The banks and their regulators seem to be further apart than ever on the issue of culture. Central Bank deputy governor Ed Sibley recently launched a broadside on the banks, and how they have to be cajoled and forced into doing the right thing.

It isn’t the first time Sibley has had a pop at the banks, especially in relation to the tracker mortgage scandal. This time, he was even more comprehensive, throwing in a few grenades on how they charge interest rates, short-term thinking, relying on customer inertia and even a creeping hubris.

None of this is surprising, except that it appears Sibley has the clear impression that not a lot has changed with the banks.

Leopards don’t change their spots and all of that comes to mind.

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But the tracker scandal happened several years ago and it has cost hundreds of millions of euro.

If Sibley is right, and he is very much on the inside track, banks have a massive distance to go to improve their culture.

But this isn’t just an Irish phenomenon. The head of KBC Bank Ireland’s Belgian parent rounded on the Central Bank for its continued focus on the tracker mortgage scandal and lenders’ other past sins, saying this “nitty-gritty stuff” is holding back the industry.

“What is still an annoying thing is all (the) tracker mortgage stuff and, honestly, we would recommend to the Central Bank of Ireland: come on, guys, turn the page,” KBC Group chief executive Johan Thijs, told analysts on a call on Thursday. “We’re focused on doing business,” he said. “We’ve learned our lessons, we know what to do.”

Clearly, Sibley doesn’t agree with Thijs, who issued an apology on Friday evening. This massive chasm between the two sides does raise some interesting questions about what is best for customers and the economy.

The Central Bank itself was slow to really come down hard on the banks over the tracker scandal. If what they did wasn’t illegal, was it wrong? Clearly it was wrong, but the Central Bank in the past had its own culture of light-tough regulation, where unless something was very clearly illegal, it let it go. Take the €5.4bn collapse of Irish Nationwide, for example. Now, a much-changed Central Bank is criticising the bank culture for focusing too much on what is legal or not legal, as opposed to what is right or wrong.

The banks are clearly annoyed. They are annoyed with Central Bank mortgage lending caps that are holding back growth in that market. Some bankers are annoyed at the stance taken by certain Central Bank employees, who they believe are focusing on ‘nit-picky’ details about things which they do not see as being particularly relevant.

Banking sources I have spoken to complain privately that in their view, the regulators have become too technocratic and in some cases, are actually focusing on the wrong stuff.

Surely it is healthy to have a level of tension between the regulators and the regulated. In the past, their relationship was far too cosy. This has to be a good thing.

But this latest spat looks like much more than just a healthy level of tension. Instead, it implies a massive gulf between the views of bankers and their regulators.

Perhaps the outstanding probes by the Central Bank into individual banks and bankers, in relation to the tracker mortgage scandal, are stoking a lot of tension behind the scenes. Bankers should realise it is a battle they simply cannot win.

Plenty of cash under the tree at Spar this Christmas

One of the points that Ed Sibley made about banks was that they should be there for their clients when things go wrong.

Well, things certainly went wrong in the crash for BWG, the Irish company behind the Spar brand here. Yet it is a tale with a happy ending. There will be plenty of money under the tree at Spar this Christmas. BWG management, including Leo Crawford, John Clohisey and John O’Donnell, are to share a €41.5m payout as they sell down their 20pc stake in the group in two tranches.

After buying the business at the height of the boom in 2006 for more than €300m, the economic crash hit them hard. They spent the guts of eight years trying to manage the business in a massive recession while dealing with their bankers, who were owed around €230m. In 2013, the banks agreed a restructuring of the debt, in which they collectively took a €100m write-off.

The three sold 80pc of the firm to the Spar Group, a listed South African company, for €55m, while it absorbed remaining debts of €130m. They lost a lot of equity but were still in the game. It was a great deal.

That deal valued the equity in the business at €68.7m. Now, five years later, the business is being valued at over €400m, higher than its original boom-time value.

It is a real turnaround success story for the management team after what has been a long, hard road. They made assumptions about the Irish economy and the value of Irish property during the boom years which proved to be wrong. No doubt, they have learned their lesson and it has not been easy.

But it is an interesting test case for the banks which were willing to take a write-off to save the company. Famously, Larry Goodman owed 33 banks a total of IR£300m (€380m) after his business collapsed. He bought the business back for £50m and the banks took a write-off of most of the money. But 10 of the 33 banks continued to finance him. The company has grown exponentially since then.

When the banks at BWG see the Spar Group buy a business for €67m in 2013 which is six years later worth €415m, they may wonder if they could have done a better deal. Who can say?

Eir broadband figures show tough road ahead for NBP

‘Build it and they will come’ doesn’t always work with rural broadband. Eir’s latest quarterly figures provide some insight into the costs and challenges that will await the new National Broadband Plan (NBP).

Eir has understood the long-term value of investing in its network if it wants to win new customers with new services. Its ebitda was up 2pc in the first quarter of its financial year, despite a 3pc dip in revenue.

After rolling out fibre broadband to more than 300,000 rural homes, it now plans a massive €1bn investment programme for urban and suburban areas. Its broadband customer base grew by 20,000 in the year to Q1 2020. However, within that mix, it gained 23,000 wholesale broadband customers and lost 3,000 retail customers. The firm blamed “competitive discounting and sport content” for the loss of retail customers.

In the 12 months to the end of September, its fibre-to-the-home rollout passed a further 115,000 premises to an impressive 401,000. But where are all the extra new customers?

Eir is probably winning some new rural fibre customers but also losing customers elsewhere. Nevertheless, the rollout should provide a massive opportunity to gain new broadband customers.

Industry sources suggest the rural rollout has seen a take-up of less than 25pc. What does that mean for the NBP, which will have to pay Eir for use of part of its network, and then incur much greater costs as it provides fibre to more remote homes, which may not even take it up?

The NBP has become a political imperative, especially with an election looming. It will be costly.

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