‘Credit unions must consolidate and banks tackle arrears’

Further consolidation among credit unions combined with banks working their way through the backlog of loan arrears as well as a possible solution for loss-making tracker mortgages are all needed for the financial sector to return to profitability, Central Bank governor Patrick Honohan has said.

“If the banks can manage to accelerate their processing of the large backlog of troubled legacy debt into sustainable solutions, much of what is needed to restore their health will have been achieved.

“If in addition the funding of their low-yielding tracker portfolio could be enhanced — something for which technical solutions have been devised, but require wider official European agreement that does not seem likely to be forthcoming in the short-run — then, when combined with the credit union restructuring framework being implemented by the Credit Union Restructuring Board, the foundations would be well laid for the long-term rehabilitation and repositioning of the banking sector,” he told the IIEA conference on the ‘Future of Banking in Europe’.