Families have been given fresh hope that their tracker nightmare will end this year, after the Government threatened to hit banks with massive tax bills if they do not rectify the mess.
Taoiseach Leo Varadkar said the behaviour of the banks was “scandalous” after it emerged that lenders are actively frustrating the efforts of regulators.
The Government is devising a plan to hit banks with steep tax increases, after the Central Bank watchdog was accused of failing to use all its powers to resolve the trackers scandal.
Mr Varadkar warned that the Government is losing patience with the banks, who must restore the low-cost mortgages to those who should never have been deprived of them.
If the Government does not see results before the year ends, it will provide the Central Bank with enhanced powers or will increase taxes on the banks.
At least 13,000 borrowers were forced on to higher interest rates after their banks refused them their right to a low-cost tracker.
But at the moment, banks like AIB, Bank of Ireland and Permanent TSB will not have to pay any tax on profits for decades to come because they are sitting on multi-billion euro “tax losses”.
There was previously a cap that restricted their use of “deferred tax assets” to just 50pc of their corporation tax bill, meaning the other 50pc would still have to be paid every year.
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The policy was changed in 2013 when the cap was scrapped in its entirety. In one stroke then-finance minister Michael Noonan gave banks the ability to completely offset all corporation taxes.
Reversing this move is within the Government’s power and would prove hugely costly as three banks have a combined €4.45bn in deferred tax losses. Some €2.2bn of this could no longer be used to offset against their tax bills if there is a return to the system in place before 2013.
Mr Varadkar said: “It’s very much in the interest of the banks, their shareholders and staff to fix this problem, and fix it quickly.”
Finance Minister Paschal Donohoe will call in the heads of the main banks on the trackers issue next week.
The minister is also meeting with the Central Bank to see if it has all the powers it needs to deal with the scandal.
Governor of the Central Bank Philip Lane is due before the Oireachtas committee on the matter today.
Mr Varadkar was responding to a new progress report from the Central Bank, as part of its efforts to get 15 lenders to review their mortgage books.
The report found lenders are refusing to acknowledge large numbers of people that regulators reckon should never have lost a tracker.
Banks are also making “unacceptably low” offers of compensation in cases where they do agree a tracker should be returned.
They are putting some customers back on trackers, but on margins so high they might as well be on a high-cost variable rate.
It has also been revealed that up to 100 families lost homes because of banks’ failures.
Labour leader Brendan Howlin said the Central Bank had been investigating this issue for two years, but the delays were unacceptable.
He said people had suffered financial loss and great human suffering, and called on the Central Bank to name the two banks that had behaved especially badly.
Chairman of the Oireachtas Finance Committee John McGuinness said politicians were open to strengthening the regulators’ powers, but it was not using all of the sanctions at its disposal at the moment.
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