Ireland to set banks targets for mortgage clean-up
DUBLIN — Irish banks will be set quarterly targets for restructuring distressed mortgages under a new plan set to be unveiled this week by the government and central bank, a senior government minister said on Sunday.
Ireland’s mostly state-owned banks have booked big losses on bloated commercial property books after the financial crisis.
They have, however, struggled to get to grips with mortgage arrears, viewed by the central bank as the country’s biggest domestic policy issue.
"The government is likely to publish a mortgage plan in the coming days that will set out targets for banks," communications minister Pat Rabbitte told national broadcaster RTE.
"Banks have been dragging their heels, there is absolutely no doubt about that but now the mortgage plan will require them on a quarterly basis to deal with a certain proportion of the mortgages in trouble irrespective of what that category is."
The proportion of mortgages in arrears for more than 90 days rose to 11.9% in the fourth quarter of last year but grew at the slowest rate since statistics began to be collected three years ago, the central bank said on Thursday.
The Sunday Business Post, quoting government sources, said domestic lenders would have to make extra provisions if they did not meet the restructuring target under the new plan but would be also offered incentives if they achieved the required numbers.
The plan would likely involve a target to restructure about 20,000 distressed mortgages every quarter, the newspaper said.
Almost 95,000 home mortgages and another 28,000 mortgages in the more troubled buy-to-let sector were in arrears for more than 90 days at the end of 2012.
A spokeswoman for the central bank declined to comment on the newspaper’s report.
The central bank said late last year that measurable targets for the resolution of mortgage distress might be required to keep lenders focused on working out their stock of distressed loans.
Central bank governor Patrick Honohan, however, said earlier this year that while it was working on targets, he did not want them to be overly relied on. If targets were too simple, they would be met in a way that "does not deliver the good," he said.