The Central Bank's Fiona Muldoon has warned that the country is set for a turbulent time over the next few months as the issue of mortgage arrears are dealt with.
The bank's Director of Credit Institutions and Insurance Supervision, Fiona Muldoon, made her comments at the MacGill Summer School in Donegal today.
Ms Muldoon said that households which are simply not able to pay their mortgages will need to confront that difficult fact and engage actively with their banks.
''There will be some who will unfortunately lose their homes, and some who will need to enter insolvency proceedings,'' she stated.
But she added that there are many people who will have to continue to face the consequences of bad investment or financial decisions and who will still have to pay up.
Urging compassion for those who have fallen on hard times, she said that this compassion and realism needs to be mixed with real skills for uncovering those that may be ''trying it on''.
''This ability to distinguish between, and separate, the response to these two distinct groups needs to be part of the toolkit for bankers, the legislature and the administrative and judicial systems that are dealing with these issues and indeed for wider society and its tolerance for that kind of behaviour,'' she stated.
The Central banker also said that there is no real alternative right now for the Government to cutting back as it is constrained by the availability of foreign sources of funding.
''The real choices to be made are whether some areas should be cut more than others or in how much we cut and whether we get value for money in what we spend,'' she added.
Ms Muldoon said the country must ensure 'that the ''clean-up here'' is complete so that there is meaningful and real participation for most consumers and businesses when the big economies of Europe and the US start growing again.
