Interest Offset Mechanisms – Lifting the Veil

Interest Offset Mechanisms are a facility where two or more bank accounts are grouped for the purposes of charging interest. On a daily basis, the Bank’s computer combines the cleared balances of these accounts, and accrues interest (at a pre-agreed lending rate) to this net balance. Interest Offset Mechanisms are typically available to two or more current accounts, which are either in the same business name or in the names of related companies. Certain company law requirements must be complied with, before an offset can be implemented between two limited companies. Interest Offset Mechanisms must not be assumed to be in place. In many instances, Irish banks will not unilaterally volunteer to set one up unless instructed by the client. A typical Standard Lending Term involves offsetting between two or more current accounts, at a standard rate of 1 per cent. It is less common for offsetting to take place between a current account and a loan account. Some banks claim not to provide Interest Offset  Mechanisms to client facilities in any circumstances, while others allow only a limited offset – for example, up to a certain debit balance threshold. Some banks can, in the right circumstances, implement  Interest Offset Mechanisms between current accounts held in different branches of the same group. Interest Offset Mechanisms are a major driver of bank profitability, and can be an integral part of the lending facility structures of: public limited companies; large private companies; professional practices; not-for-profit sectors, including the public sector and charities. For example a  motor dealership might require an interest offset mechanism between: the motor dealership and the related computer...

AIB Belfry Cases

AIB Belfry cases progressing in Court Approximately 300 investors in AIB Belfry cases (out of an estimated 3000 investors in the six Funds) are pursuing damages for alleged negligence, breach of contract, breach of fiduciary duty, negligent mismanagement and misrepresentation by AIB and other parties. Last month the Irish Times reporting on AIB Belfry cases (in a preliminary ruling in April 2017) a High Court judge approved hundreds of damages actions by investors in the Belfry property funds to go to a full trial on some, but not all, of the grounds advanced. The Court found, while some elements of the claims are statue-barred, other parts of the claims can now proceed to trial. The claims involve the operation of five separate investment funds into commercial property in the UK known as “the AIB Belfry Funds”. Affidavits claim individuals invested sums of between €50,000 and €200,000 in the funds between 2002 and 2006. Some cases involved individuals’ life savings to have been designated as pension funds. Seemingly the Statute of Limitations may not protect the various classes of Defendants if fraud in the mis-selling & operation of the AIB Belfry Funds can be evidenced. Loan to Value covenants In his preliminary ruling after 11-months, Judge Haughton decided on 28th April 2017 crucially, the investors’ contentions of alleged failure to advise them about aspects of the funds known as a loan-to-value (LTV) covenant before they invested are not statue-barred. It is claimed these covenants permitted assets which the fund had invested in to be sold if their value fell below a certain amount. These asset sales, it is claimed, occurred...

Ulster Bank GRG letters – April 2017

Ulster Bank GRG seeking some type of self-redemption Late last year Ulster Bank GRG [the Bank’s – now disbanded Global Recovery Group],  produced a 3-year delayed response to the Tomlinson Report into RBS & its subsidiaries (2013) lawrence Tomlinson Report into operations of RBS  The Irish Times reported [ Ulster Bank GRG notice to Irish borrowers] on the establishment of a compensation Scheme whereby €450M was being made available by way of a dispute appeal reserve. Eligible individuals & businesses must first of all meet the following criteria (A) not have previously referred their Dispute to the Financial Services Ombudsman, and (B) not engaged in Litigation or pre-litigation communications with the Bank. Very recently Ulster Bank GRG  made direct contact with a number of potentially qualifying Borrowers, with quite an obscure account of how the Scheme will operate. It only relates to certain ‘complex fees’ as applied by Ulster Bank GRG from 2008 to 2013. Under the very narrowly defined scheme such ‘Complex Fees’ disregard Irish Interest Rate Hedging Products’ miselling. Additionally the Scheme bypasses any recognition of the understated role of Consequential Losses (or chain-reaction/ cause & affect losses). A salient precedent case on this topic is Hadley versus Baxendale (1854), beloved by many Law Students over the previous Century-and-a-half. In an appearance of Senior Ulster Bank Executives before the Oireachtas Finance Committee in December 2016, the following was put to Andrew Blair (Head of Problem Debt Management – Ulster Bank),  by Pearse Doherty (TD Sinn Fein). “Businesses believed they would be supported but, as was put to me, they were not aware that they were being put...

