Allied Irish Banks PLC

The Central Bank has imposed a significant fine on AIB in respect of serious and long running failings in meeting its obligations to its tracker mortgage customers. The consequences of AIB’s prolonged failings were serious and included significant financial strain and distress for those affected and their families. Our investigation found that when AIB withdrew its tracker mortgage offering there was no proper regard or concern for the impact on its customers. What followed was a litany of failings where customers were wrongly denied their tracker entitlements and others lost their tracker rates due to AIB’s deficiencies in its provision of day to day mortgage services. In respect of many of its failings, AIB had opportunities to act in order to address those failings and prevent further breaches of its customers entitlements - AIB failed to take these opportunities. Underpinning AIB’s failings over a prolonged period of time was a culture of failing to properly consider and recognise the rights of its customers and its obligations to them. The Central Bank expects firms to place the Consumer Protection Code at the forefront when making decisions which impact customers and that where failings are identified that firms engage with their customers, and act swiftly and thoroughly to address any failings. The Central Bank also expects firms to cooperate and engage with the Central Bank in an open, constructive and meaningful manner at all times. The Central Bank welcomed AIB’s overall cooperation with this investigation.

Background to the Requirements Under the Requirements, credit institutions are required to analyse cash flows under various headings and place them in time-bands depending on when it is considered that the cash is received or paid out. Details of these cash flows are required to be submitted to the Central Bank in regulatory liquidity returns and credit institutions are required to make assumptions on the behaviour of cash flows when preparing returns. The Requirements also set out rules regarding what a credit institution’s liquidity policy should include. The contraventions in this case relate to inaccuracies in the regulatory liquidity returns and the failure to have in place adequate internal controls to ensure the accuracy of these returns. Penalty decision factors The penalties imposed in this case reflect the importance the Central Bank places on compliance with regulatory reporting obligations.

The Central Bank has taken into account:  that the firm reported these failures to the Central Bank;  the progress being made in putting structures and systems in place to address these failures;  the co-operation of the firm during the course of the resolution of the matter and in settling at an early stage in the administrative sanctions procedure. The Central Bank confirms that the matter is now closed. -end- The Central Bank remains concerned that financial institutions continue to experience control failures that result in customers being overcharged and that the timeframe for the resolution of these errors and making restitution to customers can be unduly drawn out at times. When errors occur, in addition to rectifying the error, firms should give relevant consideration to whether the error(s) is an indication that problems may exist within the firm’s systems and controls. Firms should monitor and test their internal control systems on a regular basis so that the potential for errors is reduced and that any errors are readily identified. The prevention and handling of errors should be dealt with as a priority with the necessary resources being devoted to ensure customers are protected. The Central Bank is currently consulting on a number of new measures in relation to dealing with errors to strengthen the protection for consumers including requirements to resolve errors within six months from the date of discovery and the carrying out of regular reviews designed to prevent errors arising.

PO BOX 9138 T +353 1 224 4000 College Green F +353 1 671 6561 Dublin 2 Settlement Agreement between the Financial Regulator and Allied Irish Banks, p.l.c. relating to Insider Lists under the Market Abuse (Directive 2003/6/EC) Regulations 2005 (‘the Regulations’) The Financial Regulator has entered into a Settlement Agreement with Allied Irish Banks, p.l.c. (AIB) on 21 May 2010. The Agreement arises from a breach, acknowledged by AIB, of an administrative requirement to regularly and promptly update an insider list in accordance with Regulation 11 of the Regulations. Details of the breach were provided by AIB to the Financial Regulator. AIB fully cooperated with the Financial Regulator. Specifically, the breach involved a delay of twenty days in two instances of updating the insider list relating to the release of an Interim Management Statement by AIB on 11 May 2009. AIB’s procedures in respect of its obligations relating to the maintenance of the insider list under the Regulations did not, in these instances, result in the prompt updating of the insider list. The Financial Regulator has required AIB to pay a fine of €40,000. AIB has advised that it has reviewed its procedures and practices to ensure more effective compliance with the requirements of the Regulations in relation to insider lists. 2 The Financial Regulator is not undertaking any other investigations under the Regulations in relation to the issue. There are no further related investigations.