‘Vulture’ funds file 35 authorisation applications with Central Bank

Some 35 so-called vulture funds have filed applications to be authorised by the Central Bank following the passage of laws late last year forcing owners of Irish mortgages to be regulated, according to officials from the bank.

Derville Rowland, director general of financial conduct at the Central Bank, told the Oireachtas Finance Committee on Thursday that none of the applications have been passed yet, as the bank is not yet satisfied with the proposals.

A Fianna Fáil Private Members’ Bill was enacted last December to bring previously unregulated buyers of distressed Irish loans under the oversight of the Central Bank. Previously, only firms that serviced such loans on behalf of the owners were supervised.

All 35 new applicants are deemed to fall under the radar of the Central Bank while they pass through the authorisation process.

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Ms Rowland said that financial supervisors have inspected portfolios covering 70 per cent of the 90,000 loans that are currently owned by firms outside of the mainstream banks.

Many of the loans that have fallen into the hands of overseas firms – including Lone Star, Cerberus and Goldman Sachs – came from banks that retreated from the Irish market or imploded in the wake of the financial crash.

Surviving domestic banks have cut their average non-performing loans (NPLs) ratio from a peak of 30 per cent in 2013 to 7 per cent at the end of June, according to Central Bank data, as they focused mainly on restructuring the terms of 109,000 distressed mortgages.

ECB pressure

However, they are resorting increasingly to selling off distressed mortgages as they come under pressure from European Central Bank (ECB) regulators to lower their levels of NPLs to the European Union average, which currently stands at about 3.5 per cent.

Deputy Central Bank governor Ed Sibley told the committee that loan sales are a valid way to help banks reduce their NPLs. But he said that his team has pushed back against lenders who have been too focused on this method to deal with soured debt.

“There have been a couple of instances where we were dissatisfied with the strategy that was being pursued and where it was overly focused on sales and not continuing to [restructure NPLs],” he said.