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UPDATE FROM KBC BANK IRELAND REGARDING THE TRACKER MORTGAGE EXAMINATION

20 December 2017

Update on Tracker Mortgage Examination

KBC reiterates its full acknowledgement of the errors that occurred in relation to the rate administration of the Bank’s tracker mortgages in the past. These mistakes should not have happened and we acknowledge that they have caused significant detriment to some of the Bank’s customers. We sincerely apologise for this once again.

We cannot undo the past but we can provide remediation and learn from mistakes. The tracker mortgage examination has been the top priority for the Bank and KBC has taken this matter very seriously.  The review of the historical documentation and account information, individual customer circumstances and influencing factors at the time is a comprehensive process. KBC has conducted this review under the examination framework in the interest of achieving a fair outcome for customers, identifying circumstances where the interaction between the Bank and certain customers has been seriously deficient or not of a standard that would be required under the framework.  While taking into account its legal and contractual commitments, in making its determination the Bank’s approach has been to ensure that the balance of consideration is in favour of the customer.

Following its statement of 25th October 2017, KBC continued its engagement with the Central Bank and is now in a position to comment on the agreed customer cohorts that are impacted.
 
Update on Customer Accounts Previously Identified as Impacted
KBC had previously identified as impacted 417 mortgage accounts (note 1), that either did not roll to a tracker rate after a fixed rate period, were moved off their tracker rate following a change to the terms of their loan (such as an interest only period), or were on the incorrect tracker margin. 

Redress and compensation payments to those customers commenced in November 2017.  In a majority of cases, full payment of redress and compensation will be made before the end of December 2017.  For the remaining cases a partial payment will be made before year end with a final payment expected before the end of January 2018.
In a review concluded in 2010, prior to the current examination, the Bank rectified 571 customer accounts.

Update on Additional Customers Accounts Identified as Impacted
In our October statement KBC had anticipated that an additional 200-600 accounts would be identified as impacted.

The Bank is now confirming that this number has increased and as a result of further review, a group of c. 2,557 mortgage accounts are now identified as impacted for a variety of reasons.  These accounts will be moved back to a tracker rate, if the account is still open, and they will receive redress and compensation:
  • c. 1,907 mortgage accounts that converted from a tracker rate to another rate product post drawdown up to the period July 2008 are now identified as impacted. 
  • c. 650 PDH (Private Dwelling Home) mortgage accounts are now also identified as impacted. These related to new mortgage applications in the period November 2006 to February 2008 that drew down their mortgage on a fixed rate with a roll off to a standard variable rate.  While these customers were never on a tracker rate, KBC has decided to offer these PDH customers a tracker rate product if the account is still open.
Payment of redress and compensation for the customers identified more recently as impacted will commence in January 2018 and complete by the end of June 2018.
 
Total Number of Customer Accounts Impacted
Overall, KBC has to date identified c. 2,974 mortgage accounts as impacted as part of this tracker mortgage examination.  
 
Customer Queries
Customers that have queries on this issue can contact KBC at TrackerMortgageExamination@kbc.ie or by calling on 01-6646983.
 
Update on Provisions related to the Tracker Mortgage Examination
In Q3 2017 KBC Bank Ireland had made a provision in its financial accounts of €54.4 million regarding the ongoing tracker mortgage examination to supplement a provision of €4.4million made in 2016.

To account for redress and compensation payable to recently identified impacted accounts, the provision regarding the ongoing tracker examination will be further increased to a total of €120.3 million, implying an additional provision of €61.5 million to be made in Q4 2017.

Notes:
(1) The 490 accounts identified as impacted in Oct 2017 have since been updated to 417 accounts as we have subsequently located additional  evidence resolving some cases and other cases have moved into other cohorts.