from the public, stakeholders and bank staff. We promised to address these concerns and that is what we are doing. Our work programme up to April 2020 comprises nine key themes, each of which has been identified from the findings of our public consultation. These themes are customers in a vulnerable position; services to bereaved customers; respectful and transparent communications; financial education and awareness; small medium enterprises, SMEs, including farmers; support for community and society; speaking up; embedding ethics and behaviour and; staff resilience and pressures.

During our work, we will partner as appropriate with the expertise in our member banks, with other relevant industry bodies such as the Banking and Payments Federation Ireland, BPFI, and the Institute of Bankers, as well as with other relevant bodies, to achieve our aims as efficiently and transparently as possible. However, we will always be protective of our independence and our overall goal of being a trusted, independent voice and a transformative influence on banking culture in Ireland. We will call out poor conduct when we find it and we will acknowledge good things when we can identify them. The chief executives and boards of the five founding-member banks of the Irish Banking Culture Board have clearly and repeatedly committed to me their full support for the board and its activities. The leadership of the banks recognises that this board is independent. We do not speak for the banks. We speak for the stakeholders of the industry. We see ourselves as a critical friend to the industry in many ways. We will promote an environment in which ethical behaviour lies at the heart of banking, values are restored, and a reputation for competence is rediscovered. We will hold the banks to account on their progress.

I accept the scepticism that exists around this endeavour. I am also a sceptic. It would be difficult to spend 42 years in the practice of the law without developing a healthy degree of scepticism. I have encountered a lot of bad places and bad people in my time as a judge and barrister in Ireland and as a judge at the European Court of Human Rights in Strasbourg. However, I have never lost my faith in human nature.

I am convinced that the vast majority of Irish men and women who work in the banking industry are decent, honest, honourable people who wish to serve their customers and their country well, to be an example to their families and friends and to feel proud of the work they do as guardians of a great national interest. Our task is to help and empower them to regain public trust in the banks by pursuing the highest ethical standards and levels of competence and by ensuring the fair and humane treatment of customers.

This is just the beginning. A long road lies ahead but I believe that we have made a good start. Identifying and changing culture is difficult for us and society. We must dare to believe that we can do this. Irish society and culture have changed dramatically over the years and bank culture must also change. People today demand better of everything, including their banks. We see ourselves as being part of this change in the banks, change that is not before time. Embedding ethical behaviour in banking culture is an ideal whose day has come in Ireland and around the globe. We dare to believe that we can do this. We can and we will.

Finally, should we be invited to return to this committee next year to update it on our activities, we would be delighted to do so to answer members' questions regarding our progress. I again thank the committee for the opportunity to present the IBCB to the committee this afternoon. We are very happy to take its questions.

I welcome Mr. Justice Hedigan and Ms Kelly and thank him for his opening statement. How many staff members does the IBCB have?

Mr. Justice John Hedigan

All of our staff are here.

It is great to see them here.

Mr. Justice John Hedigan

I have warned them. There has been no booing or clapping. I am sure they will behave themselves. The IBCB is a small group and I expect it to remain a small organisation. One of the ways I want us to proceed is to be able to use the resources of the banking members of our board to press forward with our various working groups. We are already doing that. We have three working groups and another coming on Thursday.

So the IBCB has five staff. Ms Kelly is full-time acting chief executive officer, CEO, while Mr. Justice Hedigan's role as chairperson is a part-time non-executive one. How many hours per week does that typically involve for him?

Mr. Justice John Hedigan

I was told at the outset that I could probably expect to be used about three or four days a month. It has changed radically from that. It is almost what most people would call a full-time job for me. As this board becomes established and settles in, this may tail off a bit. When I was interviewed by the selection board for this, I was not asked to do so but I said that I would not take on any other work until this board was fully established and this is exactly what I have done.

I am not sure if Mr. Justice Hedigan is in a position to say what the organisation's budget is. I assume it is just for his office and staff.

Mr. Justice John Hedigan

I will ask Ms Kelly to answer that question. She is more au fait with all the budgetary details than I would be.

Ms Marion Kelly

At present, the staff are primarily secondees from the different banks. We have one permanent employee who joined us over three weeks ago and we are moving to recruit the rest of the staff in the next month. The Deputy will appreciate that we needed to get the company incorporated etc., before we could hire full-time employees but that is the intention.

We are fully funded by the five founding member banks. The contribution is in proportion to their relative size. Our establishment has been fully funded by all five banks. The establishment costs were of the order of €1.6 million. That was primarily to fund the consultation processes we entered into and to operate an office. We are fine-tuning the budget for the period going forward because that will be driven by the activities in our work programme.

Ms Kelly said that the IBCB is in the process of recruiting permanent staff.

Will they be additional to existing staff or replace the secondees?

Ms Marion Kelly

The intention of the IBCB is that we will continue to use secondees on an ad hoc basis for certain expertise, but we wish to have a permanent secretariat. The intention is to hire full-time staff, including the chief executive. As Deputy Michael McGrath mentioned, I am the acting chief executive on secondment from Bank of Ireland. We will hold an open competition and place an advertisement in the newspapers in the coming month to six weeks to recruit a permanent chief executive.

Okay. Will the chairman, Mr. Justice Hedigan, tell us why the recruitment of a permanent chief executive has not yet commenced, given that the IBCB has been in place for some time?

Mr. Justice John Hedigan

Before the time I came on board, I spoke to Ms Kelly during the selection process and found her to be an inspirational character. Her assistance in setting up the board has been outstanding. She is a fairly senior banker and her knowledge of the banking industry has been of immense assistance to me. Quite recently I made representations to try to have her kept on until we replaced her with a permanent chief executive. I am very glad that I have been assured that will be done. I cannot think of anybody who could have helped so much in setting up the board. Had I brought in somebody new, he or she would have needed a long time to settle in. When we have a chance to explain the working programme we have established which was designed by Ms Kelly, the Deputy will see what I am talking about. Its intensity and depth more than demonstrate what I am saying.

My intention was not in any way to question the capacity of the acting chief executive.

Mr. Justice John Hedigan

I did not assume that.

One is drawn to the word "acting", but I take the point made by Mr. Justice Hedigan. How often does the board meet?

Mr. Justice John Hedigan

We had our third formal board meeting last Thursday. We had a board meeting very shortly after it was launched as a get to know you exercise and have a training session. We had people from the Institute of Bankers come to deal with issues such as competition law, the problems that arose when one got a group of bankers together and current issues in banking in order that our non-banking staff, including me, could be brought up to speed on issues with which bankers were familiar.

Is it proposed to have quarterly, rather than monthly, board meetings?

Mr. Justice John Hedigan

We are looking at having six meetings a year initially.

Are the members of the board serving on a pro bono or expenses basis or otherwise?

Mr. Justice John Hedigan

The bankers are not accepting any fee, while the board members, with the exception of the representative of the trade union, are paid an annual fee, which is in accordance with market norms.

Is Mr. Justice Hedigan in a position to say what it is?

Ms Marion Kelly

The non-bank members of the board, as Mr. Justice Hedigan mentioned, with the exception of the representative of the financial services union, are paid a fee of €30,000.

Mr. Justice John Hedigan

I am told that is the market norm.

I will have to take Mr. Justice Hedigan's word for it.

Mr. Justice John Hedigan

I have to take it also.

it was said three working groups or sub-committees had been established. What areas do they cover?

