Banks are required to meet certain targets around customers in mortgage arrears
By Business Editor David Murphy
Many people were glad to see the end of Ireland’s EU-IMF bailout.
Leaving it behind shows the country is moving in the right direction, although it is far from the national victory portrayed by some politicians.
But the experience of an external force calling the Irish authorities to attention had benefits, too. There were parallels with the way tougher regulation of bankers fostered better behaviour.
Under the agreement with the Troika, targets had to be met by certain dates. These were the strings attached to the loans given to Ireland.
Whether those aims were achieved or not was to be made public. Not all of the goals were palatable and the Troika made some very questionable decisions.
However, among objectives set out were targets for the banks on their progress towards helping hard-pressed families in mortgage arrears. These specified improvements which the banks had to make in concluding agreements with borrowers in arrears.
By the end of last year, banks were meant to have concluded agreements with 45% of borrowers in arrears of 90 days or more. But the targets came to an abrupt halt at the end of 2014.
If a particular bank failed to meet the aims it would have to set aside additional capital – a tough condition because it would cost the financial institutions significant sums of money.
All of the banks met the targets. However, some were heavily criticised for classifying the threat of repossession as a sustainable solution. (Sustainable for the bank, presumably, but not for the family losing their home.)
The plan was not popular with the banks – which were glad to see the back of them presumably.
The targets weren’t particularly sophisticated, either. Different banks have different shortcomings in dealing with homeowners in arrears.
Sources within the Central Bank say the lenders are now given more specific directions. For example, a lender which has been particularly poor at dealing with those in long-term arrears could be given the specific objective of dealing with that category of borrower.
While the Central Bank might be relatively sanguine about an end to the practice of publishing public targets for banks, the European Commission takes a different view.
In its post-programme surveillance report, it advocates extending the practice into this year and carefully monitoring the outcomes.
But there are other reasons why the targets should be retained. Sixty-four billion of them. The taxpayer rescued the banks by €64 billion gross.
Long-term mortgage arrears, in other words people who are two years or more behind on their repayments, remain a significant issue. Despite the improving economic environment, the numbers slipping into this category is rising rather than falling.
Latest figures show there are 37,484 owner-occupier mortgages in arrears. In many of these cases, these people are in danger of having their homes repossessed. They risk being left behind as others clamber out of the economic wreckage.
Observers fear the banks are concentrating on the easy fixes, such as families who have recently fallen into difficulty, at the expense of hard-core cases.
Without new targets and outcomes published by the Central Bank, taxpayers and policymakers have less information regarding Ireland’s progress after the crash.
Publicising the banks’ endeavours to resolve these problems is an important measure – especially if individual banks are named.
As the old saying goes: sunshine is the best disinfectant.
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