DUBLIN: The Central Bank has directed that the problems faced by borrowers in the COVID-19 context should be addressed humanely and all possible interventions should be made. Deputy Governor of prudential regulation Ed Sibley and director general of financial conduct Derville Rowland, outlined the need to protect borrowers in a letter to chief executives of banking institutions.
The central bank urges lenders to take special action to ensure that past mistakes are not repeated and that chief executives take the necessary steps in this regard by December 18.
The central bank hopes that the crisis facing borrowers and borrowers will be adequately addressed, and that lenders will be able to avoid ‘past mistakes’ and restore the economy.
The letter asks for information on how to handle loan payment breaks. The letter warns that in most cases, information about support provided to borrowers is not granular enough to hinder the lenders’ boards and executives from having effective oversight. The bank says there have already been indications that mortgage lenders are over-relying on short-term adjustments without repaying any capital.
“These arrangements may not be in the borrowers’ best interest as they increase the overall cost of credit for the borrower and do not address the affordability of their loans over the longer term,” the letter points out.
Concerns of borrowers for small and medium enterprises should also be addressed. The central bank highlights the lack of innovation in the range of options offered to borrowers.
“No single measure will be successful in resolving all distressed debt, and research shows that borrowers and lenders benefit from taking a candid up-front view of borrowers’ repayment capacity, and having a range of solutions appropriate to all circumstances,” the letter clarifies.