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Financial Services Regulatory Newsletter, December 2013

  • Ireland
  • General

06-12-2013

Central Bank publishes the outcome of the Mortgage Arrears Resolution Targets 

On 29 November 2013, the Central Bank of Ireland published the outcome of the Mortgage Arrears Resolution Targets for Quarter 2 and Quarter 3 of 2013. In line with requirements all banks have reported sufficient proposed solutions to meet the target of 20% proposed sustainable solutions in Quarter 2 and 30% in Quarter 3 (end September).  Please click here to view report.

Central Bank confirms transfer of Newbridge Credit Union ("NCU") to Permanent TSB

  • On 10 November, the Central Bank successfully made an application to the High Court to transfer ownership and management of the customer assets and liabilities of NCU to permanent TSB at a cost of €54m to the taxpayer.  Click here for further details.
  • The NCU had been in financial difficulty since 2008, culminating in the Central Bank appointing a Special Manager over it in January 2012. 
  • While the transfer of a credit union to a bank is unusual, the Central Bank explained that the transfer was required and was the only option when proposed combinations with other credit unions fell through or were not determined viable due to the extent of Newbridge credit union's liabilities.  One of the main concerns of liquidation was approximately €2m of members' shares did not fall under the Deposit Guarantee Scheme.
  • In response to this, there has been speculation as to the financial position of other credit unions, although both the Government and the Central Bank have sought to quell same at this stage.  

Regulator unable to take action against Newbridge Credit Union directors

  • As part of the court application referred to above, the Central Bank filed an affidavit with the High Court in which various instances of regulatory breaches by the directors of NCU were outlined.
  • The primary issues cited were improper lending practices, governance deficiencies and inadequate provisioning requirements.
  • These are potentially in breach of the fitness and probity rules introduced for directors of credit unions under Part 3 of the Central Bank Reform Act 2010.
  • However, as this only came into effect on 1 August 2013, enforcement action cannot be taken against NCU directors as such actions cannot be taken in respect of retrospective breaches.
  • A link to the High Court affidavit filed by the Central Bank can be found here.  

Central Bank publishes Irish responses to Euro Area Bank Lending Survey (October 2013)

  • The Central Bank published these responses on 30 October 2013 to this survey issued by the ECB.  These responses are publicly available here.
  • These responses were:
    • Credit standards were unchanged in relation to lending to enterprises during the third quarter of 2013, while demand for short-term loans decreased and demand for long-term loans increased
    • Credit standards tightened with regard to loans for house purchases but were unchanged for consumer lending. Loan demand increased in respect of loans to households for both house purchases as well as consumer lending during the third quarter of 2013; and 
    • Access to retail and wholesale funding markets improved somewhat across all funding categories during the third quarter of 2013 and is expected to improve again during the final quarter of 2013.
  • The survey itself can be accessed by clicking this link

Banks agree protocol for legacy debt of small and medium enterprises

  • The President of the Irish Banking Federation announced on 21 November that the banks lending to SME's have agreed a Protocol on Multi-Banked SME Debt.
  • It is intended for this to come into effect on 2 January 2014, and is proposed to help distressed SMEs to manage their debts as effectively as possible and to become viable again.
  • To do so, a framework will be created that allows an SME in financial difficulty with debt owing to multiple banks to communicate with those banks on a collective basis and to allow those banks to collectively discuss and consider the case.
  • This announcement can be viewed by clicking this link.  

Central Bank publishes research paper on the Irish mortgage market

  • This paper, entitled "Credit Conditions in a boom and bust property market" has been published by the Central Bank.
  • Loan-level data from four Irish institutions (AIB, Bank of Ireland, EBS and Irish Life & Permanent) was analysed for the period 2000-2011 in reaching conclusions.
  • One of the main conclusions drawn is that "regulators should pay attention to both the loan-to-value ratio and the income fraction in moderating the exposure of individual institutions to credit risk".

Disclaimer

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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