ONE MORE THING:THE COMPLEX task ahead of unravelling property loans from other loans held by companies and individuals at the banks is best seen in the work facing AIB.

To reduce their reliance on European and Irish Central Bank borrowings, the banks are splitting into core and non-core operations, with the non-core unit being disposed of or run down over time.

AIB, which is 99.8 per cent State-owned, has split its remaining loans into €73 billion core and €19 billion non-core operations. The majority of the non-core portfolio earmarked to be disposed of or run down is property and construction (46 per cent) or residential mortgages (10 per cent).

Despite the fact that the National Asset Management Agency was set up to purge the banks of their most toxic loans – land and development – some €6.8 billion of such loans remain on AIB’s books. This is as a result of the decision not to transfer land and development loans of less than €20 million into Nama.

The difficulty for AIB is that it has customers which it regards as core with non-core loans. In other words, AIB has personal and business customers who are regarded as central to the future of the business but who have some loans which are not central.

These may be small and medium-sized enterprises who were not heavily involved in property but dabbled in development, or personal customers who have buy-to-let investment properties as well as residential mortgages, personal loans and current accounts with the bank.

The challenge for Peter Spratt, head of the bank’s non-core divisions, is to “decouple” the loans from those customers. This is no easy task when you consider how loans are cross-collateralised across a customer’s assets.

AIB and the two other “live” banks left standing (just about) after the financial crash – Bank of Ireland and Irish Life Permanent – have €73 billion of non-core loans, some of which will also require decoupling.