FULL marks to Minister for Finance Paschal Donohue for, at least, summoning the top brass of our main banks to his Department and berating them over their behaviour towards many of their tracker mortgage customers, whose lives have been made a misery by the banks’ wronging of them. While his actions on behalf of the government came a bit late in the day, they were not before time either as the situation has been dragging on for so long that deadlines for bringing matters to a conclusion needed to be set.
Even though the official dressing-down of the chief executives was done behind closed doors, the media attention – unwanted from their point of view – forced most of them (not all, mind you) to apologise in public for their actions, which were nothing short of reprehensible and cannot be allowed go unpunished.
They may endure further deserved discomfort in the public eye before the Oireachtas Public Accounts Committee, who recently heard some harrowing accounts of the effects it had on their lives from people who had been wrongly taken off tracker mortgages or who had been refused their entitlement to be put back on them. Most of these people would have bought their houses or apartments at high prices during the Celtic Tiger boom era before the property bubble burst.
Taoiseach Leo Varadkar spoke about the loss of trust between the State and the banks over the tracker mortgage issue, which could affect up to 30,000 people – about 10% of the total of those on, or who should be on, such products. However, trust in our banking institutions finally broke down nine years ago when the country’s taxpayers were forced by decree of the then government to bail them out as a result of the reckless lending practices they had engaged in during the property boom.
We are still paying off the estimated €64billion it cost to bail out the banks and future generations will also be saddled with this extra sovereign debt that was added to the overall national debt, which – while reducing slowly – will be a millstone around our economy’s neck for quite a while to come. This situation came about due to light-touch regulation by the Central Bank of Ireland which naïvely accepted, at face value, most of what the banks told them about things being fine when they obviously were far from it.
It was only when the chief executives of the main pillar banks came cap in hand to the government on that fateful night of September 29th, 2008 and put Taoiseach Brian Cowen and the since-deceased Minister for Finance Brian Lenihan on the spot to bail them out that they finally admitted the seriousness of the situation they were in. As a result, the two Brians were effectively press-ganged into providing a blanket guarantee for the banks without having all the information they needed for making such an important decision; it is debatable – if the full facts about them were known at the time – whether the government would have bailed out all of the banks.
Any bit of trust there was left in our banking institutions went out the window at that stage and there is little or no evidence to suggest that trust has been restored since. In fact, the Central Bank came very badly out of the sorry mess and, while efforts were made in the years following the bail-out to strengthen its hand in financial regulatory matters, it has still seemed reluctant to take banks to task as forcefully as it should and to impose punitive sanctions for transgressions.
The way it has let the tracker mortgage scandal drag on so long suggests that it has been going too easy on the banks, many of whom are dragging out dealing with and righting the wrongs done to customers, as well as providing compensation. The Central Bank again failed to put the fear of God in them, which is why it was necessary for Paschal Donohue to do something his predecessor, Michael Noonan, should have done ages ago and call in the banks’ chief executives and give them a good talking to.
Looking suitably chastened after leaving the Department of Finance, some of the top bankers were all apologetic, but cynics might wonder if they were sorry for what they had done or over the fact that they were caught out. As a result of their meetings with Minister Donohue, they have quantified the number of cases on hand and promised to resolve most of them by the end of this year and any outstanding ones by next April at the very latest.
This is progress, but they need to be held to those deadlines and make sure all the customers affected by the banks’ wrongdoing are properly compensated also, as agreed. Failure to do this should be punishable by monetary fines and, after that, the Central Bank needs to identify those individuals responsible for denying customers their rights and impose sanctions that will deter them from ever doing so again.
Unfortunately, in many cases, it will be like closing the stable door after the horse has bolted.