AIB executives are appearing before the Oireachtas finance committee this afternoon to answer questions about the bank’s policy on debt write-offs for borrowers in financial difficulty in the wake of the controversy over the debt settlement agreed with former Kilkenny hurling star DJ Carey.
In the bank’s opening statement circulated to members of the committee ahead of its appearance, AIB said that it agreed debt write-offs of more than 90 per cent with about 1,900 borrowers in financial trouble since the financial crash. The settlements were agreed privately through the bank’s debt resolution process, outside the formal bankruptcy or insolvency process.
The committee invited AIB to appear to explain its policies on debt forbearance and forgiveness measures to determine how it writes off debts for struggling borrowers after details of Mr Carey’s private debt settlement with the majority State-owned bank dating back to 2017 emerged.
Follow my live reporting here - committee hearing begins at 1.30pm...
AIB’s Jim O’Keeffe told the committee that on personal insolvency agreements - mechanisms where debt is forgiven - the average write-down is almost 65 per cent where assets are involved.
For unsecured debt, not connected to assets ,the average write down is over 99 per cent. These mechanisms, known as PIAs, are formal debt deals, separate to the private settlements with borrowers.
Mr O’Keeffe, AIB’s head of retail banking, told Fianna Fáil TD Robert Troy that 11,500 home mortgages and 7,500 buy-to-let mortgages have been sold to investment funds, the vast majority of which were owing by borrowers who had stopped engaging with the bank.
AIB had agreed new debt solutions with borrowers on about 1,600 loans sold to so-called vulture funds but they were sold off as they were still classified as non-performing, he said.
The committee’s chairman, Fianna Fáil chairman John McGuinness, urged the bank to provide a greater degree of information to answer whether there “one rule for the wealthy and the famous and another for the ordinary people” when it came to debt write-downs.
“I want that question answered. I think that that goes to the nub of problem in society,” he said.
“People need to know that there is a fairness, there’s a level playing field and that everyone is being treated the same.”
Mr O’Keeffe agreed to provide a further breakdown of information about the debt write-downs agreed by the bank to the committee.
“The assurance we are giving you here today is that we have the policies and the procedures in place to make sure we are very fair right across the board,” he said.
“I think you will see that as we break out the solutions that we have given customers; I think the data will bear that out.”
AIB’s Jim O’Keeffe tells the Oireachtas committee that it cannot provide a breakdown of the scale of the write-downs for the 1,900 borrowers who had debts forgiven by 90 per cent since 2015.
The bank’s head of retail banking cites “commercial sensitivity” around financial figures ahead of the publication of AIB’s annual results for 2022 next week.
Aontú leader Peadar Tóibín said that distressed borrowers often had to make “very significant” cuts to their expenditure to keep making repayments on bank debts.
“It is very, very seldom that there is any write-down considered. It is usually a pause or a reduction for a period of time or an extension of the loan or maybe a parking of the loan if they are very lucky,” he said.
There was “anger and frustration” when they see sizable debt write-downs, he said.
He asked Mr O’Keeffe whether he could provide a breakdown on whether the 1,900 borrowers are developers, builders, farmers or “just ordinary people who had a couple of houses that are overpriced.”
The bank executive said he would be willing to disclose that to the committee at a later date.
“I would certainly like to dismiss the concern that this is a particular cohort of people,” he said.
Mr O’Keeffe disclosed to the committee that the bank repossessed eight properties and agreed more than 300 mortgage-to-rent deals where financially distressed borrowers remain on in their homes as tenants with the bank taking ownership of the property.
Mick Barry, People Before Profit-Solidarity TD, claimed that there was a bias in the bank’s approach to writing off debts for bigger borrowers because the sums owed were larger.
He cited an old adage: if a customer owes €5,000 to the bank and cannot pay, the borrower has a problem, but if a borrower owes €5 million and cannot pay, it is the bank that has the problem.
“The little guy loses out to a greater extent than the bigger guy,” he said.
Asked how much the bank has written off in total - beyond the 1,900 big debt write-off settlements - Mr O’Keeffe said AIB had written off a total of €3.5 billion in debts between 2015 and 2021.
He said he was unable to say whether any of the repossessed properties involved any of the 1,900 borrowers who received the large write-offs.