GDPR risk assessment

Recently in preparations for a Data Protection post-graduate Certificate, I discovered what perhaps few EU citizens are aware of -> that modern European Privacy Rights have their roots in the operations of the STASI (the former east-German Ministry of State Security) and the NAZI party in the late 1930s. One person in seven of the then east German population were informing the STASI on the rest. GDPR & DPRIA., stand for General Data Protection Regulation and Data Protection Risk Impact Assessment, respectively. This Blog uses the  term ‘Data’ in the context of ‘personal data relating to an identifiable Data Subject’ . If you are a Decision-maker in an Irish Company and your Company uses data on European Citizens then, you really do need to get familiar with the steps necessary to comply with GDPR and DPRIA.  GDPR will become mandatory from 25th May 2018 onwards, and Companies that are not sufficiently geared-up for compliance will be subject to seriously substantial financial fines in tandem with potentially greater reputational damages. By way of direct preparation for the seismic impact on 25th May 2018, GDPR risk assessment has just become  everyday terms in business strategy  for  entities that use and/or store data on citizens of the European Union and far beyond. The Regulation will put individuals in control of their personal data, empowering them to choose how (and whether at all) businesses use their data. Where an individual’s personal data is not treated in compliance with GDPR risk assessment, the affected individual will have legal recourse and a potential financial compensation claim. Additionally data protection Regulators within the EU will be adequately resourced...

Tracker Mortgage compensation 2017

Bank of Ireland Tracker Mortgage compensation being faced-up to as Movable Feast . Last month (first quarter 2017) 15-Banking Groups have owned-up to having to redress in excess of 15,000 Borrowers through a series of Tracker Mortgage compensation schemes. See also Fintan O’Toole on Banks getting away with fraud . There is now a likelihood that the Regulator will impose additional separate financial sanctions on the offending Banks (in the Regulator’s industry-wide review). The Banks’ euphemism of ‘falling short of their contractual obligations’  is an opaque reference to affected Borrowers’ being denied of their rightful opportunity to switch back from fixed Rates to tracker rates over 9-years ago. BoI is the last of the Irish Banks to set up a Tracker Mortgage compensation scheme – now apparently operational since early 2017. The 15,000 Mortgage borrowers who were impacted, represent an aggregated overcharge value of €500M over the mortgages’ lifespan. A Tracker Mortgage compensation  scheme typically allows a sum [in the region of €500] for Independent Professional Advice per case, clearly based on the thesis ‘ask me no questions and I’ll tell you no lies’. Central Bank recommend Indep Legal Advice on Redress Offers   BoI’s latest disclosures are suspect in so far as they represent a new (& previously unheralded phase-2 Tracker Mortgage compensation) whereby some 7-years ago, in 2010 it previously restored 2100 of its own customer accounts back on to tracker rates. In December 2016, the Central Bank,  confirmed that, to date approximately 100 houses have been repossessed by Irish Mortgagee Banks as a ’cause & effect’ of having been denied the right to have obtained substantially lower tracker mortgage...
Flaws in Tracker Redress Schemes

Flaws in Tracker Redress Schemes

A Conflict of Interest is something that potentially haunts members of the Professions in all democracies. On the Web Site of KPMG., (authors of PermTSB’s Tracker Redress Schemes) reference is made to a recent Wall Street Journal article1 and public comments by the Securities and Exchange Commission’s (SEC) Director of the Office of Compliance Inspections and Examinations, 2 the Financial Industry Regulatory Authority (FINRA) and the SEC are “keenly focused on conflicts of interest” for firms in the financial services sector. Further emphasizing the importance of managing conflicts of interest (COIs), SEC Director di Florio stated that “conflicts of interest, when not eliminated or properly mitigated, are a leading indicator of significant regulatory issues for individual firms, and sometimes even systematic risk for the entire financial system.”A recent Sunday Times article disclosed that KPMG were paid €8.6m by Permanent TSB in 2015 for work on the state-controlled bank’s Tracker Mortgage Redress Schemes [TMRS] and other “regulatory and compliance projects”. The payment, equivalent to a substantial 3% of the accountancy firm’s all-Ireland fee income [of about €300m a year], provides the first glimpse of how a Tracker Redress Schemes scandal will cost Irish lenders millions in fees, on top of the interest refunds and compensation they will have to pay to impacted customers. The emerging Tracker Redress Scheme scandal, is rooted in the unfair removal of low-cost tracker mortgages from thousands of home owners, is also interfering with the banks’ ability to securitise, or offload mortgages as they seek to sanitise their balance sheets. Approximately 90 of the 1,372 customers offered compensation as part of PTSB’s Tracker Redress Schemes have...