Bank warns over 'unusual rules' for mortgage arrears
THE IRISH banks would require a “huge increase” in fresh capital if they adopted “unusual rules” in dealing with mortgage arrears and wrote off problem loans, the chief executive of Permanent TSB said.
Jeremy Masding told the Oireachtas finance committee in a letter that the stress tests of the banks, which identified a €4 billion capital shortfall at Permanent TSB, assumed the banks would deal with mortgage arrears as they would normally run their banks.
“Should banks now adopt exception/unusual rules in respect of any of these matters, this would have a material impact on customer repayment behaviour and the calculations underlying the stress tests would have to be completed recalculated,” he said.
This could lead to a “huge increase” in the capital required by the banks, he said in a letter following his appearance before the Oireachtas committee in July.
“It would be grossly unfair to adopt a more lax attitude to debt forgiveness in respect of customers currently in arrears, for example, and deny that same facility to customers who have worked hard to avoid arrears to date or who may ultimately fall into arrears in the future,” he said.
Mr Masding’s comments emerged as it was disclosed that the guaranteed banks rejected 38 per cent of mortgage applications in 2011.
Figures released by the Minister for Finance Michael Noonan show Bank of Ireland, AIB (excluding subsidiary EBS) and Permanent TSB received 28,501 mortgage applications last year and that 17,740 or 62 per cent were approved, (including EBS).
The figures were released in a letter to Fianna Fail finance spokesman Michael McGrath TD.
“The figures confirm that it is exceptionally difficult for somebody to get a mortgage,” he said.
“The banks keep repeating the mantra that they are are open for business but people are finding it extraordinarily difficult to get mortgages,” Mr McGrath said.
“The banks are almost looking for an excuse to say no.”
AIB, which has the biggest stock of mortgages, said that it was approving seven out of 10 mortgage applications and providing 45 per cent of all new mortgages.
The bank said it was experiencing “significant growth in its market share” and that the number of mortgages approved increased by 70 per cent year-on-year in the period to June.
New mortgages worth €156 million were approved in July, the largest monthly approval rate in almost three years, the bank said.