Mr. Jeremy Masding:

I thank the Chairman, Deputies and Senators for the invitation to appear before the joint committee. I am joined by my colleagues, Mr. Ger Mitchell and Mr. Stephen Groarke, each of whom has attended previous meetings of the committee, together with Ms Breege Timoney and Mr. Greg O'Leary.

I know that each of the various bank executives who have appeared before the committee in the past two weeks begun with an apology. I know that the committee has found the apologies to be wearing thin at times, but I must start in the same vein.

Nobody goes to work to do harm to customers, but real harm was caused as a result of the errors and failures that happened at our bank, for which we are very sorry. We are committed to doing better and working very hard to fix the situation.

Let me outline the current position. When we talk about our work in this area, we talk about three separate but linked work programmes, namely, the 2015 PTSB-specific mortgage redress programme which focused on specific issues and which was conducted under the supervision of the Central Bank of Ireland; the programme set up under the product review group which we launched in late 2015 which focused initially on tracker mortgages; and the Central Bank of Ireland's industry-wide tracker examination programme. Each of these programmes reviewed the management and administration of different categories of mortgage account in respect of entitlements to tracker mortgage products and inevitably the three programmes had a substantial overlap.

Through the programmes we have identified a total of 1,979 customer accounts which have been deemed to be "impacted". A total of 1,374 of these accounts were identified under the mortgage redress programme in 2015; while 605 were identified under the Central Bank of Ireland's industry-wide tracker mortgage examination which included work commenced under the product review group. Of course, like every other institution, our work in this area is subject to review by the Central Bank of Ireland and we are co-operating fully.

In the case of impacted accounts, all have now been offered redress and compensation. The majority have accepted and received the payments. We await acceptance of offers to complete payments for the residual number of customers. Where accounts are still open, they are all on the correct tracker mortgage rate. The majority were redressed and compensated in the second half of 2015. The final letters were issued to the remaining customers in December 2017. We acknowledge, of course, that some have chosen not to accept the payments offered. However, as both the Minister for Finance and the Governor of the Central Bank of Ireland have recently confirmed to the committee, accepting the payments now will have no impact whatsoever on a customer's ability to appeal or challenge the amounts offered, if they consider that is appropriate. As there is literally no downside to accepting the payments, I urge anyone who has yet to do so to accept them now.

The committee has, rightly, spent a lot of time in trying to understand how the problems occurred. In the case of PTSB, the core problem was that we had not provided customers with full information when they asked us to break early from an agreed fixed rate, typically in 2008 and 2009. When customers applied to break early, we did not tell them that a consequence of that request would be loss of an automatic entitlement to move to a tracker mortgage rate at the point when the fixed-rate term would otherwise have concluded had the customer not requested to break early. We have found no evidence that this information was deliberately withheld. However, we accept that we erred by not providing the right information, which is why, in the mortgage redress programme in 2015, we went back to each of the customers and worked out how much they would have saved had they moved to a tracker mortgage rate at the relevant time. As a number of members of the committee have said in recent days, this was their own money and we have returned it to them with compensation.

The number of customers identified through the mortgage redress programme was 1,374 of the total of 1,979 impacted customers across all three programmes, or approximately 70%. The bank's work under the mortgage redress programme identified certain other categories of customer whom we felt might have been disadvantaged for various unrelated issues - typically administrative errors. In September 2015 the board initiated the product review group to review these additional issues and, on an ongoing basis, to monitor and deal with any other legacy issue we might find. Given our experience on the tracker mortgage issue, I think this was and continues to be a prudent measure.

The number of impacted tracker rate mortgage customers identified by the product review group was 201 of the final 1,979, or approximately 10%. As the product review group began its work in late 2015, the Central Bank of Ireland requested all banks to undertake a fuller examination of the issues related to tracker rate mortgages in their institutions. This required us to identify any mortgage account that ever had an entitlement to a tracker mortgage rate or an entitlement to be offered one. In addition, we had to consider how changes which could occur to a customer's mortgage throughout its duration might be related to their entitlement to a tracker mortage rate, including changes to repayment dates, the use of payment holidays, switches in or out of fixed rates and so on. This required a review of the workings of 342,000 mortgages over a 12-year period.

