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AIB redundancy plan could face mortgage trouble

THE PROVISION by AIB of €1.8bn in mortgages to its own staff and other groups could cause problems when the bank lays off staff, it has emerged.

The bank's total mortgage book in Ireland came to €27.1bn at the end of 2009.

Some 64pc of this sum went to ordinary householders, while a further 29pc was loaned out to investors.

However, the bank stated it loaned the remainder to "staff and others", without providing a breakdown of this last group.

The bank is expected to announce a major cost-cutting programme later this year, while it is also expected to sell assets in order to raise further capital. Some commentators have said the final figure for redundancies could be in the thousands.

However, group managing director Colm Doherty has refused to speculate until the EU Commission issues a ruling on its restructuring plans.

It is thought lay-offs could pose difficulties if staff members holding mortgages with the bank are made redundant.

The bank insists that staff members in arrears must be treated the same as customers.

Bank of Ireland also advanced large sums to its staff. Both banks have refused to say if bank shares were used as security for loans or remortgages.

In recent comments, Mr Doherty rejected suggestions mortgage books could lead to another raft of losses.

However, UCD economist Morgan Kelly has warned that Irish banks could end up in trouble by the losses on mortgages.

The current level of arrears on mortgages to staff is not known or disclosed by AIB.

The arrears figure refers to mortgage accounts which are more than 90 days behind their agreed schedule.

Nationally, there are almost 793,000 mortgage accounts in Ireland with a combined value of €118.3bn, the Financial Regulator said.

Of these, 28,603 accounts -- about 3.6pc of the total -- were in arrears for more than 90 days, according to the latest set of figures.

An Oireachtas committee heard last month the inquiry into the Irish banking crisis will name institutions that may have been at fault, but will stop short of blaming individuals.

The preliminary inquiry, led by German economics expert Klaus Regling, is examining the "root causes" of the banking collapse and will report to Minister for Finance, Brian Lenihan, before the end of May.