Bloomberg News

Irish Banks Have Enough Capital for Mortgages, Honohan Says

October 13, 2011

(Updates with Honohan comment in second paragraph.)

Oct. 13 (Bloomberg) -- Ireland’s lenders have enough capital to deal with the difficulties borrowers have meeting mortgage payments, Ireland’s central bank governor said, urging lenders to “ramp up” efforts to deal with unsustainable home loans.

“Insufficient capital cannot be a reason for inaction,” Irish Central Bank Governor Patrick Honohan said at an event in Dublin today. Lenders have restructured “relatively few” mortgages, according to Honohan, who added that the country is developing more “comprehensive solutions” to the arrears problem.

Ireland’s banks should “warehouse” portions of home loans, enabling cash-strapped borrowers to pay down a smaller sum for a period, according to a government-appointed committee’s proposals to ease mortgage burdens yesterday. The country has tried to curb home repossessions, and warehousing measure would be one way for its bailed-out banks to pass along some of the relief they received to borrowers struggling to remain solvent.

The share of Irish private home loans in arrears or restructured rose to 12 percent in the three months through June, according to data published by the country’s central bank.

Yesterday’s report, which said some 55,000 mortgages are more than 90 days in arrears and another 70,000 have had repayment terms relaxed, will be debated next week in the Irish parliament. Irish Finance Minister Michael Noonan said he plans to bring in measures to deal with mortgage arrears “straight away” following the debate.

Matthew Elderfield, the central bank’s deputy governor and head of financial regulation, will set out the bank’s position on mortgage arrears tomorrow in the southern city of Cork, Honohan said.

Ireland pumped about 62 billion euros ($85 billion) into its financial system as its real estate crash forced the state to seize control of five banks and take an international bailout last year.

--Editors: Chris V. Nicholson, Keith Campbell

To contact the reporters on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net; Finbarr Flynn in Dublin at fflynn3@bloomberg.net

To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net


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