At the Institute of Banking today, Deputy Governor of Prudential Regulation, Ed Sibley spoke about the functioning of the Irish Mortgage Market. He warned that 10 years after the start of the financial crisis, banks must continue to reduce non-performing loans to address the dysfunction in the mortgage market and build resilience ahead of the next downturn.
The Deputy Governor said this requires continued engagement with borrowers, a willingness to enter into sustainable restructures and other avenues, including sales of loans – while ensuring the fair treatment of borrowers through adherence to the strong consumer protection framework in place.
Mr Sibley highlighted the human costs of mortgage arrears and urged anyone in arrears to engage with their lenders and/or the supports that are available. He noted that the protections, safety nets and restructuring options that are available are not going to address the underlying problems if distressed borrowers do not engage with their lender or the supports that are in place.
On future developments, Mr Sibley said the projected levels of growth in the Irish mortgage market, high net interest margins, regulatory developments, financial innovation and the continued reduction in non-performing loans should lead to increased competition in the market.
Speaking today, Mr Sibley warned that "the continued high level of non-performing loans makes banks highly vulnerable to future economic downturns, from both the existing non-performing loans, and potentially new defaults. While all the Irish retail banks are significantly better capitalised than pre-2008, they are more vulnerable than those without this legacy to future economic shocks."