KBC Bank Ireland has been reprimanded and fined €18,314,000 by the Central Bank of Ireland for regulatory breaches affecting tracker mortgage customer accounts.

The Irish regulator 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 (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.

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:

  • Provided incorrect information to the Financial Regulator in respect of KBC’s treatment of certain tracker customers: In 2009, KBC advised the Central Bank that customers who sought interest-only arrangements did not lose their tracker rates for the remaining term of their loans. This was incorrect. As a result, certain interest-only customers were denied redress and compensation and an account balance adjustment until identified as having wrongfully lost their tracker through the TME 8 years later.  KBC only acknowledged that it had not treated these customers fairly following robust and sustained intervention by the Central Bank during the TME.
  • Operational and systems failings: In addition, the investigation found that KBC had inadequate mortgage systems and/or operational controls in place to enable them to meet their regulatory and contractual obligations to certain customers.

In total there were 12 separate regulatory breaches of the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 (“, the Consumer Protection Codes 2006 and 2012.

The Central Bank’s Director of Enforcement and Anti-Money Laundering, Seána Cunningham, said “The Central Bank’s investigation into KBC has revealed a stark example of the very real harm caused to people when financial service providers fail to treat their customers fairly. By placing their own financial interests ahead of their customers’ best interests, KBC failed to adequately consider their obligations under the Consumer Protection Codes, which were put in place in order to protect customers in their dealings with financial service providers.”

“Our message today is clear, and goes beyond the tracker mortgage-related issues to all regulated firms: Firms should act in the best interest of their customers and consider their Consumer Protection Code obligations when making decisions that impact their customers.  Where firms fail to do so, our response will be robust and the consequences will be serious.”