A Central Bank inquiry probing whether former CEO of Permanent TSB David Guinane participated in a suspected regulatory breach by the bank, has heard the bank's very existence was in question at the time a controversial decision was taken affecting some of its tracker mortgage customers.
Giving evidence to the inquiry, Niall O’Grady, who was marketing manager of the bank in 2009, said the bank’s deposit base had been significantly eroded over the previous years.
Mr O’Grady said PTSB had the highest loan to deposit ratio of any bank in Europe at the time and relied more heavily on mortgages than other banks in Ireland.
But he said at the time people were losing their jobs and couldn’t pay mortgages, and funding lines to fund the existing loan book were no longer available.
As a result, he said, he was asked by then CEO David Guinane to create a team to organically increase the deposit base as quickly as possible, as the alternative was that the "bank’s very existence was questionable."
The inquiry heard that around this time, in January 2009, a broker sent a query to the marketing department about a customer who had a tracker mortgage, but had moved to a fixed rate for a period, and on completion of that was seeking to return to their original tracker rate.
The inquiry was told the query resulted from an ambiguous condition, known as special condition 706, included in the loan documents of around 10,000 PTSB tracker mortgages from 2004 onwards.
Mr O’Grady told the inquiry that he had never received any query about the interpretation of this special condition before the issue was brought to his attention in January 2009 by another member of his marketing team at that time.
After that team member had consulted with others in the compliance and legal departments in the bank, a proposal was put forward that while the customer was incorrect to think they could return to their original tracker rate, an exception would be made to the benefit of the customer, the inquiry heard.
This would also be applied to any other cases where the issue arose, but only if the borrower contacted the bank, the inquiry has heard.
Mr O’Grady said he didn’t consider himself qualified to opine on the issue, as it was not something that had come before the marketing department previously.
So he brought the proposal to the executive committee of the bank the following day in the hope someone else in senior management would "own" it, or have a perspective, or better view of it than he did.
But he said ultimately that didn’t happen and instead he was asked by members of the executive committee to find out the answer to various questions around the matter.
Mr O’Grady later forwarded the proposal to Mr Guinane for approval, and yesterday the inquiry heard Mr Guinane subsequently wrote back, "OK with that."
Much of this morning and this afternoon’s sessions of the inquiry were taken up with questioning of Mr O’Grady in private session about legal advice given about the query by PTSB’s legal department, which the bank has claimed privilege over.
However, it has allowed the contents of the advice to be considered by the inquiry in private session.
Yesterday the bank heard the Central Bank had determined that it had reasonable grounds to suspect that Mr Guinane, who was CEO of PTSB between 2007 and 2012, had participated in the commission of a prescribed contravention by the bank between January 2009 and April 2010.
The inquiry heard that during the period PTSB decided to apply, or decided to continue to apply, an interest rate for tracker mortgage customers coming off a temporary fixed rate that was less favourable unless the customer raised specific queries about the new rate.
The Central Bank suspects that PTSB treated those customers who did not complain about the tracker rate that was applied after the fixed rate period, unfairly and contrary to their best interests and that this was a breach of the Consumer Protection Code 2006
The Central Bank suspects Mr Guinane, while CEO, participated in the bank's breach of the Consumer Protection Code 2006.
However, the inquiry has also heard that Mr Guinane thinks there was no contravention by the bank, that if there was, he did not participate in it.
He also thinks that it is unfair that the inquiry is taking place in 2024, when it is alleged that the contravention happened in 2009 and 2010.
His senior counsel, Paul McGarry, also told the inquiry yesterday that his client is being singled out, that he has an impeccable record over 35 years in banking and chose to bring the inquiry to public hearings so he could clear his good name.
