Honohan urges more long-term debt solutions

Irish banks are still engaging in too many short-term solutions to mortgage debt and more should be done to offer long-term sustainable solutions, Central Bank governor Patrick Honohan declared yesterday.

Among those long-term resolutions for distressed borrowers, the Central Bank is prepared to support banks offering interest-only options with the loan extending beyond retirement age, he told members of the Oireachtas Finance Committee.

“We will continue our intensive oversight of the banks’ progress,” Mr Honohan said, rejecting suggestions that the Central Bank was adopting a hands-off approach and promising it would continue rigorous pursuit of the banks on the matter.

“We have pushed the banks and the consequence of pushing the banks is that actions have been taken,” he said.

Earlier, the committee heard the head of the Insolvency Service of Ireland express disappointment at the refusal of some banks to consider full or partial mortgage debt write-off and indicated that new laws may be needed to compel them to do so.

Earlier this month, both Bank of Ireland and Permanent TSB told the Finance Committee they would not offer write-offs as part of a sustainable solution to indebted borrowers.

Bank of Ireland’s group chief executive, Richie Boucher, said his bank will seek to veto any personal insolvency arrangement which includes a full or partial mortgage debt write-off.

ISI director Lorcan O’Connor told the committee he was disappointed but not surprised some banks had said they would not entertain debt write-offs.

“The legislation includes, as an option, the writing-off of secured debt. It is disappointing to see that certain creditors are saying that under no circumstances will they entertain that kind of a solution,” he said.

He also promised a ‘get tough’ policy towards banks that refuse to co-operate.

“If a creditor stands in the way of a solution, there are mechanisms available to debtors to deal with this. I believe that, on a case-by-case basis, we will achieve solutions for debtors. If, however, we meet a brick wall and do not make progress on individual cases, then we will report this back to you and we will recommend change,” said Mr O’Connor.

Fianna Fáil spokesman on finance Michael McGrath attacked the banks’ attitude to debt write-off. “They have given two fingers to the insolvency service and to the State and said they will not sign up to one of the main options which was provided for in the legislation,” he said.