Sunday 22 September 2019

'Vultures better with writedowns than banks'

Taoiseach defends sell-off of loans

Taoiseach Leo Varadkar
Photo: Frank McGrath
Taoiseach Leo Varadkar Photo: Frank McGrath
Laura Larkin

Laura Larkin

Taoiseach Leo Varadkar has said 'vulture funds' are often better than Irish banks when it comes to their dealings with people under financial pressure.

The firms lining up to buy distressed loans, which remain a hangover from the crash on the balance sheet of Irish banks, have come under fire from campaigners and opposition TDs.

Permanent TSB, Ulster Bank and AIB have all progressed significant sales of bad loans this year to vulture funds.

However, Mr Varadkar has defended the record of the funds - and dismissed the term vulture funds as "political". "What we're talking about here is investment banks, investment funds, finance houses, you know, there are lots of different things and lots of different financial entities there and the term is used, vulture funds," he said.

"You'll know from the numbers that they're often better at writedowns of loans than our own banks are," he said.

"Our own banks tend to 'extend and pretend' rather than coming to settlements with people."

'Extend and pretend' is a term used by some critics who say banks are not entering into realistic restructuring deals and are merely kicking the can down the road.

Regulations

Mr Varadkar said that the controversial vulture funds were "increasingly" subject to the "same regulations and the same consumer protections as the banks are".

A bill brought forward by Fianna Fáil finance spokesperson Michael McGrath looks to regulate vulture funds, giving the Central Bank investigatory and enforcement powers.

Mr Varadkar said the Government was working to enact that legislation and pledged to ensure "that anyone who has a mortgage, who is repaying their mortgage, making a reasonable effort to pay it, continues to have the exact same protections, the exact same consumer protections as they would if the loan was still owned by the banks.

"That's our commitment to make sure that people who pay their mortgages, pay their bills, are no worse off as a result and have the exact same protections," he said.

Mr Varadkar also defended the practice of non-performing loans being sold to vulture funds, saying taxpayers could be hit with another bailout otherwise.

The practice of banks selling off portfolios of non-performing loans came under renewed scrutiny in recent months when it was revealed Permanent TSB sold off a batch of mortgages which included ones where borrowers were engaging with the bank. Prior to the transfer of the loan book, banks were largely expected to sell off only mortgages where there had been no engagement or effort to pay.

More than 6,000 mortgages were sold, the majority of which were split mortgages, meaning that homeowners were able to pay off part of the debt while a portion of it is parked and dealt with at a later date.

Mr Varadkar said the State-owned bank had to sell off bad loans to meet regulatory requirements and that without doing so taxpayers may be forced to pump more money into the bank.

"We wanted those that were split mortgages to be categorised as performing but we just didn't win that argument, so unfortunately they were counted as non-performing loans. PTSB was required to get those loans off its books," he said.

"If it had not done that, the bank would have found itself in a difficult position and potentially we would have had to put more money into the bank, which is something we would never do again and we managed to avoid that."

Mr Varadkar said as well as meeting regulatory standard, s the dumping of bad debt means the bank is now in a position to issue new mortgages to people.

Irish Independent

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