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Bank fines for Irish mortgage scandal could reach €350m

Edmund Heaphy
Finance and news reporter
The headquarters of the Irish Central Bank in Dublin. Photo: PA

Irish banks could be liable to pay around €350m (£310m) in mortgage scandal fines if the Irish Central Bank issues penalties similar to one imposed on Permanent TSB (IL0A.IR).

The Irish Central Bank issued a €21m (£18.5m) fine on Permanent TSB on Thursday. The bank was fined for significantly overcharging more than 2,000 customers who had signed up for tracker mortgages, which led to 12 families losing their homes and the repossession of 19 buy-to-let properties.

While banks can be fined up to 10% of their total operating income for regulatory and compliance breaches under Irish Central Bank rules, the Permanent TSB fine was roughly equal to 5% of its total operating income in its most recent financial year.

Similarly weighty penalties imposed on the five other financial institutions implicated in the scandal could result in total fines of around €350m.

Irish banks have already paid out almost €650m in compensation to customers affected by the scandal. The banks have admitted that almost 40,000 customers were affected.

AIB, EBS, Bank of Ireland, Ulster Bank, KBC Bank Ireland, and Permanent TSB have set aside around €1bn in order to pay compensation, potential fines, and other related costs.

READ MORE: Irish bank fined record €21m in mortgage scandal

In the case of Permanent TSB, the Irish Central Bank said on Thursday that the bank had made “serious failings” relating to 2,007 mortgage accounts.

The €21m fine, it said, was indicative of the “unacceptable harm” Permanent TSB caused to its customers.

"Our investigation found that [Permanent TSB] failed to put their customers first, with distressing and, in some instances, devastating consequences,” Seána Cunningham, the Irish Central Bank’s enforcement chief, said in a statement.

Tracker mortgages, unlike some other types of mortgages, have variable interest rates because they “track” the interest rates set by a central bank.

In the case of Permanent TSB, the affected customers signed up for tracker mortgages, but were overcharged because they either were not given a tracker mortgage or they were not put on the correct rate.