Dáil Éireann Debate, Tuesday - 12 July 2022
321. Deputy Alan Dillon asked the Minister for Finance the steps that are being taken to compel banks, funds, the National Asset Management Agency or others in possession of distressed assets (details supplied) to inventory and segregate loan portfolios on the basis of the size and location of the locality in which they are held; and if he will make a statement on the matter. [37336/22]
View answerThe Central Bank of Ireland is the independent regulator of credit institutions and other regulated financial service providers. However, it is not possible for the Minister for Finance, nor the Central Bank in carrying out its regulatory functions to advise or comment on the management of loans (and/or the treatment of any security which may be associated with a loan) by regulated entities as such issues are a business matter for the individual regulated entity.
However, at a general level, the Central Bank advises that loan arrears cases have individual circumstances, many of which are complex, that require real sustainable solutions and there is not a 'one size fits all' solution the issue of distressed debt. Nevertheless, holding a high stock of non-performing loans (NPLs) can affect the credit supply channel, by restricting the amount of capital that could be otherwise lent or used for more economically and socially useful activities, and can cause serious dysfunction for the banking system and hence its ability to serve the economy and its customers.
Therefore, the Central Bank expects credit institutions with a high proportion of NPLs to set, at a minimum, clearly defined realistic yet ambitious quantitative targets to reduce the level of NPLs. Where assets which acted as security for a loan are realised (such as properties in possession) are material, a strategy in respect of such assets should be defined or, at least, reduction targets should be included in the NPL strategy in respect of such assets.
Where this is a part of a credit institution’s NPL strategy, it should also monitor the volume, ageing, coverage and flows of such assets at a sufficient level of granularity to take into account material types of assets. The performance of such assets vis-a-vis the predefined business plan should be monitored.
The Central Bank acknowledges that resolution of NPLs might involve an increase in the number of properties in possession of regulated entities for the short term, pending the sale of those assets. However, this timeframe should be clearly limited as the aim is a timely sale of the assets concerned.
In relation to the National Asset Management Agency (NAMA), it advises that its loans are primarily segregated and managed by borrower/debtor connection as this was the most efficient way to manage the cross-secured loan portfolios originally acquired by NAMA and that the property assets securing NAMA's loans remain in the ownership and control of their registered owners (NAMA debtors) or appointed receivers, in the event of enforcement. Furthermore, NAMA has indicated that less than 1% of its remaining loan portfolio is secured by assets located in rural areas.
In relation to the issue of neglected buildings, the responsibility for dealing with derelict sites is a matter for the relevant local authority and there is a statutory duty on local authorities to take all reasonable steps to ensure that any land situated in their respective functional area does not become or continue to be a derelict site.
