AIB chief proposes 'mortgage buyouts' to ease loans crisis
Published 29/07/2011 | 05:00
STRUGGLING mortgage holders look set to be thrown a lifeline after a senior executive of state-owned AIB suggested a new "mortgage buyout" scheme for homeowners.
The scheme, proposed by AIB chairman David Hodgkinson, would see banks buying the homes of troubled borrowers and renting them back to the occupants.
Speaking at the MacGill Summer School in Glenties, Co Donegal, Mr Hodgkinson said the plan was one of a number of solutions presented to the Central Bank by AIB. Banks needed to find solutions for people who can't pay -- rather than those who won't pay -- their home loans, he said.
He also said that while candidates to become chief executive of the bank were aware of the €500,000 government cap on salaries, a long-term incentive plan over five years could help to secure the right person.
The AIB executive chairman warned that banks must charge more for credit if they were to achieve commercial viability .
It was "simply not possible" to build a sustainable future for any bank that was lending funds without getting a return.
And he asked the Government to consider the appointment of a 'pay czar' for banks in line with the US model "to avoid the pitfalls of the past".
Mr Hodgkinson told the schools that AIB was training staff on how to deal with business.
"Our aim is to demonstrate we want to lend and to re-establish our role as trusted advisers to our customers," he said.
On the issue of personal loan arrears, staff were being trained with the focus on keeping families in their homes through a variety of restructuring options.
He claimed that the relationship between government and banks had "become more distant" than was good for society and he called for an open and trust-based relationship "with no surprises on either side".
"The distrust of bankers, however merited, will not ultimately resolve the problem of limited lending which needs us all to work together for its revitalisation.
"We in the banks must constantly challenge our tendency to believe 'we know best' when it comes to how to run our business," he told the school.
The bank chief also warned that talk of leaving the euro was "dangerously naive".