Process is delivering workable solutions for both lenders and borrowers
“The sale of non-performing loans (NPLs) to third-party investment funds provides benefits for banks and protection for borrowers”, states Brian Hayes, BPFI Chief Executive, on the publication today of a paper presenting the facts and dispelling the myths about the process.
“Our banks have made significant progress in reducing their NPL ratios in recent years and further progress continues to be made in accordance with plans agreed with the European Central Bank Single Supervisory Mechanism. The extent to which this is contributing to healthier bank balance sheets is good not just for banks but for the wider economy which depends on banks for personal and business lending. At the same time, the Central Bank of Ireland, with the support of the Oireachtas, has ensured that the protections afforded to borrowers by the relevant Codes, including the Code of Conduct on Mortgage Arrears, travel with the loans.”
BPFI’s Chief Economist, Dr Ali Ugur, states:
“Unfortunately, a number of false claims made about the NPL sales process have created unhelpful myths. We believe it’s important to dispel those myths by illustrating the way in which the process provides one of a number of very important solutions to the management and resolution of mortgage arrears. We know from talking to various firms, on both sides of the NPL sales process, that the process is delivering workable solutions for lenders and borrowers alike.”
The BPFI paper, “Sale of Non-Performing Loans to Investment Funds: Benefits to Banks and Consumer Protections” explains the process of NPL sales and provides the most recent figures. It also tackles head on various false claims made about the process, such as:
- Claim: borrowers do not have the same protection when their loans are sold on by banks
Fact: Borrowers do have the same protection - Claim: Investment funds do not offer to borrowers forbearance measures similar to those from banks
Fact: Investment funds do provide a wide range of forbearance measures to borrowers - Claim: Ireland is facing a ‘tsunami of repossessions’
Fact: Repossession here are low by international standards - Claim: Investment funds do not facilitate arrangements for borrowers
Fact: Investment funds do put arrangements in place for borrowers
The paper concludes that banks here have made significant progress in reducing their NPL ratios over recent years using various resolution tools including sale of NPLS portfolios; that during this process borrowers are fully protected; but that further important progress on this front is not helped by misleading claims.
Notes: Banking & Payments Federation Ireland (BPFI) represents the banking, payments and fintech sector in Ireland. Together with its affiliates, the Federation of International Banks in Ireland and the Fintech & Payments Association of Ireland, BPFI has some 100 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.
Contact: Jillian Heffernan, Head of Communications, 087 9016880 or jillian.heffernan@bpfi.ie
