Last week AIB came to the Oireachtas finance committee attempting to dispel the notion that it gave special deals to special customers following news over the large debt write-off for Kilkenny hurler DJ Carey in a settlement dating back several years.
Legal constraints about discussing individual customers prevented the bank from talking about Carey’s debt write-off, while “commercial sensitivity” in a closed reporting period limited the financial detail the bank could provide ahead of its 2022 results being published this week.
The committee had hoped to explore whether the bank followed debt forgiveness procedures that in essence ensured that debt write-offs did not come down to who you are but what you could pay. TDs and senators were left frustrated by AIB’s inability to drill down into the figures.
On private deals, outside the formal bankruptcy and personal insolvency processes, the bank went as far as disclosing that about 1,900 borrowers had 90 per cent of their loans written off in debt settlements. However, it disclosed little more on the scale of the debts, the average write-downs or the types of customers involved.
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The post-crash personal insolvency regime, created in 2012 to deal with a wave of debt that was never going to repaid, has developed a system that has matured as borrowers and most banks and so-called vulture funds have grown to accept that blood cannot be squeezed from stones.
Over the past decade the Insolvency Service of Ireland (ISI) has been keeping count of the legacy debt, mostly from the Celtic Tiger years, that has been washed out through personal insolvency arrangements, or PIAs, that have returned borrowers to solvency. About ¤4 billion of unsustainable debt has been resolved since 2012, including almost ¤2 billion in the last three years.
While debt write-offs may be hard to stomach for squeezed borrowers , PIAs serve an important civic purpose in allowing people to start again, debt-free, through a process that is far from easy. For the most part, the figures show the system has helped smaller rather than big borrowers. According to the ISI, the average PIA has dealt with total debt of €357,000 and a write-off of €158,000 – sums that do not reflect excessive activities in property speculation during the Celtic Tiger years.
When it comes to PIAs for the bigger borrowers, court-approved deals in recent years have shown that the scale of Carey’s debt write-off was not unusual.
Sunlight, it is said, is the best disinfectant. AIB could take a leaf out of the ISI’s book by providing similar or more detailed breakdowns on the figures on the bank’s private settlement deals. This would go further in supporting the bank’s case that there isn’t one rule for the rich and famous, and another for everyone else.