It will be easier for banks to sell non-performing loans to third parties, including to so-called vulture funds, under new plans announced by the European Commission.
The plans, revealed yesterday, will reduce the high level of non-performing loans in banks across Europe.
In Ireland, according to the report, 11.2% of all loans are non-performing, a decrease on a year ago.
However, Permanent TSB said, yesterday, that a whopping 26% of all of its loans are in arrears.
A proposed sale of 14,000 home loans, by Permanent TSB, has caused significant political controversy. But, under the EU plans, the power of the banks to deal with non-performing loans will be increased.
One of the key proposals involves allowing banks to recover collateral from debtors without having to go to court, to prevent a build-up of non-performing loans.
The plan will exclude home loans, but will include loans to businesses, and opposition politicians have raised fears about what this could mean for Irish firms.
The commission is also proposing that banks set aside greater amounts of money, in reserve, to cover losses on non-perform- ing loans.
Michael McGrath, Fianna Fáil’s spokesman on finance, has said he is concerned that this directive has the sole aim of protecting large corporations, ahead of the needs of the consumer.
Speaking to the Irish Examiner, Mr McGrath said: “It is a concern and it is confirmation that this is to clean up the banks at all costs and without a proper regulatory structure in place. I find it incredible that the EU did not see fit to regulate the so-called vultures,” he said.
“It would be far more advisable for the EU to bring about a proper single market for financial services. Irish people are paying rip-off prices in insurance and can’t buy insurance available in other countries.”
Central Bank governor, Philip Lane, at the weekend, said that his organisation was not demanding that banks sell loans to improve their balance sheets, despite the banks saying that it was.
Mr Lane said that banks can resolve non-performing loans through multiple channels, including workouts, restructures (including accounting write-offs), foreclosures, and sales.
He said: “It is clear that NPLs have been reduced through restructuring and re-engagement between lender and borrower, with both banks and non-banks pursuing restructuring, where possible.”
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