Mr. Justice John Hedigan

I ask Ms Kelly to take that question.

Ms Marion Kelly

There are nine themes in our work programme. As mentioned, three work streams have been established to date and two more will be established during the course of the next few weeks. Of the three that have been established to date, the first is in respect of speaking up and how comfortable bank staff are in challenging authority and whistleblowing. The second deals with services for bereaved customers. We hope to announce something in that space in the coming week. The third and final work stream is financial awareness and education.

Mr. Justice John Hedigan

A meeting on the fourth stream - vulnerable customers - will take place on Thursday afternoon. I sit in at the inaugural meeting of each of the working groups. I have been greatly encouraged by the entire attitude taken, which has been highly energetic, enthusiastic and idealistic. I have great hopes.

Is it the intention that the IBCB will be a permanent organisation?

Mr. Justice John Hedigan

I have been appointed for a three year term, as have all of the other members of the board. I see it as a long-term project.

As I said, I see this as a very long-term project and my understanding from the banks is that they look at in that way too.

In effect, it is permanent. In terms of the make-up of the board, there are people from a banking background and a non-banking background. Mr. Justice Hedigan has listed the seven stakeholders from a non-banking background, as such, and then there are five bank representatives. That is 12 members.

Mr. Justice John Hedigan

There is the chief executive officer and me.

Yes, the CEO and the chair. That is 14 in total. Is it the case that all 14 would have votes if it ever came to the crunch? Mr. Justice Hedigan would probably see it as failure if that ever did happen.

Mr. Justice John Hedigan

Yes, in fact, we have gone a bit further than that. We have divided the directors into A directors and B directors. The A directors are the non-banking people and the B directors are the banking people. The B directors can never out-vote the A directors. That cannot happen with the structure that we have set up.

Okay. Is that in a memorandum?

Mr. Justice John Hedigan

That is in the articles of association.

In Mr. Justice Hedigan's view, what does success for the culture board look like? How does he measure success?

Mr. Justice John Hedigan

That is a very interesting question and I have thought an awful lot about it. Culture and ethical conduct are matters that are difficult to identify, difficult to strive for and difficult to achieve, maintain and monitor. Doing the best that we can, it seems to me that if we can achieve openness, transparency and fair outcomes for customers we will be achieving success. I honestly do not know at this stage to what extent we have to go in that direction in order to achieve success. We are starting off a completely new project. As I said, nothing like this has ever been established in Ireland before. We are feeling our way. We are going to learn to walk before we run but that does not mean that we are not going to be ambitious. Our work programme might show that. If anything, it might be called over-ambitious.

I think it is fair to say the tracker mortgage scandal was the catalyst for the formation of the culture board and that, as a result of that, the necessity for a change of culture is accepted within the sector. It begs the question as to what needs to change, arising from the handling of the tracker mortgage scandal. From Mr. Justice Hedigan's perspective, what was wrong in terms of what the banks did and how they handled it and what should have been done differently?

Mr. Justice John Hedigan

It should not have happened. It was a truly terrible situation; that after all of the trouble we had had back in the early days with the collapsing banks and with efforts being made by everyone to try to regain some trust in the banking sector, that something like this should suddenly arrive. The Deputy is quite correct. I think it was the catalyst. There was talk of setting up a banking culture board because the UK had set one up in 2015 or, interestingly enough, a banking standards board. We see ourselves as somewhat different. We do not focus so much on the staff, which is what the UK does, we are focusing on the customer, which I think is a better approach.

There was pressure on the banks to do something in terms of setting up a culture board and I think the tracker mortgage scandal situation sparked that and was the catalyst for it. In terms of recent events in that regard, when I became aware of the letters that had been sent to the committee by the Financial Services and Pensions Ombudsman concerning the invocation of time limits, I immediately emailed all the five banking members of our board in order to find out the facts of the situation. I asked them which of the banks were invoking those time limits. I asked those who were to please contact me to discuss what I described in the email as "this troubling issue". Over the following days - it was less than a week - I was very pleased to see that all of the banks made public statements saying that they would no longer invoke the time limits. Subsequently, Ms Kelly and I met the Financial Services and Pensions Ombudsman to see what was going on, from his perspective. He seemed to be satisfied with the way things were going. I do not want to speak for him; he can speak for himself. We got the impression that he seemed to be satisfied with the way things were going. I hope that we played some part, perhaps in backing up the committee's interaction with the Financial Services and Pensions Ombudsman.

I acknowledge that. The Central Bank launched its investigation into the tracker mortgage scandal in late 2015, and since then there has been much foot-dragging by the institutions concerned. What does that tell Mr. Justice Hedigan? Even at the tail end of the process, the right of consumers to bring cases to the independent ombudsman and have a hearing with no predetermined outcome was being rigorously contested by some institutions. Does that underline to Mr. Justice Hedigan the scale of the job he has to do? It is a cultural issue. The whole raison d'être for the IBCB was the tracker scandal, and yet its handling of it, right up to the present day, has not been satisfactory.

Mr. Justice John Hedigan

I was surprised and disappointed to hear that this situation still existed at this stage, though the Deputy may not have been. I cannot speak for the Financial Services and Pensions Ombudsman, but I got the impression that there might be a disconnect between the executive and legal levels in the banks. To that end, at our most recent board meeting we resolved to set up a small group consisting of Mr. Philip O'Leary, a senior solicitor and the chairman of the Legal Aid Board, Professor Blanaid Clarke, and myself. We will meet people from the legal services on an informal basis to find out what is happening, what the problem is, and what we can do to sort it out. I understand the difficulties in-house lawyers have from my own experience both in practice and as a judge. They are told to defend their clients, and then they are told not to, so it is a difficult situation for them. This situation is not without the possibility of a satisfactory resolution. I want this small group to get together in an informal way, try to hammer things out, and figure how to proceed in a way that would prevent executive people feeling like they are at war with the legal staff.

I have two further points to make on areas I suggest Mr. Justice Hedigan and Ms Kelly look into. One is the question of how banks deal with the breakdown of relationships. We as politicians often encounter couples, whether married or unmarried, separating, and they might have a joint mortgage, for example, which can cause major problems. It is a complex and difficult area in which communication is a big issue. Problems also arise when one person wishes to remain in the home. Though that person is prepared to pay the mortgage and is trying to get the other person removed from it, the bank will say that it is an entirely new mortgage and that the person staying has to qualify in his or her own right. There are many issues around that. I have made this point to the Banking and Payments Federation of Ireland, BPFI, as well. Banks should have an agreed protocol or mechanism for dealing with relationship breakdowns, particularly when it comes to joint mortgages, because it often involves a family home and children. It can get very difficult. It would be positive if the IBCB could play a role there.

One of the nine areas the witnesses are focusing on is customers in a vulnerable position. The Mental Health Commission made recommendations in 2011 about providing specific training to staff within the financial services on dealing with vulnerable customers. Based on the work Deputy Browne has done, those recommendations do not appear to have been fully followed through on. We are often contacted by people in vulnerable positions, and the nature of the communication from the bank, even down to the way they are spoken to on the phone, can leave much to be desired. I ask the witnesses to look into that as well.

I wish both the witnesses and their staff well, as they have a difficult task ahead of them. There is much scepticism about this issue, which they have acknowledged. However, it is a worthwhile effort, and my party and I support their efforts and hope they succeed.