AIB manager Jim O’Keeffe said that the recent commentary around debt write-offs have become “almost something whereby it is a prize for somebody to achieve.”
He referred back to his opening statement where the bank applies “robust” criteria around assessing income and assets available, and the affordability of a borrower before reaching a full and final settlement of debt that may involve the write off of residual debt after this process.
“It is not the old world of somebody landing into the bank and saying: ‘I am here I owe you x and I am going to cut a deal and we are going to halve it.’ That is not how we operate,” he said in response to questions from Sinn Féin’s Pearse Doherty.
Write-offs are agreed on “the basis of affordability” and the “residual situation” around settlements involving debt write-offs was “consistent across the board,” said Mr O’Keeffe.
AIB’s retail banking chief Jim O’Keeffe tells Sinn Féin’s finance spokesman Pearse Doherty that there are “no special deals for special individuals” at the bank on debt write-off settlements.
In a reference to reports about DJ Carey’s debt deal, Mr O’Keeffe said, without referring to the hurler, that he acknowledged that the commentary had “caused a lot of upset for customers.”
He was responding to Mr Doherty who referred to complaints from “upset” members of the public who claimed they had not been offered debt write-downs by AIB and who couldn’t get thousands, never mind millions of euro, from the bank.
The Sinn Féin TD asked whether AIB had a special policy for the “top 1 per cent.”
“We deal with every case consistently and fairly. We have a governing set of policies that are reviewed internally, right up to the board,” he said.
He denied that there was any special treatment for the bank’s top borrowers.
“I can categorically tell you that there are no special deals for special individuals coming to AIB,” he said.
Mr O’Keeffe apologised to “customers who have been through that torture of the past week to 10 days or if they have been made to feel that they have been subject to something that doesn’t happen to a wider group.”
He declined to answer Mr Doherty’s question on how many of the debt write downs of more than 90 per cent for the 1,900 borrowers were for loans of over €1 million since 2015.
“But it is fair to say that within that grouping there would be loans of that magnitude,” Mr O’Keeffe said in relation to the €1 million figure.
He added that a majority of the loans would not be over €1 miliion.
Mr O’Keeffe said that whether the debt settlement involved €2 million, €3 million or €4 million with a borrower, they were “subjected to the same consistent policy application,” he said.
“There were no special deals in that 1,900.”
AIB’s managing director of retail banking Jim O’Keeffe tells committee, reading from his opening statement, that the bank has a “framework of controls” to ensure actions to help financially distressed borrowers are “consistent, fair and robust.”
The bank’s debt resolution framework is based “on a customer’s ability to repay, taking account of their assets and their sustainable income and prospects.”
“Our primary objective is to engage with the customer and to make every effort to come to an agreed arrangement to adapt to their changed financial circumstances,” he said.
Among short-term “stabilisation” solutions available to borrowers who cooperate with AIB are split mortgages, where customers retain their homes or where they cannot afford to repay the loan a mortgage-to-rent arrangement where a substantial level of debt is written off, he said.
Mr O’Keeffe tells committee that where a customer does not engage or cooperate to seek an agreed forbearance arrangement, the bank may seek to recover debt through the legal process.
“The objective of such a course of action would be to prevent any further weakening of the bank’s position and to allow for the disposal of secured assets either via a court order or through the appointment of a receiver,” he said.
The bank may also seek a court judgment on any unresolved part of the debt following asset sales, he said, but the borrower can still engage to settle outstanding debt, including after the disposal of assets.
“If they do, this may lead to a situation where a final settlement or compromise is agreed that may include a partial or full write-off of debt. Any such agreement is, as always, based on affordability and sustainability criteria,” he said.
Some background:
For more on DJ Carey’s debt deal and how properties he owned at the K Club and Mount Juliet golf resorts were sold to reduce his debts to AIB: https://www.irishtimes.com/ireland/2023/02/21/sale-of-golf-properties-linked-to-dj-carey-raised-18m-towards-his-aib-debt/
How common have big debt write-offs become since the financial crash? Read analysis here: https://www.irishtimes.com/ireland/2023/02/21/dj-carey-eye-watering-debt-write-off-deals-now-common-on-celtic-tiger-loans/
