The Irish Banking Federation (IBF) and its member institutions have consistently supported reform of the legal framework for personal debt resolution.

The publication today of the Bill to give effect to the new personal insolvency and bankruptcy regime marks the Government's response to this complex issue.

Commenting on the Bill's publication IBF President John Reynolds said: "All banks have shared purpose and common ground with government in seeking to ensure that the greatest possible number of borrowers who are currently experiencing difficulties with their mortgage payments are restructured and restored to sustainability.   For those borrowers the mortgage arrears resolution strategies (MARS) prepared by all banks for the Central Bank will be the principal means by which this will be achieved.  It is critically important that  the new  personal insolvency regime is carefully calibrated and fully aligned with the MARS  programmes to provide the means by which lenders and borrowers can together address the problem of accumulated debt over the medium-long term".

The IBF and its members have consistently advocated that it is in the interests of both borrower and lender that the new personal insolvency regime should build on an evidenced record of prior ‘good faith' engagement between both parties.  The recognition and adoption of this important principle in the legislative proposals is welcome.

IBF and its members are disappointed with the proposed changes to creditors' voting rights and the retention of the proposed limit of €3 million.  We are concerned that these particular elements are not aligned with the emphasis given to the family home in the personal Insolvency regime.

On a related but critical issue  IBF and its members remain very concerned at the absence to date of any official remedy arising from the Justice Dunne judgement which has created an unintended legal impediment to banks' ability to enforce security on residential property including .  The legal flaw which this judgement has highlighted is impeding the progress of necessary measures to repossess and sell property in situations where all re-mediation measures have failed and the mortgage is deemed unsustainable.

The IBF and its members are devoting considerable resources to supporting borrowers in difficulty having already restructured close on 80,000 mortgages.  We are now gearing up considerably on that commitment to intensify our focus on the following key actions:

• Piloting and implementing the new loan modification and resolution measures recently proposed to the Central Bank in accordance with each bank's Mortgage Arrears Resolution Strategy (MARS).  In line with the recommendations of the Inter-Departmental Mortgage Arrears Working Group (Keane Report), these measures will help to maximise the number of customer mortgages that can be sustained over time.
• Developing comprehensive outreach programmes to communicate and liaise with customers who are or may be experiencing difficulties with their mortgage repayments and to strongly encourage early customer contact with their lenders.
• Supporting the establishment of the independent Information and Advice Service for mortgage customers in arrears.  The banking sector will work closely with the Citizens Information Board in the marketing and provision of this service through a number of channels including a website and a telephone helpdesk.  The sector will also support the independent delivery of a face-to-face advisory service to mortgage arrears customers.
• Preparing staff, systems and processes for the forthcoming personal insolvency and bankruptcy regime.

"IBF member banks are confident that the combination of MARS and the new personal insolvency regime can provide the means to effectively tackle mortgage arrears and to maximise the number of sustainable customer mortgages over the medium to long term", stated Pat Farrell, IBF Chief Executive.  "Full alignment and correct sequencing between these initiatives will be crucial and the recognition of prior ‘good faith' borrower/lender engagement is very important in this regard."

A great deal is being done and will continue to be done by banks on a daily basis to assist their distressed customers and this is evidenced by the almost 80,000 restructured mortgages now in place.  IBF and its members continue to strongly encourage borrowers who are experiencing difficulty with their repayments to communicate early with their lenders in order to find a workable arrangement that will assist in the management of their financial difficulties.

The IBF has engaged and will continue to engage constructively with policy makers and key stakeholders in helping in the delivery of solutions which appropriately balance the needs of lenders and borrowers.  We will be undertaking a detailed and careful examination of the contents of the Bill published today as the basis for that ongoing engagement.

Article Published: 01/07/2012