Mr. Justice John Hedigan

I thank the Deputy.

I call Deputy Pearse Doherty.

I welcome the witnesses and their opening statement. Like Mr. Justice Hedigan, I, too, am a sceptic on this matter. That being said, anything that might improve the culture within banks is to be welcomed. However, I am very sceptical of this because it is about the banks and the industry trying to get out first.

It came about in light of the major tracker scandal, and when it eventually came to a head close to the Christmas period, this was one of the solutions put forward. It allows for stopping more invasive action by the Oireachtas in respect of dealing with the culture within banks. If one is in industry, it is always better to get out ahead so that one can control the game. That is where some of my scepticism comes from. Despite the bank having a number of very senior representatives from the industry, I note the board also has a number of capable and well-intended members. I am sure the staff it employs are similar. I ask the witnesses to outline initially for the committee their view of the current culture within banking in Ireland.

Mr. Justice John Hedigan

When we launched on 15 April, one of the comments I made was that very bad things have happened. We have been in very dark places. There were times when we thought we would not make it as a country and an economy, but we managed to come through. I said at the time, and I still believe, that in respect of all the trouble we had, which we should not have had, right up to the present time with tracker mortgage scandals, I would like to think that that is yesterday's story and that today and tomorrow's story is what we are doing.

I share the Deputy's scepticism. He might be more sceptical than me, although from what he said not much more. However, it came into existence, and I am sufficiently cynical to agree with the rationale the Deputy put forward for the reason it came into existence, but here we are and we have a pretty powerful group of people. Some of the heaviest hitters on consumer advocacy, particularly regarding banks, are on that board. We would be very difficult to ignore at this stage. The banks have had to create something, and we are it. I have great hope that we will be able to effect considerable change. Am I happy with the way things are now? I can only say that all of the bank people I have met so far, from the highest to the lowest, seem to be very committed to the project in which we are involved.

In the course of my preparation for the selection process, I read of events around the world. I studied very carefully what the UK Banking Standards Board was doing, and it was impressive. I looked at what the Dutch were doing. Apparently, they are the leaders in this area of cultural change in the banking world. I looked at what was happening in Hong Kong. I read the Australia Royal Commission report, which is scarifying, about how the banks were operating in that country. I read what the people in New Zealand are doing, and I have read the reports from the New York Federal Reserve Bank's annual conference concerning matters of this sort. That is why I said that effecting cultural change in banks is an ideal whose day has come, both here in Ireland and around the globe, and it does appear to be so.

So far, I have reason to be cautiously optimistic. I am assured by the chief executives and the chairmen of the banks that they fully support this endeavour. I have been told that, in effect, anything that we reasonably need in terms of financial backing we will get to do this.

All the staff that I have met seemed to be very enthusiastic. I refer to the workshops we have had, especially in respect of bereaved customers. There are 50,000 bereaved customers across the banking industry every year and a great deal of trouble occurs in that respect. We want to have one standard level of care for all of those people so that, for instance, they do not have to keep ringing different people and explaining again that their husband or wife has just died, or much worse. When we met, three people from our board volunteered to be the nucleus of that working group. Each of the banks sent their people along who were expert in that area. It was a truly uplifting discussion. The sheer vigour and enthusiasm of everyone and the knowledge of the people who were there about the problems that arise in cases of bereavement was very impressive. They have gone away to work on programmes to ensure that there will be a common standard of care. We will be making an announcement on that very soon.

I have good reason to be optimistic, but I have occasionally referred to the Russian proverb Ronald Reagan quoted to Mikhail Gorbachev during the strategic arms limitation talks: "Trust but verify."

I take Mr. Hedigan's point. He spoke about the banking crash, banking culture, the tracker mortgage scandal and what he referred to as yesterday's story. Given that the board's raison d'être is to effect culture change, we need to understand where the board believes the culture is within the bank at this point. One could be forgiven for suggesting, as Mr. Justice Hedigan did, that the issues are yesterday's story and that the culture is fine. CEOs have appeared before the committee and told us their companies are all people centred, customer focused and so on. If that is the case, what is the point of having a culture board? Is the culture in the banks toxic, as some people have described it, or is it at a level less than that? Where does Mr. Justice Hedigan consider it to be? What is the rationale for the existence of the body if he believes there is not a serious problem with culture within banks?

Mr. Justice John Hedigan

I did not say that. There is a serious problem with culture but I meant that we are looking to the future to try to do something. Nobody understands better than the seven non-banking members of the board, to whom the Deputy referred, the disastrous situation that has occurred. When I was a judge sitting in the courts, particularly when I was a member of the High Court, people appeared before me in tears. I fully acknowledge that Deputies are closer to the coalface than we judges are, given that Members hear about such cases all the time from their constituents, but I have had some distressing experiences in court with poor devils in terrible situations and I understand all the trouble there was. Nevertheless, I like to think of myself as a pragmatic idealist, an optimist, and someone who has not lost his faith in human nature. I believe we can turn the matter around.

As for the current banking culture, I can only say the bankers I have met at the top level, that is, the chief executive officers and chairpersons, have assured me they are fully committed to it. I can believe that because even if there was not a moral element, the Shearman & Sterling report on banking conduct, which was published in March 2019, stated that between 2009 and 2017, financial institutions globally paid €345 billion in fines and penalties. That is no way to do business. It is just total incompetence and has to be addressed. If one wishes to take a hard-nosed view, bankers have good financial reason to change, irrespective of any moral dimension. I believe they do have such a dimension, however, although I will not name names. The chief executive officers I have met have assured me culture is at the centre of their thinking because it is the only way to regain public trust, which they have to do.

How does that rest with the facts? Two of the senior directors in the banks to whom Mr. Justice Hedigan referred, and which fund his organisation, used obscure arguments to try to frustrate their customers' attempts to make a complaint to the Financial Services and Pensions Ombudsman. The customers were entitled to make the complaints because of legislation, which I brought in and which was passed virtually unanimously by the House, that allowed them to make such complaints, which the banks had told us they would facilitate. Do CEOs tell the IBCB, on the one hand, that they are pro-culture and in favour of the board's work while, on the other hand, they fight the banks' customers? How can the IBCB square that circle?

Mr. Justice John Hedigan

With great difficulty but we have to move on. I acknowledge all the difficulties there have been - there would not be a board if that was not the case - but we cannot stand around wringing our hands in despair. Somebody has to do something, and we are the "somebody" and the board is the "something". I ask myself, "If not us, who?" and "If not now, when?" Nevertheless, I acknowledge everything the Deputy stated.

This is the basis of the Deputy's well-justified scepticism and it also challenges me and the board.

Ms Marion Kelly

The Deputy asked about the current state of culture within the banks. We conducted two detailed consultation processes in advance of establishment to get the baseline in that regard. We carried out a detailed survey of 25,000 bank staff, which is the full staffing across the five founding member banks, asking them about the current internal culture of their own organisations. We have a whole series of findings from that which we published in a report. That forms the basis of what we are going to do. Likewise, we carried out extensive public and stakeholder consultation and asked people their current view of the culture within Irish banking, what they thought needed to change and what they would like our organisation to focus on. Again, the findings from that consultation form the basis of our work programme. That is what we are hoping to address pragmatically in the coming months.

