Wednesday 20 March 2019

PTSB accused of 'cop out' by using vulture funds to sell off failing mortgages

EU finance chief Danièle Nouy has advised different options
EU finance chief Danièle Nouy has advised different options
Kevin Doyle

Kevin Doyle

Permanent TSB has been accused of a "cop out" after the European Central Bank indicated options other than engaging vulture funds are available for it to reduce its non-performing loan book.

While EU regulators want banks to shrink their non-performing loans (NPLs), it does not have a preference for how this is achieved.

A letter from chair of the ECB supervisory board Danièle Nouy has prompted Fianna Fáil to call for a rethink of PTSB's approach to €3.8bn of impaired home loans.

The expectation is the bank, 75pc owned by the State, will sell the loans to an unregulated vulture fund in the coming months.

Writing to Fianna Fáil ­finance spokesman Michael McGrath, Ms Nouy said ­guidelines from the ECB say banks should look at NPLs with "not just a single strategic option, but rather combinations of strategies/options to best achieve their ­objectives over the short, ­medium and long term".

She cites a range of strategies for dealing with troublesome loans, including forbearance measures, active portfolio reductions, change of exposure type and legal options.

Ms Nouy adds: "The ESB has not expressed a preference for some NPS reduction tools rather than others."

Responding to the correspondence, Mr McGrath said the "significant takeaway" was that PTSB can select "a range of solutions" for reducing its NPLs.

The bank has emphasised the pressure imposed on it by "European authorities" to tackle its high stack of non-performing loans, which stand at 28pc of its loan book - the highest among the Irish banks.

PTSB said it is "not alone amongst banks in the eurozone or in Ireland in having to deal with a significant NPL issue".

But Mr McGrath said: "I certainly do not believe the banks have explored all of the options. Banks are outsourcing their dirty work. It's a cop out."

He introduced a bill into the Dáil last night that will bring funds under the remit of the Central Bank.

The move comes after behind the scenes talks involving Mr McGrath and Finance Minister Paschal Donohoe.

The Government has agreed to back the Fianna Fáil bill, although it may suggest amendments as it progresses through the Oireachtas.

Speaking in the Dáil last night, Mr Donohoe said banks off-loading mortgages to third parties is "an emotive issue and people are understandably fearful".

But the minister warned that politicians "must be careful that any actions we take to further protect borrowers whose loans are sold do not have unintended and very negative consequences".

He said even if the EU wasn't pushing banks to reduce NPLs it would have "been incumbent on the individual banks to take action".

Mr Donohoe said the Government will back the Fianna Fáil bill but there are "significant drafting issues".

Among a list of concerns listed by Mr Donohoe was "how we square the circle of the practicalities of regulating loan owners who are based outside Ireland with the free movement of capital in the EU and with EU competition law".

Irish Independent

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