Slowly the Irish banking sector is getting back to normal. You can make your own mind up as to whether that’s a good or a bad thing, but in simple terms it means that they are back in profit, lending again, launching products and offering staff pay rises after years of chipping away at their incomes.
The jury is out on whether the level of customer service has improved, but that’s for another day.
Permanent TSB has already rejoined Bank of Ireland on the main market of the Irish Stock Exchange and repaid some of its taxpayer bailout,while AIB is poised to do likewise in 2016.
For its part, Ulster Bank has mostly worked through the sale of its bad property and commercial loans, and is set to start afresh as a standalone bank focused solely on the Republic of Ireland.
Next year could be the time when Belgian institution KBC Bank Ireland returns to profit as a group.
Yet certain legacy issues continue to weigh on the sector, as illustrated by the Central Bank of Ireland's letter to banks on Tuesday to the effect that it wanted them to a review all of their tracker mortgages since day one to ensure that customers were treated fairly, had the correct rates applied, and that the banks were open and transparent in their communications.
This raises a couple of questions. Why has it taken the Central Bank more than seven years after the crash to address this thorny issue? And why is the regulator leaving it to the lenders to carry out the reviews on themselves?
The Central Bank has done a lot of firefighting since 2008, which might explain the time it has taken for it to carry out this investigation. On taking his leave from Dame Street recently, Patrick Honohan said a key regret was not getting to grips with the mortgage arrears problem sooner, with the result that it continues to hang in the air like the smell of burnt toast.
Little comfort
For sure, the Central Bank’s decision to investigate the issue at this point will be of little comfort to the 22 Permanent TSB account holders who lost possession of properties since 2011 as a result of a “failure” by the bank to inform them that they could have availed of a cheaper tracker rate to which they were entitled.
The PTSB scandal broke in July when the bank said that more than 1,300 account holders were effectively denied a tracker rate when they came off their fixed-rate terms. This was in breach of their contracts. Some of these customers ended up simply being overcharged on their interest rate, some were pushed into arrears, and others were dragged through the courts. It took an enforcement investigation by the Central Bank in the middle of last year to give the bank pause for thought.
Complaints
The bank had not moved when the Financial Services Ombudsman found against it following complaints from a number of account holders, or when the
High Court
upheld the FSO’s ruling in August 2012. At that time the bank pressed on with a
Supreme Court
appeal against four customers who held two mortgages between them. This was withdrawn only in February of this year. It took a long time for PTSB to accept that it had a case to answer and the Central Bank’s investigation of this matter remains ongoing.
The PTSB case would make you wonder about the effectiveness of a review of the banks undertaken by the banks themselves, even if they are required to have a third-party certification of the examinations.This could be interpreted as the Central Bank telling the lenders to come out with their hands up or accept the consequences.
What seems certain is that many other cases of customers being denied a tracker rate or being treated badly will emerge. The Financial Services Ombudsman has said it has received 1,200 complaints on tracker mortgages since 2009, of which 200 are still live.
Some banks have been quietly agreeing deals this year with customers to keep them out of the public domain. We’ll get a better sense of this when the Central Bank provides an update on the issue in April, but it shouldn’t have taken this long.
Twitter:@CiaranHancock1
