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Ulster Bank sells off £2bn of loans to vulture fund Cerberus

By John Mulgrew

Published 10/10/2016

Ulster Bank sells off £2bn of loans to vulture fund Cerberus
Ulster Bank sells off £2bn of loans to vulture fund Cerberus

Ulster Bank has sold off a huge £2bn tranche of loans to vulture fund Cerberus.

It's sold €2.5bn (£2bn) in loans, including 900 mortgages, across Ireland.

Around 14% of that debt is based in Northern Ireland. However, there are no residential mortgages as part of this tranche on this side of the border. But around 1% of the loans involve farmers and other agri-business.

A spokesman for Ulster Bank said: "Ulster Bank has confirmed the completion of a sale of significantly impaired loan portfolio, predominantly in the Republic of Ireland, enabling the bank to strengthen its balance sheet for the benefit of its customers.

"The loans involved are all in Ulster Bank’s problem debt management unit and have been in arrears or under specialist management for a significant period of time. We will be in contact with all affected customers in the coming days to help them as their loans transition to their new owner."

Ireland-wide, 65% are distressed business loans, while the remainder are buy-to-let and owner-occupier mortgages. The sale is part of the bank's bid to clear out all remaining toxic property loans on its books on both sides of the border.

Meanwhile RBS, which owns Ulster Bank, has come under fire for reportedly trying to profit from struggling businesses.

An investigation by the BBC and Buzzfeed showed the bank bought assets cheaply from failing businesses it claimed to be helping, according to leaked files.

Thousands of businesses, including dozens in Northern Ireland, were moved into the so-called Global Restructuring Group (GRG).

Jon Pain, chief conduct and regulatory affairs officer at RBS, said:

“RBS has been very clear that GRG’s role was to protect the bank's position, where possible by working with distressed businesses to return them to financial health.  In the aftermath of the financial crisis we did not always meet our own high standards and we let some of our SME customers down.

“We have already acknowledged that, in some areas, we could, and should, have done better for SME customers. Specifically, we could have managed the transition to GRG better and we could have better explained to customers any changes to the prices or fees we were charging. We also did not always handle customer complaints well. As a result, a number of our customers did not receive the level of service they should have done or, importantly, that they would receive now.”

“It is important to remember the context of the time and the impact of the financial crisis.  In 2008 there was an unprecedented increase in SMEs falling into financial distress and the numbers moving into GRG increased by over 400%.We should have coped better but, nevertheless, between 2011-2013, GRG advanced over £100m of new lending to SMEs and successfully restructured thousands of SMEs. In doing so it safeguarded tens of thousands of jobs.

“These were incredibly difficult times for the bank and the wider economy. Between 2008 – 2013, RBS lost more than £2bn from lending to SME customers. The bank itself was in a precarious position and required extensive Government support.

“Since that time, RBS has become a different bank and significant structural and cultural changes have been put in place, including in how we deal with customers in financial distress. We continue to learn the lessons of the past and seek to do better for our customers. RBS is a fundamentally different institution today as a result.

“Despite a number of investigations that involved a detailed review of all the evidence, including reviewing millions of pages of documents, we have seen nothing to support the allegations that the bank artificially distressed otherwise viable SME businesses or deliberately caused them to fail. In regard to the wider allegations raised, we have found no evidence that the bank either inappropriately targeted such businesses to transfer them to GRG or drove them to insolvency. Nor did it buy their assets at a lower than market price."

 

“The FCA review of the treatment of SME customers in GRG remains ongoing. It would not be appropriate to comment further on that review until the FCA has published its conclusions.”

Online Editors

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