Public statement relating to Settlement Agreement between the Central Bank of Ireland and KBC Bank Ireland plc

Date24 September 2020
The Central Bank of Ireland
KBC Bank Ireland plc
KBC Bank Ireland plc reprimanded and fined €18,314,000 by the Central Bank of Ireland
for regulatory breaches affecting tracker mortgage customer accounts
On 22 September 2020, the Central Bank of Ireland (the “Central Bank”) reprimanded and
fined KBC Bank Ireland plc (KBC” or the “Firm”) €18,314,000 pursuant to its Administrative
Sanctions Procedure (“ASP”) in respect of KBC’s serious failings to certain tracker mortgage
customers holding 3,741 customer accounts from June 2008 to October 2019. KBC has
admitted in full to 12 regulatory breaches.
The Central Bank has imposed a fine at the highest end of its sanctioning powers, reflecting
the gravity with which the Central Bank views KBC’s failures. The impact of KBC’s failings on
its customers, which related to 3,741 accounts, was devastating and included significant
overcharging and the loss of 66 properties. Additionally, KBC’s engagement and co-operation
with the Central Bank’s Tracker Mortgage Examination (the TME”) was deeply
unsatisfactory. KBC caused avoidable and sustained harm to impacted customers due to the
Firm’s unwillingness to acknowledge its failings until December 2017 and to take immediate
action to apply the protections of the TME. Had KBC adhered to the TME guidelines sooner,
without the need for significant and sustained Central Bank intervention, the harm to its
customers particularly incidences of property loss - would have been significantly reduced.
The Central Bank determined that the appropriate fine was €26,162,857, which was reduced
by 30% to 18,314,000 in accordance with the settlement discount scheme provided for in
the Central Bank’s ASP
. This will be paid to the Exchequer
The Central Bank’s ‘Outline of the Administrative Sanctions Procedure’ provides for an early settlement
discount of up to 30% in order to promote early resolution of matters, which in turn leads to better utilisation
of the resources of the Central Bank.
All fines collected by the Central Bank are returned to the Exchequer.
This fine is in addition to the 153,524,363 that KBC has been required to pay to date in
redress and compensation and account balance adjustments under the TME to its impacted
tracker mortgage customers.
The enforcement investigation, which was conducted in parallel with the TME, sought to
determine how and why KBC failed to fulfil its obligations to their customers. The
investigation also examined KBC’s failure to adhere to the Central Bank’s requirements under
the TME.
Over the course of 2008, tracker mortgages were becoming increasingly unprofitable for KBC,
resulting in the withdrawal of the product by July 2008. The Central Bank’s investigation found
that in doing so, KBC failed to treat its existing tracker mortgage customers fairly and put
KBC’s financial interests above the protections their customers should have been afforded. In
particular, KBC’s failures resulted from:
(i) A proactive strategy to convert customers off their tracker rates: In 2008, KBC
devised a strategy to permanently convert certain customers from their low-cost
tracker rates. This applied to customers seeking fixed rates or interest only periods
at a time when KBC knew that trackers were unprofitable for them. KBC failed to
adequately warn the customers concerned that such amendments would result in
the permanent loss of their tracker rates. The impact of this strategy was that
certain customers, some of whom were already in financial distress, were required
to make higher monthly mortgage repayments over the remaining term of their
mortgages. This in turn increased the profit margin KBC made on these mortgages.
(ii) Failure to adequately warn customers entering interest only or fixed rate periods
that they would be unable to return to their tracker rates: At a time when KBC
was withdrawing tracker products, it failed to provide customers with clear
documentation and/or to provide customers with vital information that their
request to fix their interest rate or move to an interest only period would lead to
the permanent loss of their tracker interest rate. KBC also failed to warn
customers seeking an interest only arrangement that they stood to pay more
interest over the lifetime of their loan.
(iii) Failure to adequately comply with the Central Bank’s Framework for the TME:
KBC failed to adhere to the guidelines set out in the Central Bank’s TME
Framework, requiring significant intervention from the Central Bank to ensure that
all impacted customers were identified, redressed and compensated.
(iv) Failure to adequately comply with the Stop the Harm Principles of the TME: From
the outset of the TME in December 2015, KBC failed to take adequate steps to
prevent customers from suffering any further harm or detriment pending the
outcome of the TME review. This included failing to stop charging higher, incorrect
rates of interest and failing to halt legal activity and loss of ownership of
customers’ properties. Of the 66 properties referenced above that were lost as a

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