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UPDATE 1-KBC Bank Ireland fined 18 million euros for mortgage overcharging

(Adds details, KBC statement)

DUBLIN, Sept 24 (Reuters) - Ireland’s central bank on Thursday fined KBC Bank Ireland 18.3 million euros ($21.3 million) for overcharging mortgage customers who should have been given the option of a cheaper “tracker” mortgage, the second bank to be fined over the issue.

Ireland’s main banks, including permanent tsb which was handed a record 21 million euro fine last year, have paid out almost 700 million euros to compensate 40,000 borrowers denied mortgages that follow the low European Central Bank rate.

Ireland’s central bank launched a probe in 2015 into the product that was widely offered by Irish banks during the country’s housing boom in the mid 2000s. The country’s other lenders remain under investigation.

The central bank said KBC’s failing had a “devastating” impact on 3,741 account holders, including the loss of 66 properties, and described KBC’s engagement on the issue as “deeply unsatisfactory.”

The lender, the Irish unit of Belgian bank and insurance group KBC, apologised “profoundly” to customers impacted by its management of their mortgages.

“The tracker mortgage issue is a hugely regrettable chapter in Irish banking and one from which we in KBC have learned significant lessons,” KBC Bank Ireland chief executive Peter Roebben said in a statement.

“We deeply regret these events, and recognise that they have led to a breach of trust.”

$1 = 0.8586 euros Reporting by Padraic Halpin and Conor Humphries; Editing by Toby Chopra and Mark Potter