Sec­tor plays on our tragic def­er­ence

Irish Examiner - - Opinion -

The Cen­tral Bank’s (CB) deputy gov­er­nor Ed Si­b­ley yes­ter­day called for bank ex­ec­u­tives and di­rec­tors to be held to ac­count for over­charg­ing at least 20,000 mort­gage cus­tomers over re­cent years. Speak­ing in Dublin, Mr Si­b­ley said the bank is do­ing the ground­work so it might open an en­force­ment in­ves­ti­ga­tion into the State-owned AIB as part of an in­dus­try-wide ex­am­i­na­tion of the tracker mort­gages. That state­ment, on the face of it and by Ir­ish stan­dards of ac­count­abil­ity, seems plau­si­ble and as much as might be ex­pected. How­ever, what it re­ally shows is how de­tached from Seán Ci­ti­zen’s world our fi­nan­cial watch­dogs re­main. Re­mem­ber, Mr Si­b­ley said he ex­pects “all the main banks to be sub­ject to CB en­force­ment in­ves­ti­ga­tions”. In a world where fi­nan­cial reg­u­la­tors — and their po­lit­i­cal masters — took the job of pro­tect­ing cit­i­zens as se­ri­ously as they should those in­ves­ti­ga­tions would have ended years ago. Ef­fec­tive sanc­tions would have been im­posed and maybe, just maybe, the toxic cul­ture un­earthed at our banks might be on the wane.

The re­al­ity is that over the last decade those caught up in the 27,500 cases of tracker ex­tor­tion were as likely to get help from the Lifton Sea Scouts had that group kayaked from West Devon to try to re­solve the is­sue as they did from con­sumer pro­tec­tion laws. Un­til very re­cently they were left high-anddry no mat­ter how dire their cir­cum­stances were made by the banks. That the 27,500 fig­ure, of­fered just this week and one that may not be fi­nal, is just the lat­est in a con­tin­uum of ex­ploita­tion shows how very loose, how very hap­haz­ard Cen­tral Bank su­per­vi­sion and bank­ing ethics must have been.

That there is no Cen­tral Bank or Pen­sions Board in­ves­ti­ga­tion into how so many pri­vate-sec­tor pen­sion schemes col­lapsed in the last decade or why Ir­ish vari­able rates are so far above ECB rates hardly sug­gests our reg­u­la­tors have the nec­es­sary en­thu­si­asm for con­fronting the sec­tor ei­ther.

Equally, de­tails of the Reg­is­trar of Credit Unions in­ves­ti­ga­tion into Charleville Credit Union (CCU) pub­lished in re­cent days show that sec­tor is as ca­pa­ble of rash lend­ing as the banks. Lend­ing poli­cies at CCU have been a cause of con­cern for over a decade and led to an in­ves­ti­ga­tion that meant a liq­uida­tor was ap­pointed. At one point the credit union’s top 100 loans ac­counted for 42% of bor­row­ings. An in­de­pen­dent re­view in 2007 un­cov­ered a list of “large busi­ness/prop­er­tyre­lated loans” to 10 mem­bers which amounted to €4.1m, al­most 10% of the loan book. Ex­ac­er­bat­ing the ex­po­sure of mem­bers’ funds, most of these loans were not re­paid as was sched­uled. Though al­most his­toric now this con­trib­uted to bad debt pro­vi­sions of €7.1m made in 2010 which re­duced the credit union’s re­serves from 10.1% to 0.4% in 2009. Credit unions have a 10% re­serve re­quire­ment but CCU has not met that obli­ga­tion since then. Just as was the case when Ire­land’s banks fell off the cliff it is fair to ask what CCU’s au­di­tors PwC were do­ing dur­ing this free for all.

The re­cur­ring theme in all of these is­sues is def­er­ence. We may imag­ine our­selves in­de­pen­dent but any repub­lic that does not have the con­fi­dence — or gump­tion — to po­lice the fi­nan­cial sec­tor firmly al­most de­serves what it gets.

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