BANK OF Scotland (Ireland) (BoSI) has set up an internal bad loans unit to manage distressed borrowers who are in default on corporate and commercial loans.
BoSI established the “business support unit” as a sub-division of the bank to address rising problem loans across the lender.
The unit is managed by Martin Akers, who became head of risk last August following a move from an executive role at the bank’s parent company, Lloyds Banking Group, which is 43 per cent owned by the UK government.
The BoSI unit differs from so-called “bad bank” divisions created by rivals as the loans will not be run down over time but will revert to the bank’s normal operations if customers start making repayments on their loans again.
“By providing such a dedicated approach, using expertise, practices and learnings from across Lloyds Banking Group, we believe we can help more of our customers to manage through the present difficulties,” a spokesman for the bank said.
BoSI, which is led by chief executive Joe Higgins, has a loan book of about €32 billion, of which about €10 billion are development and property investment loans.
The bank has bolstered its capital against rising loan losses by taking €1.45 billion in capital from Lloyds in the UK in tranches of €700 million and €750 million over the past 12 months.
Plans to transfer about €20 billion of BoSI’s loans into the asset protection scheme, the UK government’s alternative to Nama, were put off after Lloyds decided to tap investors for cash to avoid the scheme, which would have ceded majority ownership of the bank to the UK government.
Lloyds raised a record-breaking £13.5 billion (€15 billion) from shareholders in a rights issue earlier this month. Part of the capital raised will be injected into BoSI over the coming months.
