Political climate an obstacle to new mortgage lenders – bankers’ group

Banking & Payments Federation says new Bill could put potential market entrants off

Potential new entrants into the State's mortgage market are likely to "think twice" in the current political climate, as they face increased risks when writing mortgages, said Maurice Crowley, interim chief executive of Banking & Payments Federation Ireland.

The comments come in light of a new Opposition Bill that would prevent banks selling problem loans without borrowers' consent, and in the wake of the arson attacks on KBC Bank Ireland branches before in December, after the lender moved to repossess a farm in Co Roscommon.

Mr Crowley declined to comment specifically on the situation regarding Belgian-owned KBC.

“A new entrant is going to have concerns about the legislative and political environment and will have to have an eye on whether you can realise your collateral in a timely fashion [if a borrower defaults],” said Mr Crowley. “I believe you can realise your collateral in this market, but it takes three or four years longer than elsewhere. So, you have an additional set of risk factors that you mightn’t have had in the past.”

Three KBC branches were subject to arson attacks in Dublin in December. This came after the farmhouse of Michael Anthony McGann in Strokestown, Co Roscommon, was stormed by about 20 men, who attacked security workers on December 16th, after the farmer and two siblings were evicted on foot of a High Court possession order secured by the bank, almost a decade after it took proceedings against him.

The McGann family subsequently moved back into the property and issued a statement saying they condemned "all forms of violence". Independent TDs Mattie McGrath, Carol Nolan and Michael Collins were among politicians who took part in a protest, at a KBC branch, against the eviction and how the bank deals with people in arrears.

Twin pressures

Sinn Féin finance spokesman Pearse Doherty unveiled a new Bill in the Dáil late last month that would prevent a bank from selling a mortgage without the borrower's consent. It comes at a time when there are almost 28,000 cases of private home loans that are at least two full years behind in repayments. Banks are also under increasing pressure from regulators to lower their level of non-performing loans.

Mr Crowley said the No Consent, No Sale Bill 2019, if passed in its current form, would lead to unintended consequences for banks and borrowers.

“If it makes it more difficult for banks to raise funds in the wholesale markets, that will have an implication for loan pricing,” he said, adding that his member banks are being asked “a lot more questions about the political environment” in recent times as they engage with investors.

European Banking Authority data issued in December showed that Irish banks had to hold almost twice as much capital reserves against mortgages as the European Union average in the first half of 2018, as a legacy of the financial crisis. When an ongoing European Central Bank review of the riskiness of banks' assets is completed, the ratio may rise to 2.4 times, according to Davy analysts.