I would remind the Deputy that as Minister for Finance there are strict rules around how I can intervene even in banks in which the State has a shareholding. The day to day operations of the banks are the sole responsibility of the boards and management teams and each bank must be run on an independent and commercial basis. The banks’ independence is protected by Relationship Frameworks which are legally binding documents that cannot be changed unilaterally. These frameworks, which are publicly available, were insisted upon by the European Commission to protect competition in the Irish market.
However this Government has firmly supported the work of the Central Bank of Ireland to ensure that customers receive fair treatment from the financial institutions involved. As the Deputy will be aware, the industry wide Tracker Mortgage Examination review is the largest, complex and most significant supervisory review in the history of the Central Bank of Ireland in respect to its consumer protection mandate. It has revealed the unacceptable damage that misconduct can cause to consumers up to and including the loss of their homes and properties in some cases. To this end there has been €665 million of redress and compensation issued to customers at end February 2019.
To further support the work and power of the regulator, I am bringing forward the Central Bank (amendment) Bill which will introduce an advanced Senior Executive Accountability Regime (SEAR) which will, in tandem with new enhancements to the fitness and probity regime, help prevent something like the mortgage tracker issue happening again.
The Central Bank has intervened on prevailing rate issues in line with its regulatory engagement via the Examination. This intervention is aligned with the Central Bank’s functions as part of the Examination to rigorously test and challenge, from a systemic perspective at the macro level, the position adopted by lenders to try and achieve the best result for all customers within a group.
The AIB prevailing rate customers have, directly as a result of the Central Bank’s intervention, been admitted to the Examination and will receive a compensation payment as well as an offer of the current prevailing rate, as opposed to the prevailing rate at the time their fixed rate expired. By securing their admission to the Examination, the Central Bank has ensured that those customers have the opportunity to utilise to the full extent, the Examination’s appeals processes. Should they be dissatisfied with any aspect of their redress and compensation offer and can pursue their case based on their own unique circumstances with the Financial Services and Pensions Ombudsman.
The Central Bank examined AIB’s model to determine the then prevailing rate and concluded that based on the information then available, that it was reasonable. In relation to the contractual interpretation of the term “prevailing rate” the Central Bank formed the view at the time that at a macro level, it could not mount a legal challenge on behalf of all customers in the relevant group, that a rate other than the then prevailing rate should be offered.