Bank can’t force lenders to write off home loan debt

Philip Lane

By Eamon Quinn

The Central Bank can’t compel lenders to write down distressed mortgage debt rather than selling on the loans, but will continue to ensure all types of mortgage lenders follow the regulator’s code of conduct, governor Philip Lane has said.

Mr Lane said Irish banks have already done “quite a bit” to lower their high levels of non-performing loans. 

Along with other European regulators, the Central Bank had urged banks to deal with soured loans at a time when the economy is growing strongly.

But speaking at the launch of its annual report, Mr Lane told reporters it was not up to the Central Bank to decide the type of deal that a lender should strike with a distressed borrower, and again urged distressed borrowers to engage with their lenders.

Most Irish mortgage lenders, including Permanent TSB, have faced scrutiny this year as they prepare to sell on distressed mortgages worth billions of euro at huge discounts to so-called non-bank lenders, or vulture funds. 

Opposition politicians have urged banks to write down debt rather than selling the assets only for the mortgage loans to end up in the hands of funds which have no long-term connection with the country.

Prudential regulator and deputy governor Ed Sibley said the banks had restructured many residential mortgages. 

And there was no evidence that non-banks who had bought distressed mortgages were more aggressive in seeking legal remedies, he said.

Tracking progress in reducing non-performing loans remained a priority for the regulator this year, said the Central Bank.

The Central Bank said it turned a profit of €2.6bn last year, of which €2.1bn will go to the Exchequer, and repeated that the profits will fall in future years as it sells off crisis-era financial assets.

And despite the strong economy, the small Irish economy still faces risks because it is vulnerable to global changes such as Brexit, “which means we can grow strongly for extended periods but are especially vulnerable to negative shocks”, said Mr Lane.

“High stocks of both public and private debt and the inherent volatility of the Irish macro-financial system requires ongoing vigilance.”

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