Ulster Bank concerned at ‘over-prescriptive’ targets

Senior Ulster Bank managers have expressed concern at "over-prescriptive" targets for dealing with mortgage arrears, saying they could have unintended consequences for homeowners.

Speaking at the Joint Oireachtas Committee on Finance, Public Expenditure and Reform, the bank's chief executive Jim Brown said recently-introduced regulatory measures had improved the bank's ability to engage with customers.

However, he said there was a “danger of another series of unintended consequences through over-prescriptive definitions regarding sustainability” in the Central Bank’s criteria for dealing with mortgage arrears.

Realistic targets
"It is critical that regulatory imposed targets are realistic and that any sustainability criteria used to assess compliance with such targets are wide enough to take into account individual circumstances," he said.

Mr Brown was asked whether the bank had reached the Central Bank target on finding sustainable solutions for 20 per cent of customers in mortgage arrears. He said it had exceeded the Central Bank target and provided solutions for more than 30 per cent of such customers.

Legal action
Sinn Féin TD Pearse Doherty said 82 per cent of these solutions had been through legal channels, which he said went against the spirit of the Central Bank's targets.

Mr Brown said 4,000 customers were in a long-term arrangement outside the legal process but had been excluded from the figures sent to the Central Bank.

His colleague Stephen Bell, Ulster Bank's chief risk officer, said there was a lack of certainty about what deals fell inside the remit of the figures. To avoid "a very public discussion" about whether it had hit the targets, it had used the legal route on customers in arrears so it could provide figures that were "unchallengeably correct".

Mr Bell said the bank’s target was to drive solutions and not legal cases but that when financial penalties loomed for not reaching a target, boards of directors did what they needed to in order to hit them.

The committee heard that 18,025 of the 122,831 mortgages issued by Ulster Bank were in arrears of more than 90 days and that 35 per cent of those in arrears were not engaging with the bank whatsoever.

Arrangements
Ulster Bank said the holders of 8,868 accounts were in some sort of an arrangement with the bank; 4,038 had entered a long-term formal arrangement; 500 were in a short-term plan, such as a payment holiday; while another 4,000 were in some form of informal arrangement.

It was engaged in a legal process with a further 4,900, and rent receivers were appointed in respect of about 1,000.

On the topic of strategic default, Mr Brown said a number of the bank’s mortgage-holders believed they could live in their homes without making payments or engaging with the bank and that this was “not fair” on others who were making their payments.