Wednesday 18 October 2017

Banks win a walkover in battle of personal insolvency

THE bankers had just stopped licking their lips at the triumph for Boucher and Murphy on Thursday when Friday brought fresh music to their ears.

The Personal Insolvency Bill was published.

We all knew the bankers had been lobbying like hell for months on this battleground. Now we know that lobbying works. The result of the battle of personal insolvency is a walkover for the banks.

The Bill is primarily supposed to solve the problem of borrowers in mortgage difficulties. It does little for them. It is manna from heaven for the banks.

Anyone in mortgage debt is advised to go and talk to their friendly banker. Borrowers can appoint someone to represent them in negotiations with the bank. The friendly banker and the battered borrower can try to agree a solution.

Banks have already proposed a suite of solutions to borrowers in mortgage debt. They love to talk, soothingly, of addressing the issue on a "case-by-case" basis.

Of course, a "case-by-case" basis means picking off the borrowers one by one and bullying them. Go.

What happens if the borrower cannot agree to the banker's prescription?

Apologists for the banks protest that borrowers can always sink the deal by declaring bankruptcy.

It is like asking a captured suicide bomber if he would prefer to be shot by the enemy or to pull the pin out of his own grenade. No sane individual will take the option of bankruptcy where hope of a solution is on offer, however arduous.

The borrower is helpless. His only weapon is to commit financial suicide.

Bankruptcy carries a stigma, is an admission of failure and inhibits opportunities for three years (reduced from 12 in the Bill).

Yet the great victory for the banks is the lethal power of hidden veto that they have extracted from the Government.

No agreed deal can be finalised without the votes of 65 per cent of the creditors -- in value terms, not in actual numbers.

The reality is that one bank normally holds more than 65 per cent of the debts of nearly all mortgagers. The biggest borrower, inevitably a bank, will hold the golden share. Even if there is more than one bank involved, the bankers will gang up against the smaller creditors, wherever necessary.

Every deal will be in the control of the bankers.

Or as they prefer to refer to themselves these days, "the lenders".

What about an appeal?

There is no appeal. There is no independent mediator.

The Personal Insolvency Bill should, instead, have put all personal debts in the hands of an independent body. The bankers and the borrowers should have been forced to accept a settlement .

Ireland's bankers have got away with murder twice in one week.

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