Central Bank warns bad loans ‘tip of the iceberg’

The high level of non-performing loans still being worked through after the financial crash is just the tip of the iceberg, the Central Bank’s new director of credit institutions supervision has warned.

Central Bank warns bad loans ‘tip of the iceberg’

The elevated level of loans mired in arrears is the visible element of the financial crash but “the even higher level of restructured commercial and mortgage debt is the rest of the iceberg sitting below the surface,” according to Ed Sibley.

“Having the crisis so close in the rear view mirror, and in some aspects still with us, means that we have daily reminders of the human and economic cost of it. We cannot have a repeat,” he warned.

Mr Sibley was speaking in his first address since taking over the role in which he said the financial sector was moving from a crisis management to a crisis prevention phase.

The Central Bank yesterday also released Q1 2016 home lending statistics which showed total loans for house purchases declined 2.4% in the opening three months of the year.

Buy-to-let loans fell a substantial 9.4% during the period compared with a 0.5% drop in owner-occupied (PDH) lending, or €207m. Within the mortgage categories, fixed rate loans continued to grow in popularity compared with variable rate loans.

Fixed rate loans rose by 32% in the 12 months to the end of March while those with variable rates declined by 5.1%.

Overall, lending for house purchase declined by €563m during the same period, driven by net repayments in both PDH and buy-to-let.

As borrowers continued to pay down outstanding debt they also continued to put money away with household deposits up €2.3bn, or 2.6%, on an annual basis.

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