The Central Bank director charged with ensuring the financial soundness of Irish banks has sharply criticised their approach to dealing with indebted homeowners who are in mortgage arrears.
Fiona Muldoon, Director Of Credit Institutions and Insurance Supervision, accused the banks of paying "lip service" to the idea of making progress in dealing with arrears.
Speaking at the Irish Banking Federation's national conference in Dublin, she said: "I see too much activity and not enough outcome."
New Central Bank statistics presented at the conference show that in addition to the 129,000 residential mortgages that are in arrears, 37,000 investment or buy-to-let mortgage holders representing €11 billion worth of debt are behind on their repayments.
The figures show a further 11,000 buy-to-let mortgages have been restructured on top of the 40,000 restructured homeloans.
But Ms Muldoon criticised what she called the "wait and see" attitude of the banks to dealing with borrowers who were behind on repayments, saying in many instances there was a failure to recognise that the debt simply would not be fully repaid.
"What is it that we are waiting for on mortgage arrears? The hope for an economic recovery, hope that house prices will come back, hope that [the] personal insolvency act will handle the issue for you? This is the stuff of denial," she said.
The Central Bank director singled out the practice of allowing homeowners and buy-to-let investors in arrears to pay only the interest on their mortgages.
She said there was no commercial rationale for allowing borrowers who were "in deep arrears" to make minimal repayments while the value of their property was continuing to fall, adding to the ultimate losses both bank and borrower would make.
Ms Muldoon was also critical of talk at the IBF conference of a sector that has been "humbled", saying she had seen little sign of humility in her dealings with the banks.
Too often, she said, the relationship between regulators and banks resembled that between a parent and a teenager.
"The Central Bank has led on the issues; the banks have waited to be told what to do and not particularly liked it when we have done just that," she said.
Head of Finance Department wants action on household debt
The head of the Department of Finance has told the Irish Banking Federation's Conference that the problem of unsustainable household debt needs to be tackled.
Secretary General John Moran said excessive debt is preventing the recovery of incomes and economic growth. He said it is time to find "the escape route" out of a vicious cycle.
Mr Moran said the biggest problem is not one of negative equity but rather of inability to pay.
"It is critical now that the banking sector move speedily and in a determined fashion to resolve all of the arrears situations, by enforcing mortgages where people can pay and by resolving excessive debt in other situations," he said.
Mr Moran said banks must start providing credit to viable borrowers. He said they also must find solutions for totally unsustainable levels of debt, and for those people with temporary financial problems that are the result of job losses.
He said those two solutions are not necessarily the same, which is why forbearance is not the answer.