I want to touch on something or perhaps it is a bit of advice. I note what was said about the board's intervention regarding banks fighting the ombudsman on allowing those cases to be heard. KBC was fighting 27 cases and Bank of Ireland was fighting 50. I assume that when the board contacted the CEOs of the banks, they said upfront that theirs were the banks involved. The board contacted each of the CEOs or each of the banks. Did they indicate to the board immediately that theirs were two of the banks involved?

Mr. Justice John Hedigan

That is not actually what happened. I circulated an email to the five members of the board asking them to let me know whether their banks were invoking these time limits and, if they were, to contact me because I wanted to discuss this troubling issue. In the following week, all five banks announced they were not. In fact, I discovered subsequently who was and who was not involved. It was only at that stage that it was clear by a process of elimination.

Did the banks let the board know that they were the two banks involved? I refer to KBC and Bank of Ireland. Did they inform Mr. Justice Hedigan as chairman after his queries to the five board members, who are the representatives of those banks?

Mr. Justice John Hedigan

I am just trying to remember. We had an exchange of emails at the time.

Ms Marion Kelly

Each of the banks via the members they have on our board came back to our chair to explain their current positions and what they intended to do going forward.

Mr. Justice John Hedigan

I emphasise that we are not claiming all the credit for this. I am well aware that there was a lot of pressure coming from here.

I know and I am not suggesting that. The intervention is helpful from Mr. Justice Hedigan in that regard. Where I differ from him, however, is in the statement that he issued. In his opening statement, Mr. Justice Hedigan said the financial institutions and banks needed to regain trust. He referred to the scepticism because his board is funded by the five main banks. It is an industry initiative. Therefore, the board must also gain trust with the public. Putting out a statement that the culture board welcomed the bank decision to waive the mortgage complaints timeline was wrong. There was no ability for them to do that. They were fighting the ombudsman and had no legal basis to do that. It was never actually determined in law whether they were right or wrong. The legislation is very clear and provides that it is three years from when one becomes aware not three years from when one had suspicions of the event. It is three years from when one became aware. The KBC and Bank of Ireland idea that a person ringing up ten years ago to say he or she thought he or she might not be on the right tracker rate had awareness is not correct. That was not awareness, it was a suspicion. However, the board came down on the side of the banks on this. It came down on the core argument to suggest there was a problem. I would welcome Mr. Justice Hedigan's insight as a judge in that regard because if there is a problem with the legislation, we need to address it. The board did not call out the culture of the banks when they were trying to argue a point of law which had not been adjudicated in court and on which the financial services ombudsman had a different view. As the author of the legislation, I also have a different view. However, the board dealing with the culture of the banks did not call that out.

That was a serious first mistake because it showed the culture of the banks in the here and now.

Mr. Justice John Hedigan

If it was a mistake, so be it. Our aim is to learn from our mistakes. As I said, we want to learn to walk before we run, but I am not sure I agree with the Deputy's analysis of the situation and I do not think the Ombudsman does either. The situation that was made quite clear to us was that unless the Ombudsman was told that his jurisdiction was not being challenged under section 51 - the time limitation - he was obliged to investigate whether there was a delay involved. The complaint he articulated to Deputy Michael McGrath was that it took him as long to do that as it would take to conduct the investigation. I do not know if there is a misunderstanding at work, but I do not agree that we came down on the side of the banks. The banks made no representations to me. As soon as I heard about this affair - I was deeply troubled when I did - I emailed all those who were invoking the time limits and asked them to come and talk to me about this troubling issue and said we would see where we would go from there. The whole issue then evaporated because they made their statements indicating that they would no longer do so and I am happy enough with that. Whoever was responsible for it, whether the board, the committee or members of the committee alone, I do not mind as long as what happened happened. It is a good step forward in that regard.

I hear what Mr. Justice Hedigan is saying. I do not want to labour the point that anybody who reads his statement could infer that the banks did a good thing by waiving that right, but the banks were completely in the wrong. They were in the wrong as opposed to being consumer-focused and customer-centred. I will not labour the point, but, if one wants to build trust where there is a clear issue of inappropriate culture at very senior levels of the bank, one must be willing to call it out, regardless of who is sitting in the courts or supplying funding. One must be willing to call it out in a way that will gain the trust of the public.

Mr. Justice John Hedigan

I regard what Deputy Pearse Doherty has said as good advice. If that is the way he perceived it, others also perceived it in that way, although that was certainly not what was intended. As far as we are concerned, the board does not come down on anybody's side, other than that of the customer. We have things to learn as we go along. The Deputy is right that we have to earn the trust of the public and that we must be careful about what we say. I assure him that there is no possibility, as it were, of our coming down on the bank's side on any issue. We are on the side of the customer. That is also what we demand of the banks.

The issue of tracker mortgages is not finished. There are 1,200 cases before the Ombudsman and others are and will be before the courts. Those cases, although yet to be adjudicated on, involve people who, rightly or wrongly, feel let down by the system and the banks.

The customers of some banks have challenged them legally. The banks are settling out of court with a confidentiality clause that means that there will be no knock-on effect on the other cohort of customers who fall within the same category. The Financial Services and Pensions Ombudsman has no insight into any of this. It has no information. One person may reach a settlement on the steps of the High Court, including a confidentiality clause, and the bank probably does not acknowledge that it has arrived at a financial settlement. Mr. Justice Hedigan and I both know that means that the bank is, at least, reducing its risk, or it thinks it may lose in the courts. Another person may go to the Financial Services and Pensions Ombudsman the following day with a mirror image of that case and the Ombudsman has no idea what is happening. The banks are not offering the same settlement to the other cohort of customers. Does Mr. Justice Hedigan have any concern about that type of culture which is as much about the bank reducing its liability as it is about what the banks tell us they are about and doing the right thing on behalf of their customers?

Mr. Justice John Hedigan

It is an interesting question about an issue I have not come across before, except in the broad sense of how controversial confidentiality agreements have become in other areas. I find it a troubling issue and do not like the sound of it.

It is something I would like to look into further and is the sort of thing I hope to be able to discuss with this small ginger group that I am talking about. This will get together initially to have a good conversation about what are the problems that lawyers in the banking sector deal with. That is certainly one of the topics I will raise with them. I have not come across that being mentioned before in the context of banking and the tracker mortgage situation.

I have one final question but to follow on to this issue, is the board willing to accept information and documentation that would show this is happening or does the board have its own agenda? Is this more an issue for the Central Bank? I am conscious that the board does not want to be flooded with what other agencies of the State can deal with. On the broader issue, there have been settlements on the prevailing rate and on the mis-selling of payment protection insurance. All of the other thousands of customers do not know this because those settlements are confidential,

Mr. Justice John Hedigan

I do not see any problem with that. We are not a complaints or disciplinary body or a regulator. We are going to be small because I believe that is the best way to be effective. When we are sent details from a particular person of a complaint against the banks, we have a protocol worked out and we have a liaison name in the case of each bank. We pass that complaint on to that particular person and we ask the member of the board from the bank in question to come back to us at some stage to let us know what has actually happened here. We then notify the person who has complained that this is what we have done. Is there any other aspect of this that we need to know about?

Ms Marion Kelly

Clearly, we are not a regulator, but one of our clear raisons d'être is fairness and transparency. If there is an issue of a lack of fairness and transparency, that is clearly something we should and could look at. As the chairman has mentioned, we are setting up a working group with the legal departments from the different banks. One of the things we want to explore in that process is that while the letter of the law may say one thing, what is the right thing to do by customers. This might be a good example of something that we could look at in that context.

