Tuesday 24 April 2018

Colm McCarthy: Debt write-downs must be limited

The banks will make deals with those who can't pay, but there will be no blanket debt-forgiveness.

Secretary General of the Department of Finance John Moran
Secretary General of the Department of Finance John Moran
Colm McCarthy

Colm McCarthy

THE three surviving domestic banks, AIB, Bank of Ireland and Permanent TSB, have around €80bn in outstanding residential mortgages. They face inevitable write-downs, as well as further losses on non-mortgage lending. There are resources to meet loan losses available, courtesy of the taxpayer, but these are limited. If they prove inadequate, there will be another banking crisis, so there is no capacity for across-the-board debt forgiveness.

On Wednesday, the Central Bank released its detailed requirements for the resolution of mortgage arrears by six banks that account for most of the mortgage lending in the country. There are specific time-bound targets and there will be penalties for non-compliance.

The failure to address decisively the problem of mortgage arrears to date has attracted repeated criticism from official lenders, the EU and the IMF. Progress here in that regard has been notably slower than in other countries facing similar problems. In particular, there have been very few repossessions compared to other countries.

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