Introductory statement by Derville Rowland, Director General, Financial Conduct, at the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach

24 October 2019 Speech

Derville Rowland

Chair, Committee members,

I am joined today by the Director of Consumer Protection, Gráinne McEvoy, and the Director of Enforcement and Anti-Money Laundering, Seána Cunningham.

I welcome this opportunity to update you on the Tracker Mortgage Examination. The scale of banks’ tracker mortgage failings was industry-wide, causing distressing consequences for customers. It necessitated a robust and comprehensive regulatory response that required banks to identify affected customers and to redress and compensate them for the harm the banks had caused.

The Tracker Mortgage Examination (the ‘Examination’) was that regulatory response. It is the largest, most complex and significant consumer protection review the Central Bank of Ireland (the ‘Central Bank’) has undertaken, probing all banks who ever offered tracker mortgage products in Ireland.

The Examination Framework required lenders to conduct their Examination in four phases:

  1. Development and Submission of Detailed Plan;
  2. Information Gathering/Review/Report Submission;
  3. Calculation of Redress and Compensation; and
  4. Implementation of Redress Programme, where relevant.

Together, these constituted the supervisory phases of the Examination, and the final report was issued as these phases concluded.

In the final report, we indicated that banks’ payment of redress and compensation was nearing completion. Today, as banks close out their redress and compensation schemes, a total of €693 million in redress and compensation has been paid to affected customers. The number of customers identified by lenders as impacted is 40,500. Banks have now paid 98 per cent of those affected.

In the final report, we described the devastating impact that the banks’ failings had on those customers with 99 people losing their homes and 216 people losing their investment properties.

The Examination, as you are aware, required lenders to undertake an initial review of more than two million mortgage accounts to identify the number of in-scope accounts before extensive Central Bank challenge of those reviews.

We were determined that everyone who should have been included in the scope of the Examination was included, and we pushed the banks to include them where we had a basis to do so.

As a result of our challenge and intervention, the banks included 20,000 additional customers in their redress and compensation programmes.

In terms of the range of redress and compensation payments:

  • 57% of redress and compensation payments were up to the value of €10,000;
  • 32% received amounts in the €10,000 to €50,000 range;
  • 8% of offers were between €50,000 and €100,000; and
  • 3% of affected customers received in excess of €100,000.

Twenty-three customer accounts1 received in excess of €500,000, including twenty-two who lost properties.

The final report concluded on the review and remediation phase of the Examination and set out the assurance process the Central Bank carried out in order to reach this conclusion.

This assurance work included desk-based reviews, intrusive on-site inspections, data verification work, scrutiny of lenders’ data returns and regular engagement with lenders. In excess of 3,000 days were spent completing Central Bank on-site work alone throughout the course of the Examination.

While our supervisory work is now complete, we continue to monitor the outcomes of any complaints, appeals and court cases and if any new information of a systemic nature comes to light, we will investigate it fully. These channels available to consumers under the Framework will continue to deliver outcomes.

We both welcome any additional uplift in redress and compensation which affected customers may gain through these channels, and remain vigilant in case any outcome has potential wider application to others.

Additionally, we are conducting enforcement investigations in respect of the main banks. I’ll return to that subject shortly.

Examination Framework:

We are conscious that no amount of money will ever fully right the wrongs that have been done by the banks, particularly to customers who lost their family homes.

However, we designed the Tracker Framework to maximise the chances of those affected securing appropriate redress and compensation.

It may be helpful at this point to say a word about the underlying objectives of the Framework.

In Ireland and other countries, we have seen in the past examples of redress schemes established that have been quasi-judicial or adversarial in nature, sometimes for understandable reasons from a legal perspective but often adding to the stress and financial impact on those affected. The Tracker Framework was designed to avoid that.

Put simply, the Tracker Framework was designed to drive redress and compensation to those affected without those customers having to raise a complaint, or pursue litigation. This gave customers the option – if they so wished – of avoiding the costs and stress of a public adversarial process. They were dealing with enough financial and personal strain as it was.

Under the Tracker Framework, we firstly required the banks to identify groups of customers affected by tracker issues and to redress and compensate those groups. The customers were not required to take any action to secure that initial redress and compensation. The money was paid out upfront to people and they could then choose what next steps they wished to take.

Second, we required the banks to provide an appeals avenue free of charge – this meant that customers could appeal the initial redress and compensation they received from their bank at no cost to them and without risking their initial award. They could “cash the cheque”, safe in the knowledge that their initial award could not be lowered or taken from them. Customers also received a separate payment which could be used by the customer to pay for independent advice on the adequacy of their lender's redress and compensation offer.

Third, we ensured that customers retained their legal rights to pursue other avenues, if they wished to do so. We required that banks would not rely on the Statute of Limitations to deny affected customers, who might otherwise have been time-barred, from bringing a claim against the banks to secure a remedy.

Customers could appeal to the Financial Services and Pensions Ombudsman (FSPO), a service which is free to the customer. And they could take court proceedings without putting the awards they had already received at risk.

Our framework was therefore constructed in such a way as to drive redress and compensation to affected customers while leaving all other elements of the State consumer protection system open to them.

Looking ahead, we have clearly communicated to banks our expectation that if any individual outcomes come to light that have the potential to impact customers more widely, then they must consider and address the broader customer impact. I reiterate that we will continue to monitor the outcomes of any appeals, complaints to the FSPO and court cases, and will utilise our statutory powers as required to seek information from banks in respect of those outcomes.

We will insist on regulatory scrutiny of the circumstances surrounding litigation outcomes to identify any broader systemic customer impact. 

