Irish lender Permanent TSB fined € 21m after overcharging scandal
Ireland’s central bank fined Permanent TSB, one of three state-backed lenders in the market, € 21 million over an overcharging scandal.
The fine was handed down on Thursday, days before outgoing Governor Philip Lane moved to the European Central Bank as chief economist. It marks an escalation of coercive central bank measures in a sector that benefited from a 64 billion euro public bailout after the 2008 crash.
Permanent TSB – which is 75 percent owned by the Irish government – is a smaller lender in the market, but the fine would be the heaviest regulatory sanction ever imposed in Ireland on a financial institution.
This follows a protracted controversy over the failure of five Irish banks to pass on lower mortgage fees to thousands of home loan customers as the ECB cut interest rates to deal with the zone’s crisis. euro. Borrowers were allowed to follow rates, contractually tied to the ECB’s rate cut, but banks insisted customers pay higher rates.
The other institutions involved in the case were the Allied Irish Banks, 71 percent owned by the state; Bank of Ireland, 14 percent state-owned; as well as Ulster Bank, which is part of RBS; and KBC Ireland, which is part of the banking group headquartered in Belgium.
The central bank has warned of further action against lenders, saying the BST’s permanent fine ends “the first in a series” of ongoing investigations. “When companies fail to protect the best interests of their customers, our response will be robust and the consequences will be severe,” said Seána Cunningham, director of law enforcement at the central bank.
Over 2,000 permanent TSB customers were caught in the overbilling affair that resulted in 12 customers losing their family homes and 19 investors losing rental properties. The bank paid 54.3 million euros in repair and compensation to mortgage customers. “I wholeheartedly apologize to all of the clients affected by the tracker mortgage issue and the resulting distress,” said Jeremy Masding, Managing Director of Permanent TSB.
In a statement, the Central Bank of Ireland said the bank had “fully” admitted a total of 42 separate regulatory violations. “The investigation found that the PTSB either denied its clients a follow-up mortgage or put them on the correct follow-up rate due to a number of defaults,” he said.
Ms Cunningham said the bank failed to put its customers first “with distressing and, in some cases, devastating consequences”. “The PTSB failed in its obligation to do the right thing for its clients. In doing so, they shattered the trust of their clients and tarnished the public’s trust in the PTSB.
The central bank said the “appropriate fine” was 30 million euros, but was reduced by 30% to 21 million euros in accordance with an early settlement “discount program” in its sanctions procedure.