I will finally ask a question on the tracker mortgage issue. Some of these cases will be dealt with on a legal basis and it is to be hoped that others will get satisfactory resolutions at the level of the ombudsman. In 40,000 cases, the banks have had to put their hands up, state they had wrongly taken money from their customers and to pay that money back and compensate them. Many of the cases before the ombudsman relate to the level of compensation or the rates onto which the customers were put back. On the culture of the banks, I probably speak with personal experience as one of the first people to challenge one of the banks on the tracker mortgages issue. The reason for this was that an extended family member of mine was one of the first victims who came to the ombudsman on this issue. They are still with the ombudsman after all of this time, even after the bank has acknowledged the wrongdoing but it has not dealt with it properly. There are many people like that. I understand, as Mr. Justice Hedigan has mentioned, that as a judge, one will hear the cases. When one sees this material at first hand, however, when one sees what opportunities people missed out on, when one hears what happened and one lives through or shares part of that, one can then see the damage the banks have done. After all of their apologies, we still have a large group of people who have taken cases the ombudsman. We have 1,200 people who have taken cases to the ombudsman. Before this tracker mortgage investigation started, there were only 18. If some of these cases are resolved by the ombudsman, thousands more will go in because not everybody who is unhappy is taking a legal case. What can the board do to satisfy itself that the culture that currently exists within the banks is the appropriate one? Mr. Padraic Kissane, who has appeared before this committee many times, has talked about banks that have put customers back on the prevailing rate. Indeed, I imagine he is representing some of the those who are taking cases to the ombudsman. These are people with serious financial experience, who understand all of the detail and sit on the Irish Banking Culture Board.

Is there something the board can do to satisfy itself that the cases it is fighting through the Financial Services and Pensions Ombudsman are appropriate to the culture Mr. Justice Hedigan believes the bank should be adopting?

Mr. Justice John Hedigan

After the circular email about the time limits we met the Financial Services and Pensions Ombudsman who certainly gave me the impression that he felt that once he could get the time issue out of the way, he could get through a lot of cases. He indicated that they had speeded up the process for dealing with cases. It is disturbing, therefore, to hear about the Deputy's relative's experience. I do not understand it, but he can rest assured that Padraig Kissane's interest in the tracker mortgage scandal has not been diminished one whit because of his membership of our board. They are all heavy hitters and I listen to every one of them, but when we talk about tracker mortgages, his voice is the one one tends to listen to. We are certainly hoping to bring our influence to bear as favourably as we can to ensure fair customer outcomes in this matter. Several of the CEOs involved in the tracker mortgage scandal have made clear to me that they want to get this thing off their desks. They want to have it sorted out and the only way to do that is to provide fair outcomes for people in order that they can move on. We are pushing an open door. I would certainly use the skills of somebody like Padraig Kissane who understands more about it than most people to try to resolve it.

Let me reframe the question. I would never question whether Padraig Kissane, as a member of the board, was in any way a less passionate advocate for consumers. I know that Mr. Justice Hedigan was not suggesting that, but it is not a question of how speedily the Financial Services and Pensions Ombudsman deals with complaints. The issue is that the banks have not resolved these issues and that their customers believe they must go to the Financial Services and Pensions Ombudsman, something that will take time and something the banks will fight, although that may be the wrong word to use. They will provide strenuous arguments against their customers as to why they should not be put on a certain rate or offered additional compensation or deemed to be affected by the tracker mortgage scandal. The banks will fight their customers. Is there a role for the board to go back to the banks to ask whether, looked at from the point of view of the culture it expects of the banks, all of these cases should be fought through the Financial Services and Pensions Ombudsman, as opposed to being dealt with as if a bank was customer and consumer-focused?

Mr. Justice John Hedigan

This issue falls under the various working groups we are running. We do not have a group that is dealing specifically with tracker mortgages, but I hear what the Deputy is saying and there may well be a way by which we might perhaps bring more pressure to bear in that regard. That is what the banks are there for. That is what I want them there for, in order that the non-banking people can bring pressure to bear on the banks to come up with solutions and explain them to us and in order that our board members can say it will or will not work or suggest a better way. We may be able to focus more on this issue. It is part of the reason we were very keen to come here because I understand the parliamentarians in our democratic system are probably closer to the people than in any other democracy of which I am aware. Therefore, at the coalface they hear a lot more than we do. I am grateful for the Deputy's comments in that regard.

Ms Marion Kelly

Each of the five banks has committed to coming to the board in the coming months to talk about lessons learned from the tracker investigation. There will be an opportunity to probe them on their culture. We are conscious of the enforcement action taken by the Central Bank.

I thank both delegates and wish them well.

It is very useful for us to examine the Irish Banking Culture Board and know the individuals on it. We do not underestimate the challenge in trying to change culture in any organisation but particularly the banks which have been coming before the committee for several years. It reminds me of trying to shovel the snow while it is still snowing.

There are many outstanding things that need to be dealt with. I am aware that the board does not have a regulatory role as such, as does the Central Bank, but I believe that the easiest and fastest way to change the culture is for honesty and admissions around what has gone wrong and where it went wrong. As for the behaviours we are trying to change now and the behaviours that make up that culture, we must remember that in other countries, people are serving time in jail for those exact same behaviours. This is why the witnesses will forgive us for having some degree of cynicism around all of this. Mr. Justice Hedigan spoke of the board trying to achieve and promote an environment in which ethical behaviour lies at the heart of banking. This is what we all want to achieve from here.

I have a couple of questions to frame that. The committee received evidence on 28 June that contained an admission by the Institute of Chartered Accountants in England and Wales that its advice to British and Irish banks on accounting for non-performing loans did not comply with company law. We approached the Irish banks about this and they advised members that they were not concerned about it and there was nothing to see. This is astounding given that as a result of this flawed advice, Irish banks were forced to sell mortgages and home loans to vulture funds at substantial discounts. If the banks are taking this attitude, is it reasonable to assume that the culture of the banks remains as "let us see what we can get away with regardless of the consequences for the consumer"?

Mr. Justice John Hedigan

I certainly hope not. The issue of the sale of non-performing loans gives rise to a lot of very complicated and difficult problems. On the one hand the European Central Bank requires the Irish banks to bring the percentage of their non-performing loans down to below 5%. The banks are having to do a lot of sales in this way. I am aware of the fact that the rights and privileges under a contract will move to the new purchaser, the so-called "vulture funds", but I am also aware of the fact that it is much harder to try to organise a restructuring of a mortgage with a vulture fund. Such funds do not seem to be quite so able to do that as are the banks. On the other hand, if a person just wants to settle a loan, the vulture funds are much easier to deal with. The inability to restructure has recently come into question and I have been told that in fact the funds are in a position to do that. This leaves me in a position where I am not sure what the situation is.

To be honest with the Senator, it is news to me about the advice the banks got from the Institute of Chartered Accountants in England and Wales. I had not heard that before and do not know anything about that. It is very interesting to hear, but I had not heard it before. As far as the non-performing loans are concerned, it is a worry, but on the other hand I can see the problem that is there. The so-called "securitisation" process, by which banks operate the sale of sections of their portfolios, has long been regarded as a way of controlling their exposure to risk. That gives rise to problems where, after the loan has been sold, a person might want to restructure his or her loan but finds that it is much more difficult to do.

Does the board have much liaison with the vulture funds?

