Banks not at fault on tracker mortgage scandal

The banks are not at fault in the tracker mortgage scandal. While banks, as corporate entities, may have legal persona of their own they are not responsible.  

Some no doubt will be tempted to read this as the banks being, as ever, irresponsible.  But individuals within the banks, as yet unnamed and unknown, they are the people who are responsible for the tracker mortgage scandal.  Our fetish about blaming “the banks” is symptomatic of a wider problem. Nobody is ever at fault for anything.

Quite rightly the banks are the focus of a lot of ire.  Banks are however composed of individuals.  When we speak about the culture of banking we are not speaking about something divinely ordained. We speak instead of a human construct. This construct is maintained and transmitted across organizational generations. Changing corporate cultures is immensely difficult. Management researchers have long known that culture will always trump over strategy. That is why the government’s policy of blaming the banks as a collective entity is not just pointless is positively wasteful and harmful.

The Irish banking market consists of a few players.  All the main consumer facing banks have been dragged into the mess of the tracker mortgages. The response, from government and opposition, has been to threaten the banks with financial sanctions.  The same people who are doing the threats know full well that any such financial sanctions will be passed on to consumers. Irish banks of still rebuilding their strength after the disastrous crash.  Even more ludicrously, some of the extremes and fringes have been calling for the banks to be stripped of their banking licenses.  Quite how this would then leave the country is never specified. But it makes for a good headline.

More generally, the calls have been for more and better regulation. The central bank has not covered itself in glory in relation to its dealings with the banks. The apparatus of the state is quite happy to adopt a softly softly approach to banks, pleading and cajoling that they do the right thing.  This is the same state that is quite willing to adopt a heavy-handed, indeed a punitive approach to those people who dare to question whether not there should have to have a public sector card.  If you’re a widow who refuses to play along with bureaucracy of the state then you will have your income stopped, and have to go to court in order for the court to determine that in fact this was incorrect.  If you are a banker who has knowingly or otherwise caused individuals to have significant financial burdens as a result of your decisions, then the state will simply speak nicely to the organization and ask for it to do better next time. 

We need a complete culture change in the Irish banks.  Indeed we need a culture change across all major organisations.  We have an abundance of regulations around banking capital, around banks interactions with individuals, and around banks operational and financial risk. What we do not have is any real sense that the regulators are concerned with the culture of the banks.   A large part of the problem may be that regulators are overwhelmingly drawn from those with an economic or a legal background.  Neither of these disciplines is noted for its path breaking approach to considering organizational culture.  Economics in particular is quite resistant to taking on board the views of other areas.  

This is a pity because organizational studies have for decades been evaluating the nature, measurement, and levers for change around organizational culture. Organizational culture not only can be measured it can be changed.

It is  instructive that the central bank is to commission a study of the organizational culture of the banks, and of the major units.  A paper from the New York Fed reserve suggests, by means of a case study, how banking culture change q can be done. Beyond that it shows how existing regulatory tools can be used to effect the change in the organizational culture backs. We have the tools should we decide to use them.

 More generally we need a culture change in this country in relation to assigning blame. Nobody is ever held to account. Individual human beings make decisions around tracker mortgages. Individual Gardai input iincorrect data in relation to drink-driving. Individuals make decisions around placement of vulnerable people such as “Grace” into care or not.  Individuals within the bureaucracy of the state make decisions about imposing their bureaucratic will in relation to the public-sector card.  

We keep bringing the chief executive or equivalent of these organizations into various parliamentary committees. Prepared within an inch of their life by public relations specialists they generally give a good account of themselves, giving the minimum necessary information and where necessary eliding, avoiding, and sidestepping. This is perfectly understandable. Everyone of us would do that.  As the leader as they are ultimately responsible for the actions of their organisations. But it would be very interesting to have named individuals who actually undertook the actions to come and give an account of themselves. 

 Let’s see a principal officer in a government department  called in front of a committee and asked to account for the actions of themselves and their junior staff in relation to the public sector card;  let’s see the bank officials who actually operationalized the tracker mortgages;  let’s see gardai and sergeants who inputted information into the system around the drink-driving situation;  let’s see executive chefs in hospitals who presided over a ghastly food culture where individuals en cardiac wards are served greasy fry ups.  This no doubt will be extremely uncomfortable for each individual.  But we have a responsibility, as a moral human being, to take responsibility for actions.   Blaming “the system” depersonalizes, and ultimately dehumanizes, the decisions that are made.  Let’s name, and where necessary shame.

6 thoughts on “Banks not at fault on tracker mortgage scandal

  1. JohnB

    Read the work of William K. Black – this book in particular, is essential/mandatory reading:

    He was an actual regulator who helped put thousands of criminals in jail for fraud, during the US Savings & Loans crisis. His theories of control fraud and the part that executives play in this, plus his own direct experience in investigating and prosecuting these executives, directly contradicts your emphasis on the rank-and-file in banks.

    His experience shows that it is the executives who actually play the major role in defining the culture of these corporations – and directly play a part in creating a criminogenic environment.

    Your post just emphasises how, here in Ireland, we are not even at the most preliminary stage of discovering what is going on in the banks – more than a decade after the massive fraud undertaken by the banks, and we still only have vague discussions about the ‘corporate culture’ of these institutions…without even building on the work of economists who are already experts on this topic – instead, reverting to harmful vague discussion with an emphasis on the rank-and-file, rather than on the executives role in creating a criminal/fraudulent environment.

    That’s pretty disappointing.

    It’s not just the banks either – our own central bank threatened to refer the whistleblower Jonathan Sugarman to the police for prosecution, if he disclosed information about fraud within UniCredit – arguably, our central bank isn’t negligent, but gives strong indications of being heavily corrupted, and primarily influenced by strong regulatory capture

    Some of your students may end up working there (some past students probably already do), there’s a duty to educate them in detail about fraud, and about the history of potential corruption and fraud in our own institutions – otherwise they may be captured by and compliant with this system themselves – when instead they should be blowing the whistle.

  2. Mike Flannelly

    Very Logical. Based on your article, Bernard Byrne and Richie Boucher are responsibe for banking strategies in BOI and AIB. Thats their job.

    Pat Farrell formerly IBF was responsible for Irish banking strategies form 2004 to 2013. This would mean he was involved in banking strategies before the bankERS crash and the strategies in response to the crash.

    You can google Archie Kane mis selling if you want to check out the cv of BOI directors. Shane Ross has written extensively on Pat Farrell, Archie Kane and Richie Boucher. Ross can be hot and cold.
    We need banks alright. Low/normal profit banks to service peoples banking needs.

  3. William Morrissey

    The aggregated liquidity fund which was opened up for the banks was “manna from heaven ” if I had a loan of 1M the Bank then went with my deeds to the CB and got 1M for it , even though the property was only now worth .25M this is fraud plain and simple but of course ,there is no such thing as fraud in Ireland , now they put in recievers who sold off the properties for whatever but whatever they got for the property that SATISFIED their loan with the CB “winner alright ” but of course some of the banks which I have evidence of set up “holding companies ” and bought the properties from their own receivers
    It is only the fools are in Mountjoy

  4. Gerard

    Are Northern Ireland customers with AIB First Trust eligible for compensation if there is any wrongdoing in their mortgage setup?


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