Rescue of homeowners shouldn't be too little, too late, says ISABEL MORTON

IT MAY, at long last, have dawned on the Government that saving the banks was not too different from saving a sack of kittens from being drowned. Once saved, they quickly scatter, as they see no good reason to remain forever in your debt. In a recent survey conducted by the PIBA (Professional Insurance Brokers Association) the word “declined” appears on numerous occasions.

According to the survey, mortgage lending declined by €19 million last December, which was the eighth consecutive month of declines in lending. And, over three-quarters of PIBA’s 900 member firms throughout the country reported that between 60 per cent and 80 per cent of all mortgage applications had been – you’ve guessed it – “declined”. More proof, if it were needed, that banks are just not lending and have not been lending for some considerable time. However, where tardy about lending, they are lively about charging and it is expected that they will attempt to follow the example of PermanentTsb, which has once again increased its interest rates by 0.5 per cent on its standard variable mortgages having already hiked them up last July, by the same amount.

The media repeatedly asks whether or not the Government can do anything to prevent banks from doing this, but alas no: apparently banks, as per all other businesses, are entitled to do whatever they wish (within the law) in order to ensure that they trade profitably.

Presumably, however, there is little or no precedent for a situation where a bank is on the verge of collapse, has to be rescued by the State and remains operating under guidelines which prove to be flawed?

Now, this is where things become rather interesting because despite the fact that our banks appear to have broken virtually every rule and regulation in the book (obviously one which neither they, nor the financial regulator, ever read), for some strange reason, we’re told we must honour and respect their right to trade profitably, therefore continue to refinance them and permit them to raise interest rates.

Having traded recklessly, have banks not now forfeited all of their trading rights and entitlements? And, surely these rights should not be reinstated until the banks have been restructured and are operating to a new set of guidelines and under new regulation.

In order to avoid quoting you reams of boring and complicated banking rules and regulations, which vary between nations and jurisdictions, I stole from Wikipedia, which had a short and concise list of “objectives of bank regulation”:

Prudential: to reduce the level of risk bank creditors are exposed to (i.e. to protect depositors). Systemic risk: to reduce the risk of disruption resulting from adverse trading conditions for banks causing multiple or major bank failures. Avoid misuse of banks: to reduce the risk of banks being used for criminal purposes, e.g. laundering the proceeds of crime. To protect banking confidentiality. Credit allocation: to direct to favoured sectors.

Banks failed to adhere to all but the last of these objectives. Their credit allocation was indeed “directed to favoured sectors”, the construction industry having been the most favoured of all. Must we wait until the proposed banking enquiry is completed before beginning to restructure our banks? And in the meanwhile, are we going to continue to let them to hold us to ransom?

Despite being entirely responsible for the dire state of our economy, banks saw fit to repossess over 360 Irish homes last year and showed no mercy to their creditors. And, just as we despaired of the Government’s apparent lack of control of the banking sector, we learn that at long last, it’s putting its foot down and demanding that the banks extend the same helping hand to its creditors as is being extended to them by the taxpayers.

Financially stressed Irish homeowners are to get Nama-style mortgage relief, which may, or may not put a stop to the avalanche of home repossessions predicted due to the increased number of households in mortgage arrears. In an effort to persuade banks and lending institutions to assist the 26,000 (and rising) households who are struggling or unable to service their mortgage repayments, the Green Party has drawn up a scheme to encourage banks to take equity in the homes or take ownership of the houses but agree to lease them back to their clients, with the rent payments to be deducted from their loan.

While undoubtedly relieved that something is being done for the hard-pressed mortgage holders, we must now ensure that it’s not too little and too late. A retrospective review should be undertaken, in order to include the unfortunate people who have already suffered harassment from their banks and been put through the horrors of the courts before having homes repossessed.

Having catnapped for over a decade, the Government must now accept that the fat cats are out of the bag and they, along with the alley cats, who indulged in so much cream over the years, will now be skinned, one way or the other.