Central Bank of Ireland: Keeping the countercyclical capital buffer at zero?

In reference to Irish Central Bank maintains countercyclical capital buffer at zero by Peter Hamilton on 27 June 2017 in the Irish Times.

The Central Bank of Ireland decided to keep its countercyclical capital buffer at zero. Only if the current credit conditions remain restrained.

What is a countercyclical capital buffer?

A countercyclical capital buffer (CCyB) is a quarterly decided rate that applies to banks and investment firms. It’s a capital requirement designed to help banks save during the good months to prepare for the bad months. The CCyB will increase if the credit growth is excessive then is released during a period of systematic stress.

Currently, the Central Bank of Ireland said it will remain at zero.

Bank of England, on the other hand, has raised its buffer from zero to 0.5 percent. This leaves bank having to raise an altogether buffer of 11.4 billion euros in 18 months. The Bank of England is also planning on raising the buffer to 1 percent by the end of the year.

The Financial Policy Committee (FPC) of the Bank of England …

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Tensions are High in the Mortgage Market

This post is in reference to It’s time to shout ‘stop’ on excessive charges by Brendan Burgess and Banks warned over cashback mortgage deals by Donal O’Donovan. Both published on June 16 2017 in the Independent.

Interest rates are high for non-tracker mortgages and banks are offering cashback deals to manipulate customers.

Everyone is accusing everyone today in the mortgage market in Ireland with interest rates the highest in the European Union. The Competition and Consumer Protections Commission (CCPC) have sat idly by for the past years as the interest rates are rising when the CCPC is designed and paid by the taxpayer to protect the consumers. CCPC came out with a report yesterday stating Ireland needs more competition, long-term strategy, vision and more committees. No suggestions in the report have a solution for the short-term.

The Government, Central Bank, and the CCPC wants everyone to be patient and the competition with drive down mortgage rate… but how long from now? Government and the Central Bank have been saying this for the past three years and nothing has changed.

Now …

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ECB Putting Pressure on Irish Banks?

European Central Bank is putting pressure on Ireland’s main banks to deal with the non-performing mortgages on their books. The banks are coming up with ways to remove these non-performing loans off their balance sheets. Considering the possibility of special purpose vehicles (SPV) that package all of the non-performing loans. They will need to sell the majority of the stake of the SPV to investors for them to remove it from their books. By creating SPVs, banks will still be able to service and have a stake in the mortgages. They are starting to create leads on investors currently.

With the ECB already overseeing a lot of the main banks in Ireland in the end of 2014, they have cut their average of 27% of non-performing loans off their balance sheet in 2013 to 14% at the end of 2016.

In the recent years, US private equity firms have refinanced millions of non-performing loans from Irish lenders. Showing a demand for such bonds because of the great success of residential mortgage backed securitisation. The banks will need to structure any …

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How Do American Mortgages Work? Part 2: How the Secondary Mortgage Market was Created

Like the housing bubble in 2008, there was a growing popularity in the residential housing market which therefore created a housing bubble throughout the 1920’s. Before the crash, there were four common financial institutions to obtain a mortgage from: commercial banks, life insurance companies, mutual savings banks, and thrifts. These would typically have 5 year balloon loans or 10 year amortization loans with families having a hybrid of the two loans.

The Great Depression started by a stock market crash in 1929, there was a huge economic downfall that lasts for 10 years spread throughout the Western world filled with great disparity and no work. By 1933, the economy fell 27%, unemployment reached 25%, and wages fell 42%. The Great Depression was not just affecting Americans but the banks as well. Laws preventing banks to invest their client’s deposits were not in existent yet so a majority of the banks’ money were in investments. When the stock market crashed the banks’ money went along with it. With the Economic downfall left little to no income for most of the families, …

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Opportunists preying on fear are the real vultures

This was a joint opinion piece by Karl Deeter of Irish Mortgage Brokers and Ross Maguire of New Beginning. Ross is a Senior Counsel and a highly skilled professional in the area of property rights. The point being raised was that property rights and contractual obligations are very well set out in Irish law.

There are those that would have you believe that a person or company can buy your loan and suddenly turf you out, that simply isn’t the case and is factually incorrect. We refer to people sending out that kind of nonsense as being mandarins in the ‘Ministry of Fear’ and make the point that the facts matter.

The full article can be read here.

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Pre-emptive insolvency, the time is now.

A headline today caught our attention, it was about an injunction to have an insolvency solution honoured.

Personal insolvency is a legislation backed process (unlike informal debt deals) and for this reason you can’t unilaterally decide, as a creditor, to opt out of one that is already in existence.

What is interesting at this point in time is that many of the applications we track in the courts when gathering possession statistics are about applications for change of name of the plaintiff. This occurs when loan books are being sold and the proceedings are being altered to reflect the new owner.

There is considerable confusion even within the courts because of this and it may be a case that a person could use this as an opportunity to seek personal insolvency because in the midst of this there is a lower level of likelihood that loan buyers will engage in the process.

Failing to do this means they lose …

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Debt Relief Notice ceiling raised by 75% to €35,000

30 September 2015: The Insolvency Service of Ireland (ISI) has welcomed an amendment to legislation which will allow people on a lower income and with few assets to have debts of up to €35,000 completely written off.

The Debt Relief Notice, also referred to as a DRN, is one of the legally binding debt solutions provided under the Personal Insolvency Act available through the ISI. It allows for the complete write-off of debts such as personal loans, credit card loans, store card debts, credit union loans and overdrafts. An application for a Debt Relief Notice is approved by the Court and once it is granted, the person can no longer be contacted by creditors asking for those debts to be repaid.

Commenting on the legislative amendment, the Director of the ISI, Mr. Lorcan O’Connor stated:

The Debt Relief Notice is intended for people with very limited means who are in genuine financial distress and we know from the hundreds of people who have availed of this debt solution already that it is life changing. I fully expect that the increase …

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Why not make a bank’s veto backfire on them?

There are two views that have been mentioned recently, one is that bankruptcy should have a reduced term to 1 year and the second is that banks have a veto on insolvency deals.

Perhaps the best way to resolve the issue isn’t to make bankruptcy one year for everybody, but rather to make it one year when and where a bank has rejected an insolvency solution put forward by a personal insolvency practitioner.

This would mean their decision to veto has a negative impact upon them, there are consequences to rejecting genuine offers. Obviously this would require some tweaking because individual cases and circumstances can become quite complex, but it would certainly help a creditor to sharpen their mind if they knew that a refusal could then have worse outcomes without affecting their contractual rights.

The good thing about this is that it would also channel more people into the proper route for dealing with debt (the official regulated insolvency one) and keep them out of what will probably become a scandal some day in the future (the informal channel …

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