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Forgiveness will lead to a new crisis for banks

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VOICE OF REASON: Patrick Honohan of the Central Bank has advocated a sensible way for the banks to handle the mortgage crisis. Photo: Tom Burke

VOICE OF REASON: Patrick Honohan of the Central Bank has advocated a sensible way for the banks to handle the mortgage crisis. Photo: Tom Burke

VOICE OF REASON: Patrick Honohan of the Central Bank has advocated a sensible way for the banks to handle the mortgage crisis. Photo: Tom Burke

FINANCE Minister Michael Noonan and Central Bank governor Patrick Honohan addressed the Oireachtas finance committee during the week and both took the opportunity to inject some reality into what was becoming a surreal debate about mortgage 'debt forgiveness'.

There are two types of mortgage borrower in today's Ireland. A significant number of people cannot meet their obligations in full, principally because their incomes have dropped significantly since the mortgage was agreed. A much larger number can pay but would naturally prefer not to. Hopefully the provisions in bank balance sheets will be adequate to absorb the losses from the first group. If any encouragement is given to the second group, by politicians or anybody else, there will be a renewed banking crisis and a quick end to prospects of economic recovery.


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