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Central Bank slams lenders on arrears

Tuesday, October 16 10:53:08

A top Irish central bank official berated the country's banks today over failing to solved their bad mortgages problem, revealing for the first time that almost 50,000 Irish buy-to-let mortgage accounts were in arrears.

Fiona Muldoon, director of credit institutions at the bank, told a room of bankers that a culture of leadership was missing in their industry, just as it had been in the creation of the credit bubble that led to the country's financial crisis.

She said fresh stress tests next year would be driven by the key assumptions of house prices, unemployment and arrears cure rates and that the country's lenders had to deal with the latter urgently.

"I see too much lip service to 'progress' and 'meaningful resolution' and not enough to 'reality'. I see too much 'give the Central Bank exactly, literally, what they asked for' and not enough true dialogue and meaningful engagement to find a solution," Muldoon said in a speech.

"I see way too many 'Extend and Pretends' masking as solutions... Yes a lot has been done but the hard stuff is only getting started and it is taking too long, and too much of it is driven by the regulator."

In an accompanying presentation, Muldoon produced the first preliminary, collated central bank data for the buy-to-let sector, showing 49,000 accounts worth a total of 13.6 billion euros had been restructured at the end of June.

The central bank will start producing official figures for the sector from the third quarter.

It said in August that 123,472 residential mortgages were either in arrears or had been restructured at the end of June, representing some 16.2 percent of that market.

John Reynolds, chief executive of Belgian financial group KBC's Irish operation and the president of the Irish banking federation, disagreed with Muldoon's appraisal.

"The banks are, as they should be, devoting huge resources to customers in difficulty and while results of this engagement are frustratingly slow to be evident in statistics due to the scale of the problem, the measures being taken will prove to be effective over time," he said.

"All of the banks, my own included, have been dealing very ably bit by bit with the tasks we have to address... That will become evident over the next couple of years."