Plan to store trackers in 'special' asset units at banks
THE government is considering moving tracker mortgages into specialised units within banks as proposals to strip them from lenders run into difficulty, it was revealed yesterday.
The Government has been in talks with its bailout partners on transferring these loans to an 'asset warehouse' to make the banks easier to sell in the future. But the loans may now be transferred into clearly defined separate units, similar to the approach taken by Royal Bank of Scotland Group (RBS).
Tracker mortgages, which are tied to the European Central Bank's key rate, account for about half of the mortgage market in Ireland and have become unprofitable as official interest rates fell and the banks' funding costs soared.
IBRC, formerly Anglo Irish Bank, was in talks about taking over the troubled loans, chief executive Mike Aynsley said in March. Freeing the banks of these mortgages would encourage them to start lending again, he said. Finance Minister Michael Noonan has said a removal of the loans would help the State sell down its bank stakes over time.
The Department of Finance yesterday said it "continues to examine various alternatives concerning the Irish banking system within the context of the evolving European frameworks".
Viable proposals to strip such loans from the lenders' balance sheets are proving hard to formulate, a source said. However, a final proposal on an asset-transfer is in sight.
The troika overseeing Ireland's bailout, the IMF, the ECB and European Commission, arrive in Dublin next week for the seventh review of the nation's €67.5bn aid programme.
John Moran, general secretary with the Department of Finance, said talks with European officials on the issue include the "complicated process of assessing the capital impact of moving assets around the system".
Against that backdrop, segregating the mortgage assets into separate units within the banks is being weighed.
The model implemented by Edinburgh-based RBS is under consideration. CEO Stephen Hester created a separate unit to reverse the $140bn (€112bn) of acquisitions made by his predecessor Fred Goodwin.
In 2009, the bank said the division would include £240bn (€300bn) of third-party assets and £145bn of derivative balances to wind down or sell over five years.
While state-controlled Allied Irish Banks has set up a unit for assets it plans to sell or run-off, it does not include tracker mortgages.
Permanent TSB, also more than 99pc government-owned, is moving risky home loans to a new internal asset-management unit. Bank of Ireland which is 15.1pc owned by the State, doesn't have a separate unit for assets it intends to sell or wind down. (Bloomberg)