The Central Bank of Ireland met with the country’s main lenders yesterday to begin a process that it hopes will lead to a voluntary framework on how “multi-borrowed distressed borrowers” are dealt with by credit institutions.
This will encompass the thorny issue of mortgage arrears, which is the biggest source of debt for many individuals.
The regulator is seeking to agree a set of “general principles” that would be applied by lenders when dealing with borrowers who are in arrears with their repayments and owe money to a number of institutions.
Such cases usually involve secured and unsecured lending and the Central Bank is seeking to establish a protocol among lenders to deal with this issue.
This could prove a divisive issue within the financial industry.
Banks hold a stronger hand, given that they often hold security over certain assets such as properties or motor vehicles.
In contrast, credit union lending is typically unsecured.
Persuading banks with security to allow borrowers to make repayments to unsecured lenders will be a key issue for the Central Bank.
Voluntary framework
It is understood the Central Bank and the Government favour an industry-wide voluntary framework to deal with this issue, instead of borrowers pursuing a solution under the new Personal Insolvency Act (PIA).
This could involve borrowers applying for bankruptcy.
Fiona Muldoon, director of credit institutions and insurance supervision at the Central Bank, described the meeting yesterday as “very productive . . . with plenty of constructive dialogue and frank discussion on strongly held views”.
She said “all issues” were aired by the various institutions. “We will work through them now one by one,” Ms Muldoon said.
“Collectively those present agreed a path forward to progress the mutual objective of a framework for multi-borrowed distressed borrowers.”
A second meeting is due to take place tomorrow with the Central Bank keen to agree a framework in the coming weeks, ahead of the implementation of the PIA around the middle of this year.
