Arrears plan target raised to 75%

The Central Bank yesterday set a tougher target for lenders to offer sustainable solutions to 75% of customers in mortgage arrears of more than 90 days by the end of June.

The regulator has upped pressure on lenders as Ireland prepares to exit the international bailout programme. It had required banks to find sustainable mortgage solutions for 30% of customers in arrears over 90 days by the end of September and for 50% by the end of 2013.

Under the new target, concluded solutions should reach 35% by June, the Central Bank said.

Addressing mortgage arrears is seen as a key to cleaning up banks’ balance sheets. The Central Bank has been critical of the banks for sitting on mortgage losses and letting the problem reach crisis point.

The banks, on the other hand, argued that because of the Dunne judgment, which prohibited the repossession of homes, and the old code of conduct on mortgage arrears, which prevented contact with a customer in arrears more than three times in one month, it was very hard to get on top of the problem.

If banks fail to meet these targets, they will incur a series of capital charges from Jan 1.

The banks must undergo a comprehensive review of their balance sheets over the next 12 months.

If they fail these tests, they will have to raise further capital to cover future losses.


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