Around 1,900 AIB customers are part of a select group who have seen at least 90% of their debt written off, it has been confirmed.
After the revelations that hurling legend DJ Carey had millions of euro written off his debt, AIB will today tell an Oireachtas committee that 1,900 borrowers – or 1% of their financially struggling customers – have had 90% or more of their debt written-off.
TDs had demanded to know what preferential treatment AIB had given other customers after details of the huge writedown of Mr Carey’s €9.5m debt emerged.
Deputies specifically sought answers on how many cases the bank had agreed to write off more than 90% of a customer’s debt. The managing director of retail banking at AIB, Jim O’Keeffe, will tell politicians this morning that 1% of client reductions had such high levels of debt writedowns.
While AIB cannot answer questions relating directly to Mr Carey’s finances, the bank can answer wider queries regarding debt deals. In his opening statement to the committee today, Mr O’Keeffe will say that some of the recent commentary about the bank’s writedowns has been “incomplete and have not presented the full picture”.
It was initially reported that Mr Carey’s debt was written down by 99%, after the bank secured a High Court judgment in 2011 for €9.5m against him, arising from a €7.85m loan.
However, sources later confirmed that it is in the region of 80%, following a sale of residential properties, including at the K Club in Kildare and Mount Juliet in Kilkenny.
The proceeds from the property sales and the €60,000 settlement represent a debt writedown of just over 80% on the total value of the outstanding debt Mr Carey owed to AIB.
Nonetheless, BusinessPlus.ie understands that AIB will today only be providing the specific figures sought – namely write-downs of over 90%, not over 80%. The value and scale in euro of those 1,900 write-downs of 90% or more is not yet known.
“We have maintained our position that we are not enabled or entitled to discuss the details of any particular account regardless of the historic or current relationship with the customer involved,” Mr O’Keeffe will say.
“However, we have also reaffirmed that the bank has a proven track record in supporting customers in difficulty and, as a regulated entity, has a robust governance and policy framework in place that deals in a consistent and equitable manner with customers whose accounts become challenged.
“The number of borrowers, other than those who went through a bankruptcy or insolvency process, who have received a reduction of over 90% of their loan amounted to circa 1,900.
“Compared to the circa 150,000 customer resolutions already referenced, this represents a ratio of just over 1%.”
Politicians and groups representing those struggling with mortgage repayments had questioned if Mr Carey, who won five All -Ireland hurling medals with Kilkenny, received any preferential treatment from the bank, which has been a major GAA sponsor since 1991. Mortgage-holders, who have seen their interest rates rise after a succession of hikes by the European Central Bank, have also been angered given the taxpayer’s bailout of the bank to the tune of €20.8bn.
Mr O’Keeffe will outline that when arriving at a final debt settlement the bank has several key criteria which are assessed, which includes debt write-offs. They are evaluated on a borrower’s individual circumstances that are “supported by full and transparent disclosure of a customer’s financial affairs” which can be independently validated.
The customer must also “demonstrate a willingness to meet their contractual obligations while maintaining a reasonable and benchmarked lifestyle and in the case of a business, its viability”.
Any proposals must address “all of the borrower’s obligations” with the bank and take into account any third-party debt. “The level of sustainable and unsustainable debt will be determined by the bank based on an assessment of the borrower’s affordability. Proposals will include a requirement on the part of the borrower to make available to the bank any windfall income that may accrue within a set period following a settlement,” Mr O’Keeffe will say.
The Oireachtas Committee on Finance will be told that AIB has a dedicated Financial Solutions Group (FSG) that was established in the wake of the financial crisis to deal with distressed loans. Resolutions are either consensual after constructive engagement, but where the customer does not engage, the bank seeks a court order for a non-consensual retrieval of assets.
Mr O’Keeffe will say that there is a framework in place, which is reviewed annually by the board, for dealing with debt issues to “ensure our actions are consistent, fair, and robust”.
He will tell the committee that the policies are underpinned by “clear rules and principles that are applied consistently with respect to the identification, assessment, granting, management, monitoring and reporting of forbearance processes and decisions, in line with regulatory requirements”. The system has enabled around 150,000 customers to return to a sus tainable financial position, according to Mr O’Keeffe.
“FSG has also played a key role in reducing the bank’s legacy non-performing loan exposure position from €30bn at its peak post the financial crisis, to its current position of circa €300m,” he will say.
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