Sunday 25 September 2016

Public to be asked how banks should deal with problem loans

Published 12/09/2016 | 13:51

The European Central Bank
The European Central Bank

A working group led by the Central Bank of Ireland’s Sharon Donnery has launched a public consultation on how banks across the Eurozone should best deal with problem loans.

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Nine years after the great crash European lenders continue to hold dangerously high levels of non performing loans – including soared business and property debts and mortgages in arrears. And there is as yet no common approach to tackling high levels of arrears.

The European Central Bank (ECB) has published its guidance to banks on dealing with non-performing loans (NPLs) as part of a wider consultation process aimed at mapping out common practice across member states. The consultation runs from today until 15 November, includes public hearing on 7 November.

Despite the mass sell off of property loans by banks here over the past nine years, Ireland remains a blackspot for problem debt. There was more than €50bn of bad loans on the books of Irish lenders at the end of 2015.

A “stocktake” by the ECB of loans in eight countries, including Ireland shows almost a fifth of Irish bank loans are in trouble, compared at an average of 7pc in the Eurozone. 

The ECB suggested that one reason bad loans remain high is a time lag between the time a loan restructurings is agreed between a lender and borrower and the time he bank changes its accounting of the loan. Authorities in Ireland struggled to get to grips with the scale of the Irish mortgage crisis in particular following the crash, only belatedly introducing firm targets for lenders to worth through arrears cases.

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