AIB agreed 1,900 deals where 90% of debt written-off after financial crash

About 1,900 AIB borrowers secured private debt write-offs of more than 90 per cent since the financial crash, the bank has disclosed in the wake of the controversy over hurler DJ Carey’s deal.

The majority State-owned bank will tell the Oireachtas finance committee on Thursday that these deals were agreed outside the formal bankruptcy and insolvency process where borrowers have fully disclosed their financial affairs and agreed to maintain a “reasonable” lifestyle.

Jim O’Keeffe, AIB’s managing director of retail banking, will say in an opening statement to the committee that a further 4,300 borrowers had their debts reduced in approved personal insolvency arrangements, a post-crash mechanism that allows people escape unaffordable loans.

AIB was invited before the committee to explain how it agrees debt settlements after politicians raised concerns about the size of Mr Carey’s debt write-down following media reports.

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The committee is trying to determine how common large debt write-downs are and how the bank treats different categories of borrowers when it comes to forgiving customer debts.

Mr O’Keeffe will say that AIB has a “robust governance and policy framework in place that deals in a consistent and equitable manner with customers whose accounts become challenged”.

[ AIB agrees to answer questions on DJ Carey debt write-down at Oireachtas committee ]

The bank secured a High Court judgment for €9.5 million against Mr Carey in 2011 on loans of €7.85 million that were advanced to buy golf resort properties at Mount Juliet in Co Kilkenny and the K Club in Co Kildare during the peak of the Celtic Tiger boom.

The sale of the properties in 2014 and 2015 raised €1.8 million that went to reducing his debt to AIB before the bank agreed in 2017 to settle his remaining debts for €60,000, representing a write-off of €7.7 million or about 80 per cent of the bank’s court judgment.

[ Sale of golf properties linked to DJ Carey raised €1.8m towards his AIB debt ]

The bank took the unusual step last month of issuing a detailed circular to staff about its policy on debt deals in response to political criticism and public anger after RTÉ reported that Mr Carey secured a debt write-down of more than 99 per cent on the bank’s €9.5 million judgment.

Mr O’Keeffe will tell the committee that the private deals involving debt write-offs of more than 90 per cent represents just over 1 per cent of about 150,000 indebted customers whom the bank has helped return to “a sustainable financial position” with debt solutions.

Precluded from discussing an individual customer’s account, Mr O’Keeffe has made no direct reference to Mr Carey’s debt settlement in his opening statement to the committee.

He will say that even where the bank has taken legal action against a borrower, it still affords them opportunity to engage or re-engage with the bank to settle any outstanding debt “at any stage in the process” including after assets securing the loans have been sold.

“If they do, this may lead to a situation where a final settlement or compromise is agreed that may include a partial or full write-off of debt. Any such agreement is, as always, based on affordability and sustainability criteria,” Mr O’Keeffe will tell the committee.

According to his statement, AIB evaluates any final debt settlement based on “full and transparent disclosure” of a customer’s financial affairs, including any assets owned or anticipated income, and that this information can be independently validated.

The bank decides what the borrower can pay based on their affordability.

In advance of any final debt deal, borrowers must agree to make available to the bank “windfall income” they may accrue within a set period following the final settlement, AIB will say.

Since the crash, the bank has disclosed that it has reduced overall non-performing loans from €30 billion at peak in the wake of the financial crisis to about €300 million currently.