Ms Marion Kelly

No we do not. We do not have any role there. That is directly between the banks, as a commercial operation or if the regulator is looking at it. This topic came up quite frequently during the public and stakeholder consultation engagement. Concerns were expressed about how people understood what was happening, for example, if their own loan was being sold as part of a sale of a portfolio of loans. One of the working groups we are establishing is on respectful and transparent communications. It is one of the issues we want to make sure is clearer for people and that if these types of activities are happening, that the process is explained clearly to individuals in order that they understand exactly what is happening, how it is happening and who they need to talk to - if they need to do so - as to what rights they still have on foot of the transfer.

As a lot of the feedback we received was that this had not been communicated appropriately, that will be a key part of our working programme going forward.

I appreciate that and I definitely think that a gap exists.

The ECB has instructed that the non-performing loans, NPLs, be reduced but not how it should be done. This committee always has tried to encourage the position that NPLs would not just be sold off but that banks would try to work with the customers to work things out. The witnesses have noted that members know a lot about this matter. The same applies to the witnesses in respect of their role and in terms of the judicial system. I have sat in on these court cases and they have first-hand experience of what it is like to deal with some of these banks and how the banks would choose to sell loans at a hugely discounted rates rather than to give it to the original customer or give him or her a discount. I am sure the witnesses will be familiar with all of those behaviours.

Mr. Justice John Hedigan

Yes, I understand. The Senator has made a very good point. When I first came across such instances, I could understand the degree of bitterness that people felt at not being given the same discount. I do not know the answer. Perhaps it is very difficult to do that on an individual basis as opposed to putting together a whole portfolio.

Certainly, one thing we are focusing on in every issue we come to is fair outcomes for customers, that is, that they be treated fairly and respectfully. There always will be repossessions. That is the way it is going to work. I have had people in front of me for whom I would have loved to do something but I could not. The one thing that I could do was to adjourn the case for six or eight months but that would do them no good and would only put off the evil day. Extremely serious moral dilemmas like that face everyone involved in these matters and I am very sensitive to that issue. The question as to why one does not get the discount that vulture funds get is a very good one.

Another question is on why they are not obliged to pay tax on that, which is a conversation for another day.

I know that the witnesses cannot comment on specific cases that are before the courts but my next query is relevant to Mr. Justice Hedigan's previous role. We have heard evidence from one group, which gave very strong evidence before this committee and subsequently supplied affidavits that were lodged with the High Court, which successfully secured a judgment when the judge outlined the following in his ruling:

As an aside, I would have thought that a competent mediator could bring sense to bear and mediate a solution to the dispute between the parties. If the parties are committed to doing business with integrity and in accordance with the regulatory requirements that exist, then what possible obstacle stands in the way of both sides starting on a new page even if some re-arrangements and compromises are required of both sides? Large banks and financial institutions, and smaller ones, wish the public to forgive the past and to move on with a positive attitude. They should lead by example. What the parties have enjoyed in business together ought not to be lost if it can be salvaged. That exercise in itself might serve to help restore in the public mind the trust and confidence and faith that they should have in banks and financial institutions and which is being slowly rebuilt with effort over and above any required to solve this ongoing dispute. That may be a high minded and naive recommendation on my part but it is something I would urge on both sides in any event.

That sounds like an imminently sensible judge. Indeed, officials from the Central Bank also told the committee that after examining the evidence in this group provided, that "clearly there were cultural issues there and there was pressure on selling". So we have culture, integrity and a judge giving sensible advice on this matter. The ruling dates back to February, which is almost eight months ago, and since then no attempt has been made by the bank to mediate. Surely this is a perfect opportunity for banks to take the judge's advice and show the public they are changing?

I cannot understand why the banks would refuse to take that very strong suggestion from a judge to sort out and resolve some issues. As the witness has said, we have to move on. The people involved in this, however, cannot move on.

Mr. Justice John Hedigan

The Senator is certainly pushing an open door as far as I am concerned. I cannot comment on any individual case. That would not be appropriate. For the last seven or eight years I represented the Irish courts at EU level on the European Network of Councils for the Judiciary. I worked on a number of different projects around improving mediation and alternative dispute resolution. It was my intention when I retired last October to turn around the other way from regulation of the area at a European level to becoming a mediator. I got myself accredited by the Centre for Effective Dispute Resolution, CEDR. I am a big believer in mediation as a way of solving problems. It is infinitely preferable to almost any form of dispute that would come before a court for all parties if they could only realise it. I would certainly encourage banks or any other parties to look at the many different alternative dispute resolution systems that are in existence, and try to avail of them. I remember when I started in the Law Library my master used to say that very few people regret a case they settle but many people regret a case they fight. If one can possibly mediate, do it. I could not agree more.

So maybe in the course of the board's discussions with the banks it would encourage this as a way for the banks to demonstrate to us that they are really, truly genuine about changing the culture within the banking system, and that we will end up with a banking system that has integrity in it. I would appreciate that.

I welcome Mr. Justice Hedigan and Ms Kelly. I wish them well in their new roles, and also to the new committee.

Were there any objections from any of the banks that have signed up to this? Does any bank want a different format, or were they all in agreement that this is the way it should be going forward?

Mr. Justice John Hedigan

When I was being interviewed finally for this post I was asked at the end if I had any questions. I said that I had only one question: "Who appoints the board?" Dame Colette Bowe replied: "You do, if you get the job". It was made clear to me that I was, effectively, going to design this old-new system. I had plenty of examples to look at. I went to London and met the people there to see what they did and what we could learn from them. I had been given a reasonably good steer in that we were calling our board an Irish banking culture board. This was a very different thing from an Irish banking standards board. Ireland had plenty of banking standards and regulations and it did not stop all of the trouble. It was a cultural thing, what was inside people's hearts and what people do when no one is looking, that was causing the trouble. Other than that, because it was set up as a banking culture board I had an open page to do whatever we wanted. I believe that what we have set up is the most effective way we can bring our influence to bear on the banks through the five banking members on the board interacting with the seven non-banking members, where we can raise all of the problems that arise in the industry today.

If the board finds there is any wrongdoing or that in the board's view things are not right where does the board go with that? Has the committee or the board any teeth? What does it do?

Mr. Justice John Hedigan

The Irish Banking Culture Board has no power of sanction and it has no teeth. We do not want it to have any teeth. Our job is to work with the banks and essentially to move hearts and minds. That is the role of this board. It is a unique body and nothing like it has ever been set up before. It is the way culture is being embedded in the banking system around the globe. Trying to work with the banks is the approach being adopted. This is why I said that we plan to be a critical friend. This was a phrase that came from one of our workshops. One of the people who had a lot of problems with the banks and who wanted something to happen suggested that this is the right approach, to be a critical friend, the kind of pre-Christian anam cara person who created modern confession - or at least modern since medieval times - a friend to whom one would confess all of ones sins and discuss all of ones faults and failings. Always remember, however, that for confession to have any meaning there has to be a firm purpose of amendment.

That is our role. We are trying to persuade people and to move minds and hearts. I am optimistic that this will happen. From all I have seen so far, the pragmatic and idealistic approach seems to be effective. We will see. Time will tell.

Ms Marion Kelly

We are conscious that the regulator has powers of fining and sanction. We see ourselves as being complementary to the regulator. Our role is different. If there is a need for fining and sanctioning, there is a body in place to do that.

