KBC Bank Ireland plc

The Central Bank has imposed a fine at the highest end of its sanctioning powers, reflecting the gravity with which the Central Bank views KBC’s failures. The impact of KBC’s failings on its customers, which related to 3,741 accounts, was devastating and included significant overcharging and the loss of 66 properties. Additionally, KBC’s engagement and co-operation with the Central Bank’s Tracker Mortgage Examination (the “TME”) was deeply unsatisfactory. KBC caused avoidable and sustained harm to impacted customers due to the Firm’s unwillingness to acknowledge its failings until December 2017 and to take immediate action to apply the protections of the TME. Had KBC adhered to the TME guidelines sooner, without the need for significant and sustained Central Bank intervention, the harm to its customers – particularly incidences of property loss - would have been significantly reduced. The Central Bank determined that the appropriate fine was €26,162,857, which was reduced by 30% to €18,314,000 in accordance with the settlement discount scheme provided for in the Central Bank’s ASP1. This will be paid to the Exchequer2. 1 The Central Bank’s ‘Outline of the Administrative Sanctions Procedure’ provides for an early settlement discount of up to 30% in order to promote early resolution of matters, which in turn leads to better utilisation of the resources of the Central Bank. 2 All fines collected by the Central Bank are returned to the Exchequer.

BACKGROUND KBC was incorporated in Ireland on 14 February 1973 and is authorised under Section 9 of the Central Bank Act 1971. Its principal activities are retail banking, including the provision of residential mortgage finance, deposit accounts, current accounts and consumer finance products. In June 2013 the Central Bank raised concerns with the Firm regarding its compliance with the Code and required the Firm’s Internal Audit Department to carry out a review of its compliance with Central Bank Codes generally. On 8 May 2014, and again on 26 June 2014, the Firm notified the Central Bank (as obliged to do so under the Code) of three related party lending transactions which were potential breaches of the Code. In December 2014, following these notifications and the completion of the annual Full Risk Assessment of the Firm, the Central Bank raised further concerns relating to KBC’s compliance with the Code and required the Firm to prepare a detailed report for the Central Bank demonstrating that it had taken remedial actions to ensure staff were adhering to the procedures and therefore preventing similar breaches of the Code occurring in the future. On 25 February 2015 the Central Bank notified the Firm of its decision to commence an investigation into suspected breaches of the Code. Between 25 February 2015 and 29 February 2016, and following a detailed internal review, the Firm reported a further fifteen occasions of non-compliance in relation to existing loans which were potential breaches of the Code.