They were reviewed according to a detailed framework required by the Central Bank of Ireland which considered both legal and regulatory requirements. This took 24 months and involved close to 200 people. At all times the work and analysis were subject to oversight by an external firm. For the sake of completeness, this last element of the three work programmes, the Central Bank of Ireland industry-wide tracker examination, identified 404 of the 1,979 impacted accounts, or approximately 20%.

An issue which has received a lot of attention since the exercise began is that of the appropriate rate. It concerns the actual tracker mortgage rate to which certain customers have been returned and, in particular, the margin above the European Central Bank, ECB, rate which has been applied to accounts. To step back for one moment, what we are doing on the tracker mortgage issue is returning to people that which was theirs: first, the money we took from them that they would not have paid if we had not made our errors and, second, the option to move to a tracker mortgage rate that had been lost to them because of the errors. The margin to which they could have returned, however, differs from account to account, depending on the particular contract a customer signed when commencing his or her mortgage or the conditions to which he or she agreed when commencing an agreed fixed rate term.

In many cases, the relevant documents set out a specific margin above the ECB rate that would apply to the tracker mortgage of which the account holders could avail at a future point in time. Where that was the case, we have given all of the relevant customers a tracker mortgage rate with the specific margin applied. For other account holders, however, the margin which would apply to the tracker mortgage to which they could move in the future was not specified in the originating documents. That is similar to what happens today in the case of other mortgages. For example, customers today move to a fixed rate for two, three or five years in the understanding they will move back to a variable rate when it ends without knowing what that rate will be. Again, we have honoured the commitment to these customers in our redress and compensation programme. The tracker mortgage rate to which they have been moved is the one for which they would have been eligible when their fixed rate term reached its scheduled end. This is actually what was applied to customers in the same situation who did not break and, therefore, reached the agreed end date of their fixed rate term. This is reflected in the wide range of margins, from 0.75% to 3.35% above the ECB rate. The particular margin applied to a particular account depends on the date at which the fixed rate reaches its scheduled conclusion.

Our approach ensures consistency between customers who have a fixed rate maturing on the same date and who each have a commitment to an appropriate tracker mortgage rate. If one customer stayed with the fixed rate term to conclusion, he or she moves to a tracker mortgage rate without disruption. If a second customer broke early from the fixed rate term and was, therefore, incorrectly denied a tracker mortgage rate, we now give him or her the same tracker mortgage rate as the first, thereby applying consistency.

The other issue which has been discussed in detail is the overall attitude of the banks to tracker mortgages after the financial crash. Again, I can only speak for Permanent TSB, but I have seen no evidence to date to support the assertion that the bank was deliberately acting against customers with tracker mortgage entitlements. The following points are pertinent in that regard. When the bank withdrew tracker mortgage products for new customers in 2008, we did not prevent existing customers from moving to where they were entitled and many did. By way of example, 47% of the balance sheet of the bank was tracker mortgages on the day the product was withdrawn for new customers in 2008 and this figure grew to 54% by the end of that year as existing fixed rate customers continued to mature on to tracker mortgages. The bank did not entice or encourage customers to apply to break early from their fixed rates. Almost half of our mortgage customers continue to have tracker mortgage rates which have operated entirely normally. In 2014, before the tracker mortgage issue exploded, my team had spent months developing and launching an innovative new product to help account holders to maintain their tracker mortgage, even where they had sold the underlying property and begun an entirely new mortgage on a new property. Of course, the bank has offered over 30,000 long-term treatments to customers in mortgage difficulties. For tracker mortgage customers, these treatments are constructed around the customer’s pre-existing tracker mortgage conditions which we have not amended or removed.

This issue should never have arisen. The errors and failings that lie at the heart of the mess should never have emerged to harm our customers and their families, but they did, sometimes in very distressing ways, for which we acknowledge our responsibility and apologise. In response, we are undertaking, through the product review group, a forensic review of all of our products. Of course, this review started with the tracker mortgage issue. We have also taken unprecedented steps to avoid further damage to customers as a result of our failures. We resourced our redress and compensation programmes to conclude as urgently as possible; restructured both our management team and the board to reflect a new focus on risk and governance; and continue to invest in product design and control. Good banking should be at the very heart of Irish society. We are committed to rebuilding the reputation of and trust in our profession.