All the banks have appeared before us. With regard to tracker mortgages, we found out that there were problems with only 3,000 mortgages. That number went up to nearly 40,000. Every time the banks appeared before us, the number of mortgages with problems rose, so we were not getting an accurate picture any time they appeared before us. Do the witnesses not think that the IBCB could encounter the same problems with the banks that we did when they appeared before us?

Mr. Justice John Hedigan

I hope not. As I said, time will tell. We will see soon enough. As Ms Kelly has said, it is for the regulator to impose sanctions, not us. The regulator is carrying out its investigation of the tracker mortgage scandal. I am not sure when its final report is to be finalised but I expect it will be very soon.

Ms Marion Kelly

The report is being finalised but the regulator is looking at the individual banks.

Mr. Justice John Hedigan

It will be dealt with fairly soon. The regulator is the body to deal with the kind of thing referred to by the Senator, namely, being given false or wrong information. The approach is about whether a bank is treating customers fairly because we are the ones who are looking for fair outcomes for customers. That is really what it is about.

If the IBCB feels there is a need for a change in the legislation, will it bring it to the attention of the Oireachtas or will it go through the Central Bank? How does the IBCB propose to highlight an issue that may need a change of legislation?

Mr. Justice John Hedigan

That is a good question. My inclination would be to talk to the Central Bank because, as the regulator, it is most likely to be able to bring the greatest amount of pressure to bear. If legislation is desired, it is probably because it is looking for some new regulation or penalties, which will impact on it and its role rather than on us.

Mr. Justice Hedigan said that the IBCB has nine teams dealing with various aspects of banking. We dealt extensively with the tracker mortgage issue. An area that has not received much attention is the small business sector. There have been many problems regarding how small businesses have been treated. Some have gone out of business. Withdrawal of credit is a relevant issue. Does the IBCB intend to have a look at the small business sector?

Mr. Justice John Hedigan

That is one of our themes. Ms Sue O'Neill, who is chair of the Small Firms Association, is a member of our board. That will be one of the workshop topics with which we will deal. Does Ms Kelly know exactly where we are with regard to that?

Ms Marion Kelly

We are about to schedule that. The first one will be scheduled this month. We would have heard about the issues of SMEs through the public and stakeholder consultation in which we engaged. We also heard about issues relating to farmers. The issues about which we heard were access to credit, face-to-face access to discuss issues with the banks and with people who understood their business. We heard this theme quite recently. We heard that it is difficult to meet people who might understand the needs of a smaller business or indeed a farmer. A work stream is commencing that will focus on these issues. Sue O'Neill, who is a member of our board, will sit on that working group, as will Martin Stapleton from the IFA.

PTSB has changed direction in recent days with regard to mortgage to rent. What is the IBCB's view on this? We have been pressurising all of the banks with regard to many issues.

The PTSB seems to have changed tack and is selling loans to third parties such that local authorities can rent houses to people in order that they do not have to leave them, which is very welcome. Has the board considered the issue, or does it intend to consider it?

Ms Marion Kelly

We have not specifically considered the issue, but we are very supportive of the mortgage-to-rent scheme. Ms Angela Black from the Money Advice and Budgeting Service, MABS, and the Citizens Information Board is also on our board also and I know that it is something very close to her heart. The scheme is one we encourage, but we have not specifically looked at the issue to date.

Does the board intend to consider vulture funds? Many mortgages have been sold to them, but they do not support or contribute to the setting up of the board. Will they come within it remit?

Mr. Justice John Hedigan

No, they will not come within our remit, but we are certainly interested in fair outcomes for customers insofar as there is a transfer from the banks to the so-called vulture funds. As I mentioned, I am aware of the fact that for some it is beneficial. If someone wants to get rid of a loan completely, he or she can avail of a great write-down by a vulture fund that one will never receive from a bank, but if someone wants to restructure, it is a big problem. I have been given to understand, quite recently, that may be changing and that some of the so-called vulture funds may actually be introducing ways of helping to restructure. That is something on which we need to keep an eye, but, as far as we are concerned, insofar as it falls under the heading of fair outcomes for customers, it is an issue in which we are interested.

Like other members, I wish Mr. Justice Hedigan, Ms Kelly and their team every success. It is hugely important that we see the type of change they have outlined for us. Five banks are involved - Bank of Ireland, AIB, PTSB, KBC and Ulster Bank. Someone asked how much each bank contributed. I think the answer given was that each bank made a contribution, according to its size. It would be worthwhile letting people know the actual amount each bank gives. The banks also give to the Irish Banking Federation, IBF. When we asked each of the CEOs of the banks to tell us how much they gave to the federation, every one of them, except the CEO of KBC, stated in writing that they gave to many such organisations but that they would not tell us the amount. KBC told us that it gave €127,000 a year. Let me explain the reason it is important to put the figures in the public domain. It helps people to understand exactly what is going on. Ms Kelly said the establishment costs were €1.6 million. How much does each bank give each year? My question is reasonable. It is information that should be in the public domain.

Ms Marion Kelly

We will bring the Chairman's comments back to our board for discussion. As I mentioned, the ongoing cost is something we are working out. Our work programme has been agreed and we will finalise our proposed budget, to which each of the banks will contribute. We take the point made by the Chairman about sharing the information.

Sharing the information would help to instil confidence in the work done by the board. People should know about all of its workings, the work done and how it is funded. The staff have been seconded from banks. Am I correct in saying they will be replaced over time?

Mr. Justice John Hedigan


Ms Marion Kelly

We have a team of secondees and will recruit permanent staff. It is also likely that we will continue to use some secondees on an ad hoc basis.

That is another important consideration in putting information on the contribution of the banks into the public domain.

I wish to raise one matter with Mr. Justice Hedigan. He has said on three occasions during this meeting that when a loan is sold to a vulture fund, the law travels with it, as it were-----

Mr. Justice John Hedigan

The protections.

-----the protections travel with it, and that it is easier to restructure with a vulture fund.

Mr. Justice John Hedigan

No, I said it is not.

It is not easy.

Mr. Justice John Hedigan

No, it is much harder to do. They are not into restructuring.

Did he say it was easier to settle?

Mr. Justice John Hedigan

If one wants to settle one's loan, they will do a deal.

Mr. Justice Hedigan has said that is his view on it or that is what is being said. I want to put my experience on record. As bad as the banks are, and I believe they are very bad, the vulture funds are even worse. One cannot get through to them by phone. One cannot speak to a human being at any stage during the course of this. It is almost impossible for the ordinary citizen of this State who wants to resolve his or her affairs to deal with a vulture fund. They are untouchable. I can give Mr. Justice Hedigan several examples of attempts that I made on behalf of people - not my constituents but generally throughout the country - to try to help them to resolve issues. The banks in some cases do not even tell the client that their loan is sold. The major problem we have is that the banks are outsourcing their dirty work and are allowing the vulture funds to appoint receivers and go to the courts for eviction orders. They are using the courts and the courts are not helpful to individuals who appear before them.

Recently, I was in the High Court with a family, and I have been there a number of times as well as to the Appeals Court, and it was shocking. I thought that it would be conducted in a far different way. For a friend or supporter of people who attend the court, even though it is moral support, to be denied any right of audience or any comment in an extremely difficult situation is something that judges should review. I am not saying this because Mr. Justice Hedigan is a retired judge and is here before us. It is a view that I have having examined and been present in the courts. It is not a recommendation I would make to any individual to go to court. I found it so disturbing for families how justice is administered, and I would have great concerns.

