The chief executive of Bank of Ireland has defended its dealings with distressed mortgage holders, saying it cannot write off debts as it has to remain profitable.
Speaking at the Oireachtas Committee on Finance, Public Expenditure and Reform, Richie Boucher said debt forgiveness was "not a policy of the bank" as it had responsibilities to a wide range of stakeholders.
Among these, he said, was the Irish State and taxpayer, which had been repaid some €3.9 billion of the €4.8 billion invested in Bank of Ireland.
Mr Boucher said that if the bank was not profitable, it could not lend money into the economy or repay the State, which could bring about a situation where citizens would face higher taxes or diminished services as a result.
'Income issues'
The committee heard the bank was entering into arrangements with customers, which it was confident would help those concerned to keep their homes.
Asked about the bank's approach to forbearance by committee chairman Ciaran Lynch TD, Mr Boucher said any loss arising from a deal with customers was "a cost to the bank".
“Unless there are exceptional circumstances, we don’t believe that a restructure is possible unless the customer can meet the full interest on the mortgage.”
He said he did not believe “negative equity is a driver of default. It is primarily where customers have income issues.”
Mr Boucher was before the committee to discuss Bank of Ireland's efforts to meet Central Bank targets on providing sustainable solutions to 20 per cent of its customers in mortgage difficulty by the end of June.
The committee heard 89 per cent (143,000) of the bank’s owner-occupier loans were fully performing; 2 per cent were in early arrears; 3 per cent were in arrears of 90 days or more, and 4 per cent were in a forbearance agreement or overpayment arrangement, designed to catch up on missed payments.
Steven Mason, the director of the bank's mortgage arrears resolution process, told the committee 11,774 owner-occupier mortgages were in default at the end of March. By the end of June, 3,103 of these were in a legal or resolution process and 3,164 had been restructured or cured. This amounted to 53 per cent of the total, well in excess of the Central Bank's target, he said.
A number of committee members expressed concern that almost 50 per cent of the solutions the bank was entering into with customers were legally based and that these could lead to repossession.
Legal route
Mr Boucher said that was a potential outcome but that he did not believe it would be the case as the legal route often opened up discussion with a client who had not been responding.
Fianna Fáil finance spokesman Michael McGrath urged the bank to review its split mortgage offering as it involved customers paying interest on the warehoused part of the loan, which he said did not suggest it actually was a split loan.
Mr Mason said the product – of which the bank has offered more than 200 – fell under the definition of a split mortgage as set out in the Keane report on mortgage arrears.
Independent TD Stephen Donnelly told Mr Boucher that it appeared almost all of the bank's restructuring deals resulted in mortgage holders paying back a higher amount of capital.
Mr Boucher said that restructuring mortgages and loans cost the bank money and that these additional costs had to be met.
He also said the bank was in discussion with the Government and other parties in relation to the State’s €1.8 billion of preference shares in the bank.
