The chief executive of Permanent TSB has said that his bank is working to deal with customers who are in mortgage arrears.

Jeremy Masding was responding to recent criticism of Irish banks by the Central Bank's banking supervisor Fiona Muldoon.

She accused the financial institutions of paying lip service to the idea of dealing with the issue.

Speaking on RTÉ's Morning Ireland, Mr Masding said the bank had invested heavily in time and people to try to deal with the issue.

He said the bank was working with the Central Bank to help people, especially those with the most serious problems, and they were "attacking" the problem in three stages.

He said the first stage was to "build the capability" to deal with people in arrears, which he acknowledged the bank had not had before.

Mr Masding said the bank is, secondly, working with customers in "early arrears" and has seen some results with this group.

"The third stage - which was at the nub of Fiona's comments - was around helping those people in what we call late stage arrears, or in what the system might call unsustainable mortgages.

"We have worked hard with the Central Bank to develop a set of treatments, which means that as long as customers engage with us, I think we now have the capability and the products to begin to help people."

He said people in late arrears are being dealt with on a case-by-case basis, and there were products to help them.

Permanent TSB, once the country's biggest mortgage lender, also says it plans to become a key provider of retail bank services for the Irish market from the start of 2013.

Mr Masding said 2012 had been a year of "fixing", and the bank would "get there" by the end of the year.

The bank has been tasked with providing competition to AIB and Bank of Ireland by the Minister for Finance, who is the principal shareholder.