Former Permanent TSB chief executive David Guinane has launched an appeal against a Central Bank decision fining him €80,000 and issuing a public reprimand for his role in the bank’s mishandling of tracker mortgages during the 2008 financial crisis.
The chairman and sole member of the inquiry, UK barrister Peter Hinchliffe, previously found “on the balance of probabilities”, that Mr Guinane participated in PTSB’s failure during the relevant period “to ensure that it acted fairly in the best interests of its customers”.
Speaking at the beginning of a hearing Wednesday on whether Mr Guinane should face sanctions, Mr Hinchliffe highlighted, however, that “there is no finding of dishonesty against Mr Guinane” and that he “did not form an intention to harm or take advantage of customers”.
Mr Guinane was also entitled to receive better support from within the wider Irish Life & Permanent Group, of which PTSB was a part at the time, in relation to the tracker-mortgage stance that was subject to inquiry, he added.
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In a statement on Wednesday, Mr Guinane said he felt “scapegoated” by the Central Bank on the matter, and that he intended to challenge the findings.
“I have been advised by my legal team that the findings of the inquiry member are manifestly wrong for a variety of reasons,” he said.
“A full appeal has been lodged and will be heard in January and February next. The inquiry findings actually confirm that I did not consciously do anything wrong. It is telling that I have to carry the can for PTSB, which was found by the inquiry member to have acted in bad faith.
“I believe that I have been scapegoated by the Central Bank in respect of these events, which occurred 16 years ago.”
The inquiry was into whether Mr Guinane participated in an alleged regulatory breach between January 2009 and April 2010 when the bank offered a low, original tracker rate to customers coming off a period of fixed rates only after they specifically requested it or complained about it. Public hearings were held early last year.
By not extending the more favourable rates to similar customers who did not complain, PTSB – and, by extension, Mr Guinane – were found by the inquiry to have failed in their obligations under a general principle of the Consumer Protection Code 2006 to act in its customers’ best interests.
PTSB stopped offering tracker mortgages, where rates are linked to the main European Central Bank (ECB) rate, in July 2008 at a time when banks’ funding costs on internal markets were spiralling at the outset of the financial crisis.
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The inquiry centred around a special condition – known as special condition 706 – included in the paperwork of some PTSB tracker mortgages dating back to when the bank first offered this product in early 2004. This required customers who moved for a period to a fixed rate to instruct the bank as they came off this rate to put them back on a tracker rate or another fixed product.
Otherwise, they would default to a standard variable rate, the inquiry heard when public hearings took place early last year.
The ambiguous wording of the special condition led to questions in early 2009 about whether a customer opting to go back on to a tracker rate after a fixed period was entitled to a loan set at the original margin over the ECB rate, or a higher margin then on offer from PTSB.
The bank adopted a strategy in January 2009, on foot of legal advice, to only put customers who requested the original rate – or complained – on to the more favourable rate.
The Central Bank position is that Mr Guinane signed off on the strategy when he responded with the words “okay to that” on January 19th, 2009, to an email from a colleague, which proposed that only customers who contacted the bank would be allowed to revert to their original rate.
This breached the Consumer Protection Code 2006, which requires financial firms to act in the best interests of customers, the regulator argued during hearings last year.