Enforcement investigations:

Moving to enforcement, we take robust enforcement action that holds firms and individuals accountable, deters misconduct and promotes compliance and high standards in financial services.

We use the full suite of our powers, and publish details of enforcement actions where we are legally permitted to do so, together with public statements outlining the standards we require of regulated firms and individuals.

As at 1 October 2019, we have concluded 131 enforcement actions since 2006, resulting in monetary penalties of almost €100 million.

In relation to the tracker scandal, forensic investigations are ongoing and we are examining various lender failings, including the actions of individuals, which may be relevant to establishing how and why customers lost their trackers.

As the investigations began at different times, they will conclude at different times.

The gravity with which we view tracker-related failings is demonstrated by the €21 million fine we imposed on PTSB earlier this year, the largest fine we have ever imposed on a regulated firm. In all, PTSB admitted 42 separate regulatory breaches.

While Committee members will appreciate that I cannot discuss ongoing enforcement investigations, it’s worth discussing some of the detail from the concluded PTSB case and the public statement we issued at the time.

Our investigation sought to determine how and why PTSB failed to fulfil its regulatory obligations to protect its tracker mortgage customers’ best interests and honour their contractual entitlements.

The investigation found that PTSB denied its customers a tracker mortgage or did not put them on the correct tracker rate resulting from a number of failings. These included failure to warn certain customers about the consequences of decisions they might make relating to their mortgage when breaking early from a fixed or discounted interest rate; operational and systems failings; a decision to deny certain customers their correct tracker rate between 2009 and 2010, and incorrect legal interpretation of contractual terms and conditions.

That is just one enforcement case against one bank. It required the scrutiny of a significant amount of documentation spanning lengthy time periods and the conduct of interviews ranging from more junior staff to the most senior role holders across a number of business areas as part of the investigative process, to establish the exact circumstances of matters under investigation.

I will note, as we did in our public statement, the fact that PTSB engaged purposefully and cooperatively with the investigation, a positive indicator in its regard. This has not necessarily been the Central Bank’s experience with every bank under investigation, and we have taken robust action where appropriate.

I remind each and every bank under active investigation that cooperation with the regulator is a basic expectation of ours in the context of engagement with firms - whether in a supervisory or enforcement context – and that the lack of cooperation can have a considerable bearing on subsequent sanctions. 

Which brings me to the issue of culture.

Behaviour and culture:

Cultural failings within the banking sector were a significant contributory factor in the tracker mortgage scandal.

Disappointingly, those failings did not stop once the Examination was launched.

For example, in the Examination, we set out clear instructions to banks which required them to stop the harm being caused to customers at the earliest possible opportunity. The Stop the Harm principles were designed to ensure that where banks identified affected customers, no further detriment was caused. Through onsite inspections, we have found evidence that certain banks failed to comply with these principles, which will be considered in the context of the ongoing enforcement investigations. 

It is the role of the boards and senior leadership teams to ensure the right culture is embedded in their firms. They must define a set of values and guidelines for desired behaviour and to lead by example. It is not enough to talk the culture talk, you must walk that walk as well.

When the Central Bank published the Behaviour and Culture Report last summer, we reported that while all banks had taken steps to reinforce the consideration of the consumer interest, some banks were more advanced than others and all had a distance to travel.

Banks were required to submit behaviour and culture plans to us outlining how they would address the key risks we had identified.

The majority of the banks were then required to resubmit their plans when we deemed the original ones insufficient or, frankly, inadequate.

We will continue to assertively monitor and challenge the banks on the delivery of their behaviour and culture plans, in order that they deliver for their customers.

Individual accountability:

But like most regulators, I am a realist rather than an optimist. And so I believe an extra nudge in the system is required to push regulated firms to behave properly.

The Central Bank already has strong powers spanning our expansive mandate.

One of those powers – which rarely features in public debate but which industry is well aware of – is our gatekeeping role under the Fitness and Probity Regime.

Put simply, where we believe an individual firm is proposing someone ill-qualified or unsuitable for a senior role, we will challenge that appointment. We take our gatekeeping role extremely seriously and, to date, since the commencement of the regime in 2010, 80 applications for senior positions have been withdrawn where the Central Bank has challenged the applicant. 

While we use our existing powers to great effect in keeping unfit individuals out of the financial services industry and pursing individual wrongdoing where it occurs, we believe that individual accountability within the sector can be further strengthened via amendments to our legislative framework.

A lack of accountability is widely seen as a key driver of misconduct and therefore we have proposed to Government that it legislate for individual accountability measures to drive better behaviour.

These include proposed enforceable Conduct Standards for staff in regulated firms, such as acting honestly, ethically and with integrity; additional conduct standards for senior management; and standards for businesses.

We are also proposing changes that will significantly reduce the chances of key people in firms being able to wash their hands of wrongdoing. We are proposing a Senior Executive Accountability Regime (SEAR) that would place obligations on firms and senior individuals to set out clearly where responsibility and decision-making lies for their business. We see this as a key prong of our culture change strategy.

We have previously discussed these recommendations with this Committee, so I won’t go into further detail now. However, we continue to work with the Department of Finance to progress the proposals.


I know from what we have seen in the Tracker Mortgage Examination, from the customers whose stories we heard, that people and families continue to live with the consequences.

The banks who caused this damage will not be permitted to move on as if it’s business as usual.

At every step of the Examination, our focus has been on affected customers and ensuring lenders paid them appropriate redress and compensation. While the supervisory phase of the Examination has now concluded, its outcomes will be taken forward and reflected in our continuing supervision and our enforcement investigations.

Thank you.


1 The 23 accounts comprised related to 20 Buy-To-Let [BLT) properties and 3 Private Dwelling Home [PDH] properties