Central Bank to act on problem loans

Ireland’s leading banks and credit unions are set to meet the Central Bank twice next week to discuss how an agreement on “burden sharing” relating to problem loans on their books might be reached.

On the same day that the Minister for Finance announced the ending of the bank guarantee scheme, the Central Bank yesterday also wrote to Ireland’s main lenders and representative groups for the banking and credit union sectors to seek meetings on this thorny issue.

The meetings, scheduled for next Tuesday and Thursday, are being sought by Fiona Muldoon, the Central Bank’s director of credit institutions and insurance supervision.

A spokesman said: “The Central Bank has invited banking and credit union representatives to a meeting to discuss the creation of a workable burden-sharing agreement between secured and unsecured lenders.”

It is understood that the Central Bank will seek to agree so-called key performance indicators with the banks on their problem loans.

This move comes against the backdrop of the recent introduction of the personal insolvency Act by the Government, which is designed to reform bankruptcy laws.

The Central Bank’s letters to lenders coincided with the State’s announcement that the bank guarantee, known as the Eligible Liabilities Guarantee Scheme, would end on March 28th.

Deposits

This scheme covered €73 billion worth of deposits and bonds at AIB, Bank of Ireland and Permanent TSB.

Minister for Finance Michael Noonan said the ending of the guarantee would help to pave the way for an agreement between the Central Bank and the lenders on dealing with mortgage arrears.

“Agreements will be entered into between the Central Bank and the banks,” Mr Noonan said.

He said the ending of the controversial guarantee scheme was another step along the path to “normalising” the banking sector in Ireland and assisting the three banks in returning to profitability.

Mr Noonan said the Central Bank’s discussions with lenders would be around the lenders “supplying solutions” on a case-by-case basis for those in mortgage arrears.