I would love to find a vehicle that was independent like the IBCB that would look at all the stakeholders. The IBCB has a firm on board with it from the commercial-legal end of things. The judges should be asked as well. Again, this is not just because this is Mr. Justice Hedigan's background, but I have seen cases where the paperwork from the banks has been appalling, and yet they will not admit it. They allow a lie to be compounded by another lie or misleading fact or whatever it is, and the citizen, who is relying, perhaps, on a McKenzie friend, has no advantage or support whatsoever. The banks use this for referring their cases to the courts and then they are almost forgotten about. The legal process, the solicitors and the barristers take their own course and the banks are sometimes not even familiar with it. They do not even know the hardship that they are dishing out to their own customers, customers who perhaps tried to settle their accounts or reach some settlement with the banks. Once it goes to court, they do not have the money. They are a beaten docket when they go to court and they are often beaten down by the banks that bully and harass them, and it is still going on.

I admire the work that Mr. Justice Hedigan is undertaking but he is in quite a pit of company that he would not normally work with, I would say.

That is why I go back to the issue of transparency and the cost of the operation. The judge said that when he was involved in Amnesty International, his motto was "as unthinkable as slavery". What is happening to Irish citizens is as unthinkable as slavery. The judge may think that is harsh, but I deal with it at the coalface every day and the culture that has been established and passed on to the next generation of bankers is shocking.

The vulture funds have hired young people who are learning the business. I sat in at a meeting with a vulture fund to make an appeal for a family and the young woman said, "You owe us X and we want it." The man was trying to explain his situation and settle, but she did not care from where he got the money, whether he had to ask his neighbour, friend, mother or father or the credit union. She just said, "We want money, money, money." I will never forget it. I thought not only was the culture out of control but that it was being passed on to a new generation of bankers.

When the bankers come here, they say with a great presentation of sincerity, "My God, we don't do business like that." They do. They are shocking and hate being called out, but they have not changed. I am not lecturing the judge about this, but it upsets me greatly when I see what they are still doing and I cannot get over the fact that they are still getting away with it. I understand how people are sceptical about the work the delegates are doing because of how the banks have infiltrated every place. I would like to hear the judge's view on some of my thoughts.

I have learned so much at this committee and it has been a steep learning curve. One of the things that shocked me at the beginning of the tracker mortgage crisis was that the Governor of the Central Bank told us that there were 3,800 affected. It turned out that there were more than 30,000. Some families have been treated so appallingly that they are broken. Some have special needs children and made special cases to us. They have had to pour out their hearts. They are the very people in the banks with whom the judge now finds himself dealing. I will not be going for a pint with them.

Mr. Justice John Hedigan

The Chairman is articulating very well the anguish and distress caused to people by the conduct of banks during the years and that is occurring in respect of vulture funds. I hear what he is saying. I understand entirely that the Deputies are at the coalface and meeting their constituents to discuss their problems. As a judge, I did not have quite the same level of exposure, but, like some of my colleagues, I had people in tears in my court. When I could not do anything for them, I called them up to the bench to let them to tell me their whole story in order that they could see a human being had actually listened to them. That was the best I could do in some circumstances.

All I can say in response to the matters raised so well by the Chairman, with such obvious personal pain, is that we will do the best we can to try to improve the culture in the banking sector. That is our challenge. We dare to believe we can do something good and move things on. It is a global phenomenon.

We are not on our own but we are very close to the head of the posse because not too many other countries have set up anything like this.

At the beginning of August we were invited to Stanford Graduate Business School's principled leadership summit. That was the first international recognition of our existence as a board and it was at the highest possible level. We were the only organisation like that there. Present were some of the biggest banks in the world and some of the largest companies, Microsoft, Google, Facebook, and so on. I took that also as a vote of their confidence that our board could do something. I can assure the committee we certainly are going to try our level best. That is why I said that if I am invited again I would be happy to come back here next year to answer any questions the committee may have and to outline our progress during the year, including some of the problems we may have encountered.

Ms Marion Kelly

I met the Chairman as part of the public and stakeholder consultation, with a range of other people, and heard many similar upsetting and sobering stories of people's first-hand experience with banks. All the feedback we have received has informed the basis of our work programme for the first year, considering how people are communicated with, how they access information, what happens if they are in a vulnerable situation, for example, if they are in arrears, have lost their job or have a personal issue that affects their relationship with their bank.

We also focus on ethics and behaviour to make sure staff at all levels in the bank are trained in what is appropriate and ethical behaviour from the top down to new people coming in the door. That is in our work programme. We work very closely with the Institute of Bankers to make sure those training programmes are delivered throughout the banks. Our chairman mentioned earlier that we also intend running sessions with the legal teams of banks, so that they understand not just the letter of the law but what should be done for customers. That is very important in showing the cultural change we are committed to supporting.

I am impressed by the fact that the witnesses say their task is moving minds and hearts and to be fair. I do not want to over-egg this but I do want to make clear that our experience here is that bankers are a heartless bunch, they do not know how to spell fair and their mindset is so trapped in beating up the customer that I do not know how the board will do them the favour of releasing them from that kind of make-up.

Maybe I should not do it, but I read a lot of the papers that clients of banks bring to me and see what they have tried to do with the banks. What strikes me is the amount of information that banks send out to their clients in answer maybe to a freedom of information request. It is never all of the paperwork. Without going into any detail the Bank of Ireland recently gave out so much paperwork on a second occasion that the case the client had against the bank was proven. The bank had been sitting on it all the time. It then said to its customer that it would not write to him anymore and he was left to battle as a lay litigant. That brings us to the courts and the McKenzie Friends issue and practice direction 72, introduced by, I think, Mr. Justice Peart; it is in the public arena so I do not mind saying it. It needed to be talked to. I am mightily impressed that the judge would engage like that with individuals in his court and try to show them the two things that are never mentioned in this room by the banks, humanity and compassion. They do not have a clue what they are doing and they are wrecking society. They are still at it.

He should not underestimate the banks. As he is doing this, they are outsourcing their dirty work, they are still condemning people to a lifetime of poverty and they are reckless in their abuse of their position in the face of families in society that are crumbling. It really disturbs me. I wish Mr. Justice Hedigan well. He is welcome to come back.

Mr. Justice John Hedigan

I thank the Chairman.

I hope he can instil some humanity and compassion in the banks. Profit is not everything in life. Bankers should know that but perhaps they learned that lesson too late in life.

Mr. Justice John Hedigan

I was educated by the Jesuits and one of the sayings they often referred to is: "What doth it profit a man, if he gains the whole world but suffers the loss of his own soul?"

I came from humble background like Mr. Justice Hedigan. He was milking cows in Ballymun-----

Mr. Justice John Hedigan

And in Limerick.

-----and spending his time behind a bar. That would teach someone a lot too.

Mr. Justice John Hedigan

It does. It is a great university of life.

I am pleased that he brought it with him in life. He might remind the bankers of their past. They were not all born as bankers. They got there somehow. Perhaps they need to examine their own conscience. I wish Mr. Justice Hedigan well.

Mr. Justice John Hedigan

I thank the Chairman very much.

I thank the witnesses very much for attending.

Sitting suspended at 3.55 p.m. and resumed at 4.15 p.m.