Banks could face €50m fines for financial breaches
Banks should face fines of up to €50m for breaches of financial rules, an Oireachtas Committee revealed today.
The Joint Oireachtas Committee on Finance and Public Services said realistic sanctions had to be imposed to deter offending by institutions earning millions in profits.
In a draft interim report, due to be published next week, the committee called for credit houses to protect the identity of whistleblowers who come clean over wrongdoing.
The cross-party group made almost 40 recommendations in a bid to improve competition, transparency and compliance for the benefit of customers.
Members said the current fines of €5m for institutions and €500,000 for individuals who did not abide by the rules of the regulator were not up to scratch.
And they said sanctions of up to €50m should be imposed.
The report stated: “The Joint Committee does not consider that the penalty for institutions is an adequate deterrent considering the profitability of some of the larger financial organisations.”
The committee noted a series of scandals which have dogged the banking sector including the Allied Irish Bank foreign exchange charges, National Irish Bank overcharging and DIRT and tax evasion.
The report noted: “A consistent concern of members was that a series of infringements had taken place and had continued for some time without being detected, or if detected, without being acted on by management.”
The body was also concerned some bank personnel, who occupied senior places at the time of the scandals, remained working with institutions.
The cross-party TDs said control and management of consumers’ savings needed to be spread across a number of institutions in order to get the best deal for the public.
The draft report stated: “At the moment the structure of the banking system in Ireland is relatively highly concentrated into a small number of powerful institutions and that there is insufficient competition between them.”
The committee said that allowing customers to switch accounts would drive competition.
“If it is difficult for customers to move their accounts to an alternative supplier then banks will have little incentive to improve their offer,” the report stated.
The committee urged banks to improve the “portability” of direct debits making it easier to close and open accounts.
And they called on credit houses to ensure delays in switching banks matched those in the United Kingdom.
The cross-party group noted the need to improve the transparency of the cost of services provided by banks.
They recommended banks should be required to publish all of their interest rates and that the financial regulator should compile interest league tables to show customers the best options.
A total of 38 recommendations are to be put forward by the cross-party committee including:
Maximum fines of €50m for breaches of financial rules with a provision for a daily fines in the event of continuing infringements.
Credit institutions to afford personnel the chance to anonymously report wrongdoing – whistleblowing.
A name-and-shame policy on loan products charging excessive interest rates.
Competition Authority should review whether interest should be paid on current accounts.
Carry out an ongoing review of the regulation of bank charges.
Government should review the use of cheques with a view to reducing them to a minimum, but social welfare recipients should have the right to opt for any payment convenient to them.
Internal audit systems in banks should match those of external groups by protecting their independence and specifying procedure.
