Regulatory failure: the ban on repossessions

In providing a blanket ban on repossessions our regulator has deployed the bluntest tool in the box with all of the grace of a Rhino on ice skates.

We brought in a new Governor and Regulator with a view to creating real change, but it seems that populism reigns supreme given that Mr. Elderfields first major move since taking office was to give a one year blanket ban on repossessions – that is a textbook mistake.

Everybody accepts that the incentives in life are carrot on one hand and whip in the other, when it comes to arrears the carrot is that of getting your payments back in order, keeping your home, and feeling secure, the whip is that the bank will take your house. When there are no repossessions allowed there is neither whip nor carrot, you will keep your home, securely protected by unthoughtful legislation, and payments…. if you don’t make any you can still walk away after 12 free months.

When deposit rates drop and …

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If you are in financial trouble, don’t be an idiot

A part of me feels bad about not having any pity for some of the people who recently had their homes repossessed. Note: I said some not ‘all’, the reality is that I agree with repossessions for people who bury their head in the sand. In many cases the person had made no payment in three or four years and avoided any contact from the lender.

How do you negotiate with a person who won’t even come to the table? Or worse yet, who refuses to acknowledge there is an issue to come to the table for! The IBF recently decided to start working with MABS on a new protocol for people in financial difficulty, we fully support such a move, and for people in mortgage arrears, or indeed any financial arrears we even wrote a guide for …

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How falling interest rates hurt banks during a liquidity crisis

The falling interest rates are heralded by consumers of Irish mortgage companies as a godsend – well, for the clients of the Irish banks who actually pass on the full rate cuts that is! However, at the same time it creates a rate compression which damages the bank and this is what we will consider in this article.

Banks have two sides to the operation roughly speaking, on one side there is the lending function which we are all aware of, mortgages, car loans, personal loans etc. on the other side is the deposit taking function which provides part of the money they lend out. There is of course the interbank market which supplements (and often surpasses) deposit funds for lending, but to keep things simple we will focus on a world where deposits roughly equal lending.

When

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