The Irish banks have shamed their industry and the country, the Oireachtas finance committee chairman, has said.

Fianna Fáil TD John McGuinness said there is an urgent an need to break the “disgusting culture” that exists in Irish banks and that the Central Bank is not fit for purpose.

Mr McGuinness was commenting following the tracker mortgage scandal in which tens of thousands of homeowners have potentially been caught up. The scandal saw banks wrongly refuse customers access to tracker mortgages after the crash. Some of those who were overcharged went on to struggle to meet their repayments, and some lost their homes through repossession.

Central Bank

The Central Bank on Wednesday said it remained in dispute with some banks about the extent of tracker-mortgage overcharging, The State’s five largest home lenders revealed the number of impacted borrowers may now be as high as 21,134.

This figure does not include the 7,100 people who had their cases settled before the Central Bank began its investigation in 2015. More than 12,000 of 21,134 will be compensated by Christmas, with the remainder to be told if they are entitled to compensation by December.

However Mr McGuinness predicted that the majority of people affected by the scandal will not be repaid before Christmas. He also claimed that many more customers will be identified in the near future which will mean a “huge problem” going into 2018.

Any change in legislation will not apply retrospectively, he told RTÉ’s Morning Ireland. The banks have challenged and manipulated existing legislation and the public would not be aware of the tracker mortgage scandal if it were not for the people who came forward to give testimony, he said. He also warned that the tracker mortgage issue is “only the tip of the scandal” with the banks.

Mr McGuinness called on the European Central Bank to send in people to introduce better practices.“The political system has abandoned these people since 2009,” he said.

“The situation needs outside focus. If this doesn’t happen then the Minister (for Finance) will get the same old story from the banks and the status quo will remain.”

Deferred action

The Government has deferred taking action against the banks over the tracker mortgage controversy as some lenders say they will not be able to compensate all customers until next summer.

Minister for Finance Paschal Donohoe has also asked the Central Bank to review the culture and behaviour of the banks to see if any further regulation or legislation is needed to protect customers.

The chief executives of the banks, who gave assurances to Mr Donohoe in meetings this week, are to be held responsible for fulfilling those commitments. “I will hold those banks accountable,” the Minister told the Dáil on Wednesday.

Inside Business on the tracker scandal

Mr Donohoe has also threatened to become an activist shareholder in the three banks in which the State holds shares – AIB, Bank of Ireland and Permanent TSB – if sufficient progress is not made by the banks in the weeks ahead.

Trust in banks

On Thursday, Minister of State at the Department of Finance, Michael D’Arcy said the Government will know at the end of the year if it can trust the banks.

“We will see if their actions match their words,” he told RTE’s Morning Ireland when asked if he thinks the banks are to be trusted to refund affected accounts before Christmas.

If the banks do not honour the refund commitment, then the options open to the Government include going to court, but that would take time, he said.

“The end of the year is ten weeks away, the banks have said that 12,000 of the accounts will be concluded by then. We will know at that stage if we can trust them.”

The banks have been dragged kicking and screaming to this stage, he added. “It is disgraceful. It is time to say enough is enough.”

Mr D’Arcy said that the Central Bank will determine the level of refund and redress, not the banks themselves.

He criticised the banks for not responding to an invitation from Morning Ireland to discuss the issue. Echoing Mr McGuinness, he said there is a need to change the existing culture within the banks, and that the banks represent their shareholders not their customers, which is wrong.

“The banks have again shamed themselves, no body else,” he said.

Ethics officers

Mr McGuinness called for the appointment of ethical officers at all the banks to over see any changes necessary. “They would act on behalf of citizens. It happens elsewhere in Europe and it works.”

The banks have handed down a “terrible culture” to the new generation of bankers who believe they are above the State, Mr McGuinness said.

“They believe they are untouchable. They do not get it, that they are responsible.”

In the Dáil, Fianna Fáil justice spokesman Jim O’Callaghan sharply criticised the banks for failing to provide representatives for radio programmes to discuss the tracker mortgage scandal.

He said their absence showed the banks knew their actions were and are indefensible.

“Banks are not above the law and they are not entitled to disregard proper principle of corporate governance,’’ he said.

Tánaiste Frances Fitzgerald said trust had to be earned by the banks because it had been deeply shattered.

She said her thoughts were with people who had been impacted by the issue.

Ms Fitzgerald said Mr Donohoe had made it clear there was a range of actions open to him if deadlines were not met.

Potentially, these were further legislation, taxation initiatives, levies and so on, said the Tánaiste.

Labour leader Brendan Howlin said Miriam Lord had wryly noted in The Irish Times the Minister had demanded two more reports from the Central Bank to join the other ones.

More than two years had passed since the Central Bank began its investigation, he added.