A powerful Oireachtas committee has questioned the decision of the Government to allow bailed-out banks to pay bonuses to their bosses.
The Oireachtas Finance Committee, in a report to be released today, says there is no justification for taxpayer-funded banks to be allowed to pay bonuses of up to €20,000 and put lenders on a path to free themselves from executive pay restrictions.
In one of his last acts as Finance Minister, Paschal Donohoe also lifted the restrictions on banks providing executives with non-pay benefits, such as subsidised healthcare, which has effectively been banned since the financial crisis.
But in a major report on the state of banking in this country, the Oireachtas Finance Committee has recommended that banks do not return to paying bonuses, even though this would affect ordinary staff as well as the top bankers.
Bonuses were seen as playing a key role in promoting irresponsible lending in the build-up to the 2007-08 financial crash.
The report also calls for a ban on lenders offering better mortgage rates to new customers, a move that seriously disadvantages existing customers.
Some lenders offer cash-back incentives for new customers, a move that competition authorities and academics have said in the past costs their customers more in the long run as the lenders’ overall mortgage rates tend to be higher than those of competitors.
Price discrimination between new and existing home and motor insurance customers is banned by the Central Bank, but is not against the regulations in the mortgage market.
The Oireachtas Finance Committee, which is chaired by Fianna Fáil TD John McGuinness, wants new measures to encourage more mortgage switching.
Around 150,000 borrowers are on high-priced variable mortgage rates, but many of these could switch to another lender to get lower rates.
The process is cumbersome and expensive, however, and the Finance Committee wants the process streamlined.
It has called for legislation to protect cash services, which is something that has been promised by the Government following the publication of its Retail Banking Review last November.
The closures of Ulster Bank and KBC Ireland are putting pressure on access to banking services.
Another key recommendation of the Finance Committee’s “Report on Banking 2022” is that codes issued by the Central Bank specifying how lenders are to treat people in mortgage arrears should have full legal effect.
The provisions of the Code of Conduct on Mortgage Arrears and the Mortgage Arrears Resolution Process would have to be observed by lenders and vulture funds if they had full legal underpinning.
The Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach Leo Varadkar have also called for changes to how lenders classify people who are not co-operating with them.
Figures from the Central Bank show that large numbers of those in arrears have paid nothing for 10 years or more, with many of those not responding to contact from the lenders.
Half of the residential mortgage accounts that are in arrears across the system have been in arrears for five years or more.