Belfast Telegraph

Distressed loan sales in Republic of Ireland is necessary, says Central Bank official

By Charlie Waston

The controversial sale of distressed loans by banks in the Republic has been defended by a senior Central Bank official.

Sales of residential mortgages in the Republic have generated heated debate, particularly when they are sold to vulture funds.

Deputy governor of the Central Bank Ed Sibley said that the sale of distressed loans by Irish banks was "legitimate and necessary".

Referring to dysfunction in the mortgage market, he said elevated levels of non-performing loans made the banks highly vulnerable to future economic shocks.

In his speech to the Institute of Banking in Dublin, Mr Sibley said: "Portfolio sales are a legitimate and necessary approach for banks to use to address non-performing mortgage loans.

"The continued high level of non-performing loans makes banks highly vulnerable to future economic downturns, from both the existing non-performing loans, and potentially new defaults."

He added: "While all the Irish retail banks are significantly better capitalised than pre-2008, they are more vulnerable than those without this legacy to future economic shocks."

Billions of euro of loan portfolios relating to the Republic of Ireland are up for sale at the moment, with most expected to go to unregulated vulture funds.

Permanent TSB, Ulster Bank and AIB are in the process of selling non-performing loan books. Customers here are not affected.

It is expected that the buyers of the portfolios will not be directly regulated by Ireland's Central Bank.

Mr Sibley said the Central Bank has ensured that the consumer protections, including the code of conduct on mortgage arrears, travel with the loans.

Worries over the attitude of buyers of Irish loan portfolios to distressed borrowers prompted Fianna Fail to introduce a Bill to the Dail in February, seeking to have so-called vulture funds regulated by the Central Bank.

Belfast Telegraph

Weekly Business Digest Newsletter

This week's business news headlines, directly to your inbox every Tuesday.

Popular