Irish Central Bank demanded to enforce tracker mortgage redress

By April 23, 2018Articles
Chairwoman of ECB supervisory board, Daniele Nouy, has demanded Ireland’s central bank to enforce the tracker mortgage redress on banks. ECB has taken notice of the increasing reports of banks ripping off their customers, and has stated that those banks will be investigated for their failure of controlling internal misconduct and financial risks. This scandal will cost the banks around 1 billion Euro, according to the Central Bank.

Hunting for the senior culprits

The tracker mortgage scandal has been unveiled thanks to multiple whistleblowers. Four enforcement cases are currently being run and the hunt for the senior culprits is ongoing.

To date, approximately 316 million Euros have been paid out to borrowers who were wronged by banks. More than 13,000 borrowers have not received compensation up to now but this process should be completed by June 2018. These clients were denied access to low interest rate tracker mortgages. Once the fines and regulatory bills will be added, the bill will undoubtedly escalate, warned the Central Bank.  

It is highly possible for ECB to intervene

The prospect of the customers getting paid compensation by the Irish banks over this scandal has also increased the possibility of ECB stepping in, especially regarding supervisory concerns. The estimated cost which the banks might have to pay in compensations and fines is €570m. According to reports, the banks overcharged more than 30,000 homeowners. The finance minister, Paschal Donohoe, along with banks and the Central Bank is to issue the latest updates regarding the customers who had been overcharged by Irish banks.

Upon concerns regarding the likelihood of systematic risks arising in the banking systems and whether ECB would intervene, Ms Nouy stated that is up to Central Bank to take action.

She also assured that there aren’t any indications of any possible systematic risk but there are chances that EB could intervene.

Failure to fulfil obligations could lead to sanctions

The chairwoman also stated that in case the credit institutions fail to fulfil the obligations they have towards the customers, then it would result in drastic implications. This, in turn, would increase the concerns regarding supervisory for ECB.

In her statement, Ms Nouy highlighted that the credit institutions that might have to compensate their customers for the damage they suffered or that are subjected to Central Bank imposed sanctions for breaching their customers’ contractual obligations could face financial implications as well as supervisory concerns. Furthermore, it could also raise concerns whether these banks have enough capital against conduct risk, governance and internal control adequacy of banks to prevent misconduct.

ECB prepared to jump in if need be

In case the supervisory concerns are raised due to this scandal, ECB would be forced to take actions against those banks. There is a high likelihood of heavy fines being imposed on Irish bank and they would have to compensate the customers they have wronged.

ECB has indicated that it is prepared to handle the fallout in case the fines to be paid become so substantial that the banks are unable to hold sufficient capital towards operational risks.

Article published in Mortgage loan :


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