AIB chief executive David Duffy has told the Oireachtas Finance Committee that engagement is the "key that unlocks the conundrum for most distressed borrowers". 

Mr Duffy said the bank has developed a range of tailor made permanent solutions for customers in mortgage arrears.

In an effort to maximise its reach to customers in arrears, the bank has also explored "new avenues", including the involvement of consumer advocacy groups.

This has already led to breakthroughs in a significant number of cases, he said, while the bank was seeing results in implementing solutions with customers who engage with them.

The Oireachtas committee hearings on mortgage arrears and the resolution process being offered by banks to those in mortgage distress held its second day of hearings today.

Ulster Bank's chief executive Jim Brown appeared before the committee yesterday while Permanent TSB's CEO Jeremy Masding meet with the committee earlier this morning.

Mr Duffy told the committee AIB must seek full repayment of mortgage debt where the customer has the ability to meet that payment.

He said that any other outcome is unacceptable from a commercial point of view and is also "grossly unfair" to a majority of mortgage holders who continue to pay off their loans in full despite their changed circumstances.

The AIB chief told the committee that the bank will only compromise on debt with co-operating customers - and only then if there is no prospect of their debt being paid, where there is no affordability to pay it and when considered against the economies of alternative options open to the bank.

Asked about the number of repossessions, Brendan O'Connor, head of financial solutions group in AIB, said that there are 2,500 cases where a civil bill has been issued.

He said that he does anticipate that they will all end up in repossessions.

He said that it is 2,500 for home loans and 200 for buy-to-lets, but most typically they are dealt with by receiverships.

Mr O’Connor said that close to 100 receivers have been appointed to buy-to-lets and that there are 2,569 buy-to lets with 800 of those are in receiverships.

Mr Duffy said that if people are taking the income from a buy-to-let for two years and not paying the bank, then a receiver is appointed.

Fianna Fáil’s finance spokesperson Michael McGrath asked Mr Duffy to what extent he was satisfied that, in all cases of repossessions, that everyone has been offered sustainable solutions.

Mr Duffy said that 50% of the people contacted about a potential legal path re-engage with the bank.

He said that, on average, 10% of arrears cases engage after entering the process. 

Mr Duffy said the average duration of people receiving a legal letter is two years after engagement, while no customers who were less than 90 days in arrears have been issued with such letters.

Mr McGrath also asked what percentage of customers are not co-operating and ‘stonewalling’ the bank. 

Mr Duffy said that when the bank issues legal proceedings after two years of non co-operation, 10% come back and pay the full capital on their mortgage. 

Sinn Féin’s Pearse Doherty asked the bank’s representatives why there had been an increase in the number of AIB customers in mortgage arrears for 90 days or more, and why there were still 10,000 owner-occupier customers yet to be offered a solution.

Mr Duffy said he would love to have offered 100% by now, but progress was being made with early arrears and pre-arrears well down.

Mr O'Connor said that the number is not static, as there people entering arrears and leaving them all the time.

He also said there is a significant portion of accounts there that deal with separated and divorce cases.

He said that the bank does not have a standard financial statement for 3,500 of the 10,000 who have not been offered a solution.

Mr Doherty said there has been a huge increase in the number of people surrendering their family home and the pressure that the bank is putting on individuals is no different to repossessions.

Mr O'Connor said that assisted voluntary sales are offered where there is zero affordability and no capacity to service voluntary debt. 

Asked about the moral hazard involved in seeking solutions to mortgage arrears, Mr Duffy said that the bank does operate on a purely commercial basis and has a role of returning €20bn to the taxpayer.

In relation to the potential sale of the State's stake in AIB, Mr Duffy said that he needs to deliver a fully profitable bank by the end of the year. 

He said that the Minister for Finance has said he would like to test the price of AIB's equity in 2016 so there may be some movement next year.

Mr Duffy said that by the end of 2014 they would like to have AIB in a position for sale. 

He said that the market suggested that there will be a wide variety of interested buyers when that happens.

Asked about the value of the distressed loan book that is in negative equity, Mr O’Connor said that approximately 70% of those in arrears are also in negative equity.