Leeson: 60% of loans lack security

Up to 60% of bank loans given out during the boom years do not have the correct documentation to enforce the security on which they were lent, according to Nick Leeson, the former rogue trader.

Mr Leeson said Irish banks were in such a rush to lend money that they failed to correctly securitise the loans they were giving out.

“Between 40% and 60% of the secured arrears have gaps in them. All of the banks where property was used of security have shortcomings,” he said.

Mr Leeson said that in a number of cases where banks were agreeing to restructure debts, what they were actually doing was perfecting their security on properties.

Mr Leeson, who now works with GDP Partnership as a business adviser, said the first thing the group does is request a security review. If there are gaps or missing documents, this can often be used for leverage when negotiating with the banks.

“We see instances where banks turn around and can’t find the documents, it is silly stuff. They completely failed to follow their own sales structures,” he said.

“We have seen from the Tomlinson Report, which dealt with Royal Bank of Scotland — parent company of Ulster Bank — that some of the banks’ strategies for improving their financial performances are impacting on good and viable businesses and that they are manipulating the businesses’ financial positions for their own gain.”

GDP Partnership’s Conor Devine met with Lawrence Tomlinson, who headed the report, to discuss the practices of banks in Ireland.

“This is about starting a conversation across Ireland about debt and around banks and banking policy. We need to educate people about the steps which can be taken to tackle their debt in an active and positive manner.”

* Nick Leeson will present a talk on ‘Banks: Ethical or Criminal?’ at 7.30pm next Tuesday, March 25, at the Clarion Hotel, Cork City.