BoI criticised for 'very blunt' approach to distressed borrowers

Bank of Ireland

was singled out for criticism by the head of the Insolvency Service of

Ireland

(ISI) Lorcan O’Connor at an

Oireachtas

hearing yesterday for adopting a “very blunt” approach in its dealings with distressed borrowers.

While he did not name the bank, it was clear Mr O'Connor's criticism referred to comments made to the committee by Bank of Ireland chief executive Richie Boucher earlier this month when he said his bank would veto any proposal from Personal Insolvency Practitioners (PIP) featuring mortgage write-down.

“While I was disappointed by the comments made by one creditor in particular to this committee, I cannot say I was altogether surprised,” he said.

“They were blunt about how they intend to approach PIAs [Personal Insolvency Arrangements] in particular. But making a global policy statement about how they intend to deal with applications does not take full account of the new reality – the new debt solutions, including the PIA, are designed to deliver better outcomes for both debtors and for creditors.”

'Brick wall'
Mr O'Connor warned that if the ISI "hit a brick wall" when trying to reach agreements between borrowers and lenders in individual cases it would report it to the Finance Committee and "recommend change".

Mr O’Connor updated the committee on the performance of the ISI since it starting taking applications for insolvency last summer.

He accepted the number of applications remained relatively low and the process slow but insisted that the ISI was key to resolving the personal debt crisis that has engulfed the nation since the recession started more than six years ago.

He said the ISI had focused minds and forced banks to do deals with borrowers unable to service their debt.

Solutions
He claimed that before the ISI's spending guidelines were published last April, negotiations between banks and borrowers "never passed go" but that since the autumn "we have seen a growing number of solutions" put in place.

Also appearing before the committee was governor of the Central Bank Patrick Honohan. He said it was "evident that the momentum has been established" in the mortgage crisis and that the Central Bank was starting to see "progress by all banks in working to address mortgage arrears issues".

Mr O’Connor expressed concern that communication between debtors and creditors “were too frequently verbal in nature, and they did not provide sufficient clarity to borrowers on what the ultimate solution proposed was”.

He said “short-term loan modifications are still too prevalent in some banks” while “affordability assessments were often not evident on files reported as sustainable”.