Note:  This is an extract from a fuller statement released on 20th February 2018

Background 

The level of Non-Performing Loans (NPLs) in certain countries is an area of concern for the European authorities. The lead regulators of the European banking sector have set out clear expectations that all European banks with above average NPL ratios will develop and implement measures to reduce the number of NPLs which they have on their books as a matter of urgency. Permanent TSB (the Bank) is not alone amongst banks in the Eurozone or in Ireland in having to deal with this matter.  

The regulators in this area are clear that in dealing with this matter, the Bank must address all NPLs, whether restructured or not. The Bank is considering a number of different approaches in respect of its NPLs.

Project Glas

As part of its response, the Bank is preparing for the potential sale of certain NPLs to third parties (this is called Project Glas).

In total, loans linked to approximately 18,000 properties are included in Project Glas; approximately 14,000 of which are Private Dwelling Homes (PDH).

The total value of all loans included is approximately €3.7 billion, with approximately €1 billion of this accounted for by properties bought specifically as investment properties (Buy-To-Let).

Of the remaining €2.7 billion in loans, just under €2 billion is accounted for by PDH loans which are typically owned by customers who have not engaged with the Bank, whose mortgages are unsustainable or who have been unable to meet the terms of various treatments put in place.

Project Glas also includes some loans which are currently subject to agreed restructuring measures, but which remain categorised as NPLs and which, therefore, we are required to address.  

It is important to note that, in preparing this loan book for sale, the Bank did exclude a significant number of loans which will be resolved through other means.

Safeguards For Customers

The Bank is conscious that customer safeguards must be a key element of any NPL reduction programme. In that regard, there are a number of points worth noting;

  • Under the Consumer Protection (Regulation of Credit Servicing) Act 2015, if the purchaser of a mortgage loan is an unregulated entity, then it can only deal with account holders of these loans through a Credit Service Firm (CSF) which itself must be regulated by the Central Bank of Ireland. The CSF’s obligations include taking any necessary steps for the purposes of collecting or recovering payments; notifying the borrower of changes in interest rates or in payments due, and communicating with the borrower in relation to matters such as errors and complaints.
  • CSFs are bound by the same regulations when dealing with account holders as currently apply to the Bank and they are required to comply with the Code of Conduct for Mortgage Arrears (CCMA) and Consumer Protection Code (CPC).
  • In regard to potential legal action, the Court system does not process cases involving third party funds any differently than it does with cases brought by banks.
  • Under the Consumer Protection Code (CPC) regulations, where a loan sale is eventually agreed customers whose loans are included in the sale can expect to receive confirmation of that fact from the Bank at least sixty days before the loan transfers.
  • Unlike the selling Bank, third party funds have greater flexibility to develop tailored solutions for individual home owners.

Your Questions Answered

Why is permanent tsb selling these loans?

Permanent tsb is required by the relevant European regulatory authorities to reduce the level of Non-Performing Loans on its books as this has been identified as being too high.

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Is my loan included in this proposed sale?

This loan sale is limited to Non-Performing Loans (as defined by the Regulator) so if your loan is performing in line with the original terms and conditions, then it will not be included.

If your loan is not performing in line with the original terms and conditions (e.g. it was re-structured), then it may be included, but this process is at an early stage, and it not possible to detail the individual loans included. Ultimately, if your loan is to be included in any sale, then you will receive notice at least 60 days before the transfer occurs.

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When will this proposed sale take place?

This transaction is not expected to complete until towards the end of the year, and there will be no significant new information about the process for a number of months.

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I have agreed a restructuring of my loan with permanent tsb - does that mean it will be excluded?

The regulator requires us to categorise certain loans which have been restructured as Non-Performing because while they may be meeting the agreed terms of their restructure, they are not performing in line with the original mortgage contract. Therefore, certain such loans may be included in any loan sale.

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I want to have my loan excluded. How do I do this?

It is not possible for customers to seek to exclude individual loans from the sale process at this time. 

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On what basis are you allowed to sell my loan to a third party?

The sale of loans and other contracts from one institution to another is a normal event in financial services and similar loan sales have occurred here in Ireland and in other markets.  

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Will any new owner of my loan honour existing arrangements?

When a new owner acquires a loan, it is bound to honour the contractual arrangements which are in place in respect of that loan, provided the borrower is adhering to the agreed terms of their contract.

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I am worried that a new owner won’t be regulated.

Under existing legislation, if the owner of a loan is not regulated itself, then it must only deal with the account holder through a regulated Credit Service Firm.  The same regulations as currently apply in managing mortgages in arrears apply in such cases including the Consumer Protection Code (CPC) and the Code of Conduct for Mortgage Arrears (CCMA).

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