Thursday 23 November 2017

Troika looks to ease banks' tracker losses

Craig Beaumont: IMF mission chief for Ireland
Craig Beaumont: IMF mission chief for Ireland
Colm Kelpie

Colm Kelpie

A RANGE of potential solutions for easing the costs to the banks of loss-making tracker mortgages are being examined by the troika, but it's still not clear when, or if, they'll be unveiled.

These include potentially using Europe's permanent bailout fund, the European Stability Mechanism, to ease the costs to the banks, one EU official said yesterday.

While no date has been given for solutions, it is hoped that they could be in place before the banks face stress tests early next year.

The tests are aimed at gauging the banks' financial health and the level of losses and future losses linked to defaulted home loans and property lending.

The International Monetary Fund (IMF) mission chief for Ireland, Craig Beaumont, said there was technical work going on into a range of solutions but wouldn't give any hint, other than to say that "all sorts of financial engineering can be applied".

About two-fifths of AIB's loan book are tracker mortgages while Permanent TSB is particularly badly hit, with the loss-making loans making up about €15bn of the bank's loan book.

The bank loses money on the mortgages, which are linked to the official euro rate, even as they are being fully serviced, because customers pay less to borrow from Permanent TSB than it pays to borrow on the markets.

Stress tests on the banks are expected to be held early next year, about six to eight weeks ahead of a wider round of assessments carried out throughout Europe.

A preliminary assessment of the banks' balance sheets is expected to be carried out before the end of November.

Meanwhile, the IMF/EU/ECB troika of lenders completed their penultimate review under the terms of the bailout yesterday.

The IMF urged the Government to put significantly more resources into tackling long-term unemployment.

It comes as the Government unveiled its new plan to deal with the problem, promising to take 75,000 people who are long-term out of work off of the dole queues.

At the conclusion of its latest review mission, the Washington-based lender urged redeployment of staff with suitable skills and training to try and get people back into work.

"Reducing unemployment remains a key challenge," the Fund said in a statement.

"The Pathways to Work initiative moves in the right direction, but significantly more resources are needed to ensure meaningful engagement with job-seekers, especially the long-term unemployed.

"Thus, the mission urged timely redeployment of staff with suitable skills and training, supported by private sector provision of employment services."

However the IMF said that while unemployment remains high, it has dropped to a three-year low.

It also forecast modest growth this year amid predictions that the international economy would recover and the domestic economy would stabilise.

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