FSU position on tracker mortgage examination

Issued : 20 October 2017

Publication cover - Oir_committee_17 Cover image for Oir_committee_17

Earlier this year the Financial Services Union appeared before the Oireachtas Finance Committee to highlight a number of key issues on our agenda.  We raised nine key issues - one of which was the ongoing tracker mortgage investigation.

Below is an extract from our submission to the Committee on the tracker mortgage issue and the issue of culture within the banks.  The full submission is available here.


Tracker Mortgages

The recent revelations in respect of tracker mortgages are totally unacceptable.

FSU welcomes the role this Committee has played in highlighting the serious questions that exist about tracker mortgages.  It is an issue of concern to our members as many have loans from the institution they work for and have faced the same difficulty as other customers have experienced. 

 The Central Bank review and policy requiring banks to commit to a redress scheme is welcome but we believe a number of initiatives need to built upon in order to address this issue, not just retrospectively but for the future.

  1. All banks and financial institutions need to commit to the redress scheme and agree to compensate customers fairly and reasonably. It is important that an effective appeal mechanism is in place if agreement cannot be reached directly by a customer and their bank. 
  2. We believe it would be positive if the Central Bank would produce an interim report highlighting the progress to date in relation to the scheme; identify the facts that led to the problem developing at the outset; and identify the key remaining questions that need to be answered. 
  3. A commitment that all bank staff that had loans are treated fairly and reasonably and are given the same resolution as other customers of the Bank.
  4. The Central Bank should set out, in very clear terms, policies and procedures to address what happens in similar situations into the future to ensure that the circumstances that led to this controversy should not happen into the future.
  5. The Central Bank should clarify what prevailing rate should apply as a part of the redress scheme and a mechanism needs to be put in place to ensure this is fair and reasonable, in the interest of the customer as well as in the interest of the Bank. 

FSU acknowledges that this is a complex matter but it is in all parties’ interest to ensure that an amicable resolution takes place within the parameters of the redress scheme. 


The Culture of Banking

 The Financial Services Union has set out previously its clear view that the culture of banking was a contributing factor to the financial crash and we are more than aware of the hardship and sacrifice faced by bank staff, customers and the taxpayer generally. The effect on individual families, communities and the wider economy is still keenly felt.

It is a fact that we are seeing– albeit in narrowly defined terms – a recovery in the banking sector.  Many banks are now reporting year-on-year growth and a return to profitability. 

We cannot, however, allow the indices which drove the last financial crash (focus on maximising profit and share value at the expense of staff and customers) to be the sole arbiter of the health of the banking system.

Even since the crisis we have witnessed many leading international financial services companies ignoring the lessons of the past.  Regulators have imposed fines for mis-selling, and interference with libor rates.  Recently in the UK we saw jail sentences handed down to bank executives and others who abused their position to defraud small and medium sized businesses.  The fact that this behaviour is still found in the industry post-2008 is frightening. 

If we are serious about learning the lessons of the crash, the culture of banking needs to change significantly. 

It is the Financial Services Union’s view that the needs of customers and communities should be on a par with repairing balance sheets and returning to profitability. Any retrospective review of banking will see that actions such as pursuit of growth and profit at the expense of customers, staff and local economies cannot be repeated.

In the past, Financial Services Union set out a number of initiatives that need to be taken to address the culture of banking and these include the following:

  1. Change the make-up of Boards of banks/financial services companies to include employee, customer and regulator representatives.
  2. Ensure that Boards of banks reflect our increasing diverse society and diverse customer base of banks.
  3. Move away from target-based sales growth as the main evaluation of success of financial services companies and staff in those companies.
  4. Far greater focus needs to be placed on customer service and value for money, transparency and long term success rather than short term indices.  Strategies on pay for the future need to move away from performance linked sales measures to skills based pay determination. 
  5. Pay also needs to demonstrate a reasonable relationship between the highest and lowest paid within an organisation.
  6. Enhanced strategy within the banks to remove the culture of fear which unfortunately still has a presence in the industry. 
  7. The adequate use of resources to assist frontline staff in dealing with the changing nature of banking. Understaffing and lack of resources is a major factor for many of our members who endure unreasonable workplace stress. 

 FSU’s views on culture pre 2008 were provided in our submission to the Banking Enquiry in 2015.  The period from 2008 to 2016 has been a time of restructuring in the industry and given the Banks move to profitability it is now timely that the issue of culture is reviewed again and the right tone, beginning with those at the top, is established within the industry. 

 The union acknowledges that some organisations have commenced work on this agenda (involving FSU in this process).  While welcome, this cannot be a matter left to each institution to do willy-nilly or used as an issue solely of competitive advantage or disadvantage.  The reality is the culture needs to change.