KBC Bank Ireland has fined EUR 18.3 million for tracker failures


The central bank fined KBC Bank Ireland more than € 18.3 million.

The regulator said the Belgian bank was responsible for “serious negligence” affecting the holders of 3,741 customer accounts between June 2008 and October 2019.

The central bank said KBC’s actions had a devastating impact on customers, with significant overburdening and a consequent loss of 66 properties – 11 of which were single-family homes.

The investigation showed that 39 of these losses could have been prevented if KBC had imposed an administrative obligation to stop any action that would have caused additional damage to customers during the investigation.

“The impact of KBC’s actions on its customers has been devastating and preventable,” said Seána Cunningham, director of anti-money laundering and enforcement at the central bank.

“KBC has been overcharging customers for long periods of time, including certain customers whom KBC knew were already in financial difficulties,” she said.

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The regulator also criticized the bank’s commitment and cooperation in its investigation, calling it “deeply unsatisfactory”.

“KBC has inflicted preventable and lasting damage to the affected customers, as the company was not ready until December 2017 to acknowledge its failures and take immediate action to apply the protection measures of the tracker mortgage check,” it said.

“If KBC had adhered to the TME guidelines earlier, without the need for significant and sustained intervention by the central bank, the damage to its customers – in particular damage to property – would have been significantly reduced,” said the central bank.

The central bank said it had fined KBC Bank Ireland, which was at the highest end of its sanctioning powers, of € 26,162,857 for the severity of the failures.

However, this was reduced by 30% to € 18,314,000 as part of the regulatory authority’s regulation discount program.

KBC Bank Ireland fully acknowledged 12 violations of the rules.

In addition, to date, the company has paid over € 153,524,363 in reparations, compensation and balance adjustments to customers affected by its actions.

Last year, Permanent TSB became the first Irish bank to be reprimanded for neglecting 2,007 tracker mortgages and it was ordered by the central bank to pay 21 million euros.

The fine was the highest the central bank has ever imposed as part of its sanctions process.

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So far, the controversy surrounding tracker mortgages, where customers were entitled to a valuable low-cost mortgage where the interest rate follows that of the European Central Bank, has been denied, lifted or not offered at all, has cost the Irish banking system a lot 1, 5 billion euros.

The central bank noted that in 2008, as the financial crisis began to deepen, tracker mortgages became increasingly unprofitable and KBC Bank Ireland stopped offering them to new borrowers in July.

The enforcement investigation found that by doing so, the bank was not treating its existing tracker mortgage customers fairly and placing their financial interests ahead of the protections that should have been given to their customers.

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The regulator found evidence that KBC was pursuing a proactive strategy to permanently distract customers, including some lagging behind, from their low-cost tracker tariffs by not switching customers to fixed or pure interest rate agreements Adequate warns that this will result in permanent loss of your tracker.

The bank also failed to adequately warn customers who only enter interest or fixed rate periods that they cannot revert to their tracker tariffs.

KBC also failed to adhere adequately to the central bank’s framework for its tracker mortgage review, so the regulator had to intervene significantly to ensure customers were identified, remedied and compensated.

It also violated the Tracker Mortgage Examination’s Stop the Harm Principles, which were designed to protect customers from further harm once the review began.

Incorrect information was also given to the regulator about the treatment of some Tracker customers, while operational and system errors were also discovered by the probe.

“Our investigation found that KBC stubbornly refused to accept its mistakes, even though it had several options for correcting the damage it was doing to its customers over a period of time,” said Cunningham.

“KBC’s actions in this regard, including failure to comply with TME’s ‘Stop the Harm’ principles, were simply unreasonable.”

“The first KBC review of their mortgage loan book during the TME found only 93 customer accounts affected. The total number of customer accounts affected has since grown to over 3,700, but only because of the ongoing challenge and intervention from the central bank.”

Investigations into the conduct of the Bank of Ireland, AIB and Ulster Bank are ongoing.

Peter Roebben, Chief Executive Officer of KBC Bank Ireland, apologized sincerely to the affected Tracker mortgage customers following the conclusion of the Central Bank’s investigation.

“The tracker mortgage issue is a very unfortunate chapter in Irish banking and one from which we at KBC have learned important lessons,” said the bank’s chairman.

Peter Roebben, CEO of KBC Bank Ireland

“I sincerely apologize to KBC customers who have been affected by our management of their tracker mortgages. This has undoubtedly had serious consequences for all affected customers, but especially for those who have lost their home and property,” said Peter Roebben.

Mr Roebben said the bank deeply regrets these events and recognizes that they have resulted in a breach of trust.

“We accept that only our actions can determine the level of trust that lies at the heart of our customer relationships and we strive to play a leading role in bringing about the cultural change that the Irish are demanding of our industry,” he added.

He also said that KBC Bank Ireland respects the central bank’s role in regulating financial services, adding that it fully recognizes the importance of constructive, timely and transparent cooperation with the regulator.

“KBC Bank Ireland is determined to be a positive force in Irish society and to provide people with the innovative digital banking and insurance services they need,” said Peter Roebben.

“Achieving fair customer results is an integral part of this and requires that we carry forward the lessons we have learned from our tracker mortgage management. We are determined to use these teachings and the associated opportunity for positive change. ” he concluded.

Call on the Central Bank to make Irish banks more accountable

The Treasury Department said the tracker mortgage controversy had shown “unacceptable practices” that resulted in real suffering for those who lost their homes and struggled to make ends meet.

A spokesman said the issue is of serious concern and will take time and effort to restore this broken confidence in the banks.

The Minister and the Department fully support the Central Bank of Ireland in completing this valuable work, added the spokesman.

Labor Finance spokesman Ged Nash said the fact that the central bank had given KBC Bank Ireland the maximum fine was an indicator of how badly KBC did in the tracker mortgage affair.

“Today’s statement by the Central Bank that KBC is ‘pursuing a proactive strategy to distract customers from their tracker tariffs’ shows the contempt KBC has shown for the customers it has betrayed throughout this whole affair,” said Ged Nash .

Ged Nash., Labor Finance spokesman

Mr Nash also said that once the central bank completes an enforcement action against a company for violating the rules, it has the power to investigate individuals from that company.

“We still have no clarity from the central bank as to whether they opened an investigation against people in Permanent TSB after they fined them last year,” he said.

Mr Nash also said Treasury Secretary Paschal Donohoe had a role in this because he had still not put in place the system of managerial accountability, even after pledging to do so over two years ago and despite the central bank’s request.

“He’s got his heels behind and he has to answer why it took so long to introduce the new regime,” said Nash.

“Individuals in the banks have made the decision to rip off customers who are eligible for trackers. They must be held accountable. Both the central bank and the minister have a long way to go,” he added.

Sinn Féin’s finance spokesman Pearse Doherty said KBC Bank Ireland’s violations showed that “rot” is pervasive at the heart of the Irish banking sector.

Pearse Doherty again called on the government to publish laws requested by the central bank nearly three years ago to increase the accountability of Irish banks.

Mr Doherty said that Sinn Féin has been calling for legislation that ensures individual accountability at the top level of our banks for years.

“The central bank reiterated these demands three years ago, calling for legislative changes that would address individual accountability in the financial sector. The government has yet to submit this legislation. You urgently need to do this now, ”he said.


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