Allegations of an AIB whistleblower who says the bank misled regulators in dealing with corporate loans in arrears raises far wider concerns beyond the specifics of the case, the country’s leading expert on banking and corporate governance said.
Eugene McErlean — an authority on the corporate and mortgage arrears crisis in Ireland who has written extensively for the Irish Examiner — said yesterday that regardless of the veracity of the claims by the unnamed whistleblower, the process for dealing with all types of arrears across all the banks was “defective”.
Mr McErlean said that Irish banks have been given too much freedom in driving the process internally and that the supervisory oversight by external regulators should be tightened considerably.
RTÉ first reported the whistleblower had alleged the bank made its progress in restructuring bad loans appear more impressive than the situation is in reality.
It is understood the Central Bank of Ireland and European Central Bank (ECB) were contacted by the whistleblower in recent days.
AIB has been able to reduce the amount of money earmarked to deal with bad loans in recent years which has helped its improving profitability.
The whistleblower, however, alleged that the bank misled both the Central Bank and ECB in relation to its restructuring targets, RTÉ reported.
The whistleblower has reportedly worked in a division of AIB which handles bad loans.
Mr McErlean said that the problem affects arrears on both corporate and mortgage loans — and the spotlight needs to be more sharply focussed on the number of borrowers that fall back into arrears following some sort of restructure.
At the heart of the system, is a “defective system” which fails “to assess the value of the loans in arrears by the lenders because the process supervised by the regulators is defective”, he said.
For the size of the country, Ireland suffered arguably one of the worst banking collapses in world history eight years ago and regulators have still not got a full grip on the problems, Mr McErlean said.
The Central Bank said that regulators were first told of the AIB whistleblower’s allegations on Wednesday through a whistleblower’s system.
A spokesman for the Central Bank said that the ECB is looking at non-performing loans on banks’ loan books across the eurozone, including those in Ireland, and that dealing with non-performing loans was a key priority for the ECB.
“Any correspondence received by the Central Bank through its protected disclosure channel is treated seriously and examined thoroughly. We cannot comment in relation to any specific correspondence,” the spokesperson added.
AIB said it was “not aware” of the allegations when contacted yesterday.
The ECB yesterday declined to comment on the matter.
Since 2014, the ECB has held overall responsibility for supervision of Irish banks.
Domestically, politicians expressed concern over the allegations.
Sinn Féin finance spokesman Pearse Doherty said it was “deeply worrying that allegations such as this one seem to be continuously missed by the regulator”.
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