I propose to take Questions Nos. 49, 50, 54, 56, 73, 76 and 305 together.
On 18 March last, the Banking and Payments Federation of Ireland (BPFI) announced a coordinated approach by banks and other lenders to help their customers who were economically impacted by the Covid-19 crisis. The measures included flexible loan repayment arrangements where needed, including loan payment breaks initially for a period up to three months and then subsequently extended for up to six months.
Banks have now provided for flexible options for borrowers who can recommence payments following a payment break, and the BPFI has produced a useful guide on this - https://www.bpfi.ie/wp-content/uploads/2020/09/Final-BPFI-Coming-off-the-COVID-19-Payment-Break.pdf. Also, the Central Bank has also updated its Covid-19 FAQ in relation to mortgage payment breaks on 18 September.
However, I continue to make it clear to lenders - and I reiterated the point at the meeting with the main banks this week - that they should continue work with and pro-actively assist their customers who are still experiencing difficulty as a consequence of Covid-19. I would also encourage any borrower who feels he or she may have difficulty in resuming payments after a Covid-19 payment break to contact their lender and if possible to do so before the payment break end date. Borrowers have a suite of regulatory protections and lenders have specific obligations, under the Central Bank consumer protection framework, to support and work with borrowers in arrears or in pre-arrears. In particular, lenders are obliged to engage and work with co-operating borrowers to identify an appropriate alternative repayment arrangement having regard to the particular circumstances of a case, and lenders should use the full suite of solutions available to them for their borrowers who continue to be impacted by Covid-19. In this regard, it is important to note that, while the European Banking Authority recently stated it would not extend its 30 September closing date to qualify for a Covid-19 payment break, banks can continue to support their customers with an extended payment break after 30 September on a case by case basis if needed with such loans classified according to the normal prudential framework.
I will also continue to work with the Central Bank, as regulator, to ensure that the Central Bank consumer protection framework will be fully available to mortgage and other borrowers that will still need support following a Covid-19 payment break. In this regard, the Central Bank wrote to all regulated lenders on 8th June setting out its expectations in relation to payment breaks. That letter requested that firms confirm that they are adhering to the Bank’s supervisory expectations and what the Bank expects in firms’ communications with borrowers. In addition, it requested that firms submit their Board approved strategic and operational plans for managing the increase in distressed debt, including supports for those borrowers unable to resume full payments after a payment break. The Central Bank has advised that it has challenged the five retail banks and six retail credit firms/credit servicing firms on their plans. While it is broadly satisfied with the firms’ plans, the Central Bank will continue to engage with all firms to ensure that these plans are effective.
In relation to the accrual of interest on loans, it should be noted that lenders will continue to incur costs (both in respect of funding and enhanced operational requirements) and that other borrowers will continue to be liable for their interest charges. However, apart for normal interest, no other specific charge or fee will be imposed on a borrower who avails of a Covid-19 payment break. Covid-19 payment break measures do not come without cost to the banking sector and these costs will also have to be managed in a way that protects their business and will be as fair as possible to the various stakeholders. Nevertheless, it has also been made clear to banks that it will not be acceptable for them to make excess profits on payment breaks and that it will be a matter for them to demonstrate that such a situation will not arise.