Elderfield welcomes 'step up' in debt relief

Central Bank deputy governor Matthew Elderfield has welcomed indications from Irish banks that there will be “a step up” in the number of homeowners who can access “carefully targeted debt relief”.

Speaking at a lunch held in Dublin by the Institute of Directors yesterday, Mr Elderfield said it was “encouraging” to hear more than one bank chief executive acknowledge that an increasing number of indebted homeowners “at the threshold of repossession” will be able to avail of “long-term loan modification” if they co-operate with lenders.

The number of repossessions will “inevitably rise significantly”, he noted.

However, he added that “wider industry recognition” of the merits of a balanced approach was important.

“For customers the key message is one of full engagement with their bank, meaning being available for contact, making a full disclosure of your affairs and actively working with the bank to discuss possible solutions.”

Mr Elderfield said banks’ capacity for dealing with arrears was “still short of ideal”, despite improvements over the past 15 months.

“Now is the time to see real delivery. It is important that this involves a more realistic mix of solutions for borrowers.”

‘Reasonable effort’

His remarks follow Central Bank governor Patrick Honohan’s warning last week that there would be “consequences” for borrowers who do not co-operate with lenders and who refuse to make “a reasonable effort” to repay. Mr Elderfield also advised the directors attending the event to avoid management “group think” by ensuring that their boards comprise people with a mix of skills and backgrounds.

If directors look around the boardroom table and find that they are “all the same sex, ethnicity, nationality and educational background”, then the board probably won’t be able to provide “the right degree of management challenge and a willingness to ask the awkward questions”, he suggested.

The deputy governor also highlighted an “uneven” quality in financial services firms’ statements on the level of risk that they undertake.

“Even at some of the larger and apparently more sophisticated firms we have been surprised by the lack of rigour and quantification in some cases.”