People who pay their mortgages are being negatively impacted by those who are not repaying home loans – AIB boss

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People who pay their mortgages are being negatively impacted by those who are not repaying home loans – AIB boss


AIB, headed by CEO Colin Hunt, is under pressure to reduce its bad loans
AIB, headed by CEO Colin Hunt, is under pressure to reduce its bad loans

PEOPLE who are paying their mortgages are being negatively impacted by those who are not repaying their home-loans, the head of AIB is set to tell politicians.

New AIB chief executive Colin Hunt will also say the large numbers of non-payers is pushing up lending rates for home buyers and businesses.

He is to suggest to the Oireachtas Finance Committee, chaired by Fianna Fáil’s John McGuinness, that the bank will sell more non-performing loans to private equity funds.

Two weeks ago the State-owned bank announced the €1bn sale of bad loans that controversially includes around 200 family home mortgages as well as thousands of buy-to-lets. The loans were sold to US fund Cerberus.

Dr Hunt will tell the TDs and senators this latest sale will reduce its non-performing loans exposure to around 8pc of its loan book.

He points out that the European average is around 3.5pc, and the bank’s aim is to hit around 5pc by year end.

“But this is a milestone, not a destination. AIB is still carrying a large chunk of deep long-term arrears that simply must be reduced by year end,” he says in his opening remarks.

The sale of so-called NPLs (non-performing loans) have proved to be hugely controversial, prompting the Dáil to back a private members’ bill proposed by Sinn Féin Pearse Doherty requiring mortgage holders to give their express consent before their loan is sold to a vulture fund.

Dr Hunt will tell the politicians: “NPLs inhibit banks’ primary function of lending to the economy and ultimately they increase bank costs, resulting in higher rates for businesses and home-buyers.

“It is also true to say that those individual customers who do meet their loan repayments are, in effect, negatively impacted by those who don’t repay.”

He says Irish banks must hold more capital than European banks because of our credit-default history.

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This requirement to hold large and expensive provisions or buffers against the possibility that customer debts will go into default means additional costs for customers, he is to point out.

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