THE CENTRAL Bank has strongly criticised banks for their slow progress in tackling the mortgage crisis, saying the extent of their efforts to fix the problems showed that “wait and see” had become the strategy of choice for lenders.

In a strongly worded speech to a conference of bankers, the Central Bank’s head of banking regulation Fiona Muldoon said that the banks were behaving like teenagers in responding to its requests to deal with the problem with mortgages.

“The Central Bank has led on the issues; the banks have waited to be told what to do and not particularly liked it when we have done just that,” she told the Irish Banking Federation conference.

Lenders have been told to offer long-term forbearance products to struggling mortgage holders.

The secretary general of the Department of Finance John Moran said the banks would have to forgive some mortgage debt that customers could not repay.

There had to be “solutions that involve much more dramatic write-off of debt in respect of households that are really in non-sustainable situations and have an inability to repay”, said Mr Moran.

Revealing for the first time that 48,000 buy-to-let mortgages with €13 billion of debt were in some kind of financial difficulty, Ms Muldoon berated the banks for failing to do more to address the crisis.

She said the banks were “stuck in stasis, but at least hunting with the pack; I see too much ‘activity’ and not enough ‘outcome’ ”.

The banks were paying “lip service” to making progress on resolving problem mortgages, she added. “I see too much ‘give the Central Bank exactly, literally, what they asked for’ and not enough true dialogue and meaningful engagement to find a solution. I see way too many ‘extend and pretends’ masking as solutions.”

Ms Muldoon queried whether bankers were hoping for an economic recovery or an increase in house prices to solve the crisis.

“This is the stuff of denial. Hope is not a strategy – any more than anger,” she told the bankers.

She said they needed to “move on” from the mistakes of the past and to concentrate on fixing them but that a culture of leadership was missing in the industry.

“Forget about humility and get busy fixing. What is needed now is authentic leadership, not humility; some courage to act,” she said.

John Reynolds, IBF president and chief executive of KBC Bank Ireland, said resolving mortgage arrears was “frustratingly slow” but that this reflected the scale of the problem. Criticism of short-term forbearance measures was “misplaced and unfair”, he said.

The banks were devoting “huge resources” to deal with customers in difficulty and this would prove effective over time, he said.

IBF chief executive Pat Farrell said he was told by “a regulator more senior than Fiona” when they last spoke that bankers had not apologised enough for the past so there was “a touch of schizophrenia” at the Central Bank.

Ms Muldoon said that of the 168,000 owner-occupier customers in arrears, half of them by value and by number had “no formal arrangement in place”.

“The economic milk spilt in poor lending, the losses already incurred, have not even begun to be cleaned up,” she said.

Some 167,000 mortgages with €35 billion of debt, including buy-to-let mortgages, were in arrears at the end of June 2012, while a further 51,000 cases of €9 billion had been restructured.

Progress in tackling problem buy-to-let loans was even slower than on home loans, said Ms Muldoon, and this was “where the emotional issues surrounding the family home are not even in play.”

A fifth of the 150,000 buy-to-let mortgages and 29 per cent by value of the €32 billion mortgages are in arrears of 90 days or more.