AIB ‘will not need another bailout’

AIB will not require another taxpayer-funded bailout because of mortgage losses, chief executive David Duffy has said.

Speaking on Newstalk’s Pat Kenny Show, Mr Duffy said: “The real question here is whether we have enough capital to deal with the realistic arrears problem and the answer is yes, absolutely we do. If you look at it, what is owed to the bank that has not been paid and that is €450m. That is a good definition.”

AIB has €3bn set aside in provisions to cover bad debts and a total tier-one capital ratio of 15.1%, which was more than adequate to cover “the quantum of losses”, he said. The biggest risk to whether it will be forced to raise capital in the future comes from a potential regulatory change included in the Basel III guidelines, said Mr Duffy.

He appeared before the Oireachtas finance committee on Tuesday, where he was on the receiving end of a huge amount of criticism for including legal letters as part of AIB’s resolution offer targets to customers in arrears.

Mr Duffy rejected this criticism and said that the Central Bank had accepted legal letters as part possible solutions. Moreover, the finance committee was too focused on one quarter, whereas, over the past eight months, 12,500 offers had gone out and 4,500 permanent solutions had been put in place, he argued.

Strategic defaulters were deemed to be customers that could pay their mortgage after making all payments needed for a reasonable standard of living yet had decided to withhold the money. Mr Duffy said the bank had targeted strategic defaulters who were in arrears of over three years.

He assured debt that was unsustainable would be written off on a case-by-case basis. He conceded that AIB had made mistakes dealing with some arrears customers, but said there was an appeals system for customers who felt aggrieved,

He declined to discuss the specific details of Ivan Yates’ high-profile spat with AIB.