Business Irish

Saturday 20 January 2018

Regulator says banks not treating crisis seriously

Donal O'Donovan and Charlie Weston

DEALING with the banks is like dealing with troublesome teenagers, according to one of the most senior regulators in the Central Bank.

The Central Bank's director of bank supervision Fiona Muldoon said banks were in denial about the extent of the mortgage crisis, and were refusing to come up with realistic solutions.

In one of the strongest speeches by an official yet, she said banks talked about being humbled by the crisis but she saw little evidence of it.

"When I deal with banks I have not found humility," she told hundreds of bankers at an event in Dublin.

The banking supervisor was speaking at the annual conference of the Irish Banking Federation.

She revealed that close to 50,000 buy-to-let mortgages are in trouble, around a third of the total.

Ms Muldoon told a room of bankers that a culture of leadership was still missing in their industry, as had been the case when the housing bubble was allowed to inflate.

Lip service

"I see too much lip service to 'progress' and 'meaningful resolution' and not enough to 'reality'. I see too much 'give the Central Bank exactly, literally, what they asked for' and not enough true dialogue and meaningful engagement to find a solution," she said yesterday.

"I see way too many 'extend and pretends' masking as solutions . . . yes, a lot has been done but the hard stuff is only getting started and it is taking too long, and too much of it is driven by the regulator."

She said resolving the mortgage arrears crisis -- particularly with 167,000 residential mortgages in trouble -- was vital for the health of the economy, a view echoed strongly by John Moran, secretary general at the Department of Finance, in his address to the conference.

There had been talk of solutions for heavily indebted householders for four years now, Ms Muldoon told the conference.But nothing had happened, and instead banks had been hoping for an economic recovery that had not arrived.

"This is the stuff of denial. Hope is not a strategy -- any more than anger."

Ms Muldoon, who is one of the most senior people in the Central Bank, compared dealing with banks to parenting troublesome teenagers.

She told the bankers that her experience with the mortgage arrears resolution strategy (MARS) was too often characterised by reluctance.

"My experience of MARS so far might be considered by anyone who parents or ever has parented a teenager," she said.

Ms Muldoon said banks wait to be told what to do, they do not like it and then they criticise. "The relationship between banking and the regulator has too often felt like a parent/child dialogue, and you know what, this will not move banking out of its current difficulties."

Comment & analysis

Irish Independent

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