All my Irish readers will be aware of the recent scandal involving our beloved bank AIB. In short they ‘mistakenly’ overcharged foreign exhange transaction customers by 100%.
Yes you read it right, instead of the agreed 0.5%, they instead charged 1.0%. Accidentally. For a decade. They also had to check that they were charging the correct amount, under the then regulator, the Director of Consumer Affairs. They checked, apparently, and still said everything was hunky dory. It wasn’t.
Thanks only to a whistleblower, we now know that they were overcharging.
And so to the reaction of our Finance Minister, Charlie McCreevy. He loves AIB I think. In a report in the Irish Times, it is noted that the new powers to be given to the IFSRA actually amount to very little. Here is an exerpt of the report.
Outlining the sanctions that a regulatory authority can impose on a financial institution, Mr McCreevy said the authority “may agree with a financial institution that the institution should pay an appropriate penalty, not necessarily requiring the institution to formally acknowledge its guilt”.
Am I reading that correctly? So the regulator sits down for tea with the bank and a bit of a chat. “Pay the fine lads” , “but remember you don’t have to admit you are guilty”. Could that even be defined as regulation? Are we the only country in the world to treat our banks as if they are bastions of virtue? The report continues:
Where an institution admits it has “committed a contravention, the authority can agree an appropriate penalty with that institution without going through a formal inquiry process.” If either side does not wish to avail of these options, “there is provision for a formal inquiry by the authority leading to a formal determination”.
So there is no inquiry either? The banks must be loving this, who have they employed to lobby the government? He must be a bloody genius. It’s not actually regulation at all, it seems to be a series of gentlemanly agreements between the ‘regulator’ and the bank.
I believe in other countries, where a bank has been found to be doing what AIB was doing, the regulator decided not to begin working with the bank to correct the ‘mistake’, but instead shut down all of the banks activities in that area – i.e. foreign exchange – until such time as it was satisfied that the situation had been corrected.
Of course this is Ireland. We do things differently here.