Banks in denial over arrears crisis, says finance watchdog

The gap between rich and poor is widening with figures showing the average income of the bottom 10% fell by 24% during 2009/10, while the income of the wealthiest rose by 6%.

As well as taking a huge hit on their income, the less well off were also hardest hit by unemployment, according to figures released by governor of the Central Bank Patrick Honohan.

Another director of the Central Bank also said banks have done little or nothing to tackle the growing mortgage arrears crisis and are in denial about the scale of the problem.

Addressing the Irish Banking Federation’s national conference, Fiona Muldoon criticised the lack of strategy and said banks had adopted a “wait and see” strategy.

“What is it that we are waiting for on mortgage arrears? The hope for an economic recovery, hope that house prices will come back, hope that the personal insolvency act will handle the issue for you? This isthe stuff of denial. Hope is not a strategy — any more than anger.”

Central Bank figures show in addition to the 129,000 residential mortgages that are in arrears, about 37,000 holders of investment or buy-to-let mortgages are behind on their repayments. Another 11,000 buy-to-let mortgages have been restructured.

Ms Muldoon, the director of credit institutions and insurance supervision at the Central Bank, warned if decisive action was not taken the bill would be “too big to carry”.

The Department of Finance said it agreed with Ms Muldoon that more needed to be done to assist people in mortgage difficulties, but it added it was up to the Central Bank to ensure banks were implementing Government-driven measures.

“We do agree with the Central Bank’s position that there is a need for action and to roll out the measures that are there,” a spokesperson said. “The Central Bank has a key role to play in terms of ensuring the roll-out of strategies to help those in difficulties.”

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