The Central Bank is set to order the boards of the three main domestic lenders to take direct responsibility for the implementation of policies to deal with the mortgage arrears crisis, The Sunday Business Post has learned.
Senior officials from the Central Bank are to attend upcoming board meetings at AIB, Bank of Ireland and Permanent TSB to emphasise to the boards that the Central Bank is unhappy with the progress made on the issue.
Under the strict new regime, directors will have to make sure executives are implementing practices and products for resolving the rapidly growing number of arrears cases on the banks' books. They will also have to make sure executives are fully recognising the losses arising from the arrears, and making timely and adequate provisions to cover them.
The escalation in regulatory action comes after months of wrangling between the Central Bank and the sector during which a previously cooperative relationship has turned hostile.
Regulators have been frustrated with what they see as foot-dragging by lenders in dealing with mortgage arrears cases, now expected to top 10 per cent of all owner-occupier homeloans. The Central Bankers feel the banks' case-by-case approach has been too limited and piecemeal to be effective.
The banks are beginning to respond and are planning to launch a range of new loan modification initiatives later in the year to provide market-based solutions for distressed borrowers. But many bank executives have expressed misgivings about the direction personal insolvency reform is taking. The industry does not want mortgages included under new rules, as they believe it will encourage strategic default.
As the squabbling continues, more borrowers are slipping into arrears, posing long-term problems for the strength of bank balance sheets, the economy as a whole and the personal finances of thousands of people