Banks involved in the tracker mortgage scandal will have to commit to starting compensation payments by Christmas in order to avoid punishment measures such as increased taxes.
Senior figures from the financial institutions concerned are to meet Minister for Finance Paschal Donohoe next week and the Government expects a firm commitment and timeline of when the thousands of people affected will receive compensation.
Taoiseach Leo Varadkar has raised the prospect of giving the Central Bank more power to tackle the banks, or of increasing taxes if they do not comply.
Government sources believe, however, the Central Bank does not need any more powers and the only other sanction that has been raised is an increase in the bank levy.
Mr Donohoe has said he will outline a number of options available after he meets the bank executives, but a commitment, which will then be made public, is seen as the likeliest outcome to avoid moves towards sanctions.
Fianna Fáil has also tabled a Dáil motion on the issue, which will be debated next week. It calls for "a firm deadline in which the Government expects all affected accounts to be identified and corrected and for all redress and compensation to be paid".
‘Demonstrable action’
Mr Donohoe on Friday said that what matters to those affected is “not the completion of a probe, but the end of a journey”, and a Government source said of any response from the banks: “Whether we or they make it public, we need demonstrable action.”
A spokesman for Mr Varadkar said: “Whether or not it is public or private, there has to be a commitment.”
It is not yet clear if the sought-after commitment would apply to customers who have yet to be identified as being caught up in the scandal by the lenders, but whose status will be determined by the end of the year, or only for the 13,000 who have been identified to date.
Mr Varadkar and Central Bank governor Philip Lane have already suggested such a timeline, but Mr Donohoe is expected to push the banks to agree to this.
It does not mean that full compensation for all should be paid by the end of the year but that those concerned should begin to receive some payment.
Broader banking matters
The meetings between the banks and Mr Donohoe were already in the diary and were slated to discuss broader banking matters, including tracker mortgages, but it is now claimed the focus will be on “decisively” dealing with the controversy.
Central Bank deputy governor Ed Sibley said on Friday that banks need a "radical cultural change" as the industry is more preoccupied by the legality of its actions than the interests of customers.
The Fianna Fáil motion also calls on the Central Bank to use its “full statutory powers” to ensure compliance from the banks, and party sources said this includes restrictions on banking licences.
It says that the Government should consider voting against the reappointment of the boards of banks in which the State is a shareholder and introducing legislation to cease all insolvency and repossession proceedings on “tracker-related mortgages” until customers are redressed or compensated.
It is also calling for the Government “to reaffirm its commitment on the pay cap in place for banks and the ban on bonuses”.
