Monday 18 December 2017

BlackRock to review bailed-out banks' mortgage strategies

Laura Noonan

Laura Noonan

THE Central Bank has commissioned consultants BlackRock to carry out a review into the bailed-out banks' strategies for dealing with troubled mortgages and SME loans.

A spokesman for the Central Bank said a "distressed credit-operations review" had been added to BlackRock's work this year, and that the outcome of the review would be included in the next Financial Measures Programme (FMP).

The FMP is essentially a road map for improving the banks which is produced at the end of each round of stress tests.

Traditionally, the document has focused on the banks' capital requirements, but the next one is expected to feature a broad range of action points for improving the banks.

Mortgages are seen as the main danger area for the next tests, as the banks struggle to find viable solutions to deal with unsustainable homeloans without incentivising even higher defaults.

Last year's stress tests looked at the 'asset quality' of mortgages, or the value of loans and their underlying properties, as well as 'data integrity', which looks at the soundness of the banks' information.

"The additional review involves consideration of the banks' strategies, operational capability and processes for the management of mortgage arrears," a spokesman for the Central Bank said.


"The distressed credit-operations review for mortgages is currently being carried out and the Central Bank continues to work with our external advisers, BRS (BlackRock Solutions), in this area." He added that a review on SME loans was "also being conducted".

The Central Bank has been fighting an uphill battle to get banks to proactively deal with their mortgage-arrears cases, and recently asked them to submit fresh plans by the end of the month.

Banking sources said officials from BlackRock had been gathering and analysing data for several weeks now and that the process was "more forensic" than last year's, with BlackRock looking at individual cases and demanding greater detail.

Sources said it was too early to say what impact the new review would have on banks' capital requirements, since that very much depended on what kind of assumptions the Central Bank makes about the economic outlook and repayment levels.

Those assumptions have not yet been modelled and are not likely to be modelled for sometime now following the Government's about-face last week, when it announced the next stress tests would be held in 2013 rather than this November.

Finance Minister Michael Noonan said that the tests' postponement reflected the "normalisation" of Ireland's banks, but some sources believe the tests were delayed so regulators could get a better sense of how the mortgage crisis is playing out.

Banks have been given until the end of May to submit plans for unveiling a wider range of mortgage solutions. The three bailed-out banks -- AIB, Bank of Ireland and Permanent TSB -- must also submit "operational plans" this week showing how they will increase staff in these areas and improve structures.

Irish Independent

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