Richie Boucher said Bank of Ireland would veto any deal that involved a mortgage debt write-off

Richie Boucher said Bank of Ireland would veto any deal that involved a mortgage debt write-off

By Business Editor David Murphy

Bank of Ireland’s CEO Richie Boucher has waved two fingers at the Government’s efforts to resolve the personal debt crisis.

Last week Mr Boucher told the Oireachtas Finance Committee his bank would veto any insolvency deal involving a write-down of mortgage borrowings owed by an owner occupier.

It means that one of the two largest banks in the country has dealt an enormous blow to the agency set up by the State to handle the personal debt headache.

Politicians have not forgotten that it was the taxpayer who rescued Bank of Ireland with a €4.8 billion bailout during the acute phase of the banking meltdown.

Justifying his hard line approach Mr Boucher argues that he has to be mindful of the capital of shareholders, which includes the taxpayers.

While nobody wants to see money written off unnecessarily, the mortgage crisis won’t cure itself. That is why the State established the Insolvency Service at considerable expense.

There are different types of insolvency arrangements available for distressed borrowers but the important one, from the point of view of mortgage arrears, is the Personal Insolvency Arrangement (PIA).

So far only four PIA deals have been approved – which is a slow start by any measure.

This arrangement is designed to help a family with mortgage debt and other borrowings, such as credit card borrowings and credit union loans.

In the case of an owner occupier borrower, the mortgage lender usually carries a veto on any proposed debt restructuring because it is usually owed the largest sum of money.

Last week Richie Boucher said Bank of Ireland would oppose any deal which included a write down of mortgage debt.

Its policy is in contrast to State-owned bank AIB and Permanent TSB, which have no such prohibition.

The State holds a minority 14% stake in Bank of Ireland, so its influence in the bank’s boardroom is not as strong as with the other two lenders.

Justice Minister Alan Shatter, who introduced the legislation to set up the Insolvency Service, has said he would review it if it was not functioning properly.

Bank of Ireland’s policy of shooting down potential deals means Mr Shatter will have to consider changing the way the service operates.

It is understood the service does not regard Mr Boucher’s testimony at the Finance Committee as helpful.

On 30 April the head of the service, Lorcan O’Connor, will appear before the Oireachtas Finance Committee.

His comments regarding how the Insolvency Service could be made more effective will be keenly awaited.

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