AIB has said it will step up its pace of mortgage write-offs in 2013, by offering customers who are working with the bank the chance to have some of their debt cancelled.

The head of the AIB’s arrears unit, Garry Stran, said the bank would begin tackling problem loans “in a more industrialised fashion than seen before”.

Mr Stran said some 30 per cent of borrowers who have had their mortgages restructured and who are working with the bank, could have some of their debts written off.

“Writing off debt where people are doing the very best they can is absolutely appropriate,” he said, though he ruled out “wholesale debt forgiveness.”

He said any loan restructurings would be based on a borrower’s ability to pay while letting them keep to a “reasonable” living standard. “Given the scale of the problem, do we really want to be having emotive conversations with people” about TV subscriptions, gym memberships and cigarette habits, he said. “No, we don’t.”

Minister for Justice Alan Shatter welcomed the comments of Mr Stran, that the bank will offer mortgage restructuring and the possibility of some debt forgiveness to customers who work with them, saying he hoped other institutions would take a similar approach.

It is estimated that in the region of 80,000 home borrowers have been assisted in recent years by such debt forbearance arrangements agreed with financial institutions.

“It is clear that any such arrangements can only apply to those who truly cannot pay as opposed to those who will not pay and that there cannot be wholesale debt forgiveness,” he added.

The Insolvency Bill 2012 will be enacted through both Houses of the Oireachtas next week, and the Act will become operative in 2013, according to Mr Shatter. The Bill will allow debtors to emerge from bankruptcy after three years instead of the current 12 and to write-off debts up to €3 million. – (Additional reporting: Bloomberg)