The country's banks need to accelerate their efforts to deal with the problem of mortgage arrears and have sufficient capital to write off losses on unsustainable home loans, the Central Bank Governor said today.
"To date banks have restructured relatively few loans," Patrick Honohan told a Central Bank conference on mortgages today.
"It's clearly time for the banks to ramp up their efforts in dealing with truly unsustainable situations," he stated.
"Enough capital has been injected into banks to absorb what I call unavoidable losses from unsustainable mortgages. Inefficiency of capital cannot be a reason to delay action," he added.
Around 32,000 households are in arrears for more than six months on their mortgages. The Government published recommendations for dealing with arrears yesterday that could see thousands of indebted borrowers lose ownership of their homes and rent the properties instead.
Professor Honohan said it was crucial that banks and the state were able to distinguish between borrowers who cannot pay and those who will not.
"Making that triage between the truly unsustainable situation and the can but won't pay is one of the key operational challenges for banks and other public authorities going forward,'' he said.
