As I write this blog post in August 2014 we are 6 to 7 years on from the economic crash that brought Ireland’s economy to a standstill and indeed when the entire Euro currency was under severe pressure. So here we are all these years later and we still have the problem of Irish and indeed other banks operating here, who lent far too aggressively in the so called good times, not writing down or off un-repayable loans to allow people to get on with their lives.

I am seriously concerned that if the banks still operating in Ireland don’t start making commercial decisions soon we will face another serious financial crisis in the not too distant future.

The borrower

Many of us were responsible for what happened in Ireland. Traditionally Irish people have a love affair with property.  We have a need to buy our own home and in recent years we all wanted to have a second or third house because everybody seemed to have one. We grasped the opportunity if we had the chance to buy a commercial building and rent it out and sure what was the risk in that.  Someone then suggesting we should buy a property in some foreign country as they were much cheaper than similar properties in Ireland.  Even that sounded like a good idea to some at the time.

That was one side of the story and all who invested too heavily in property have suffered a major financial disaster and in many cases have had their financial dreams totally shattered. This has happened to many many people and their plight needs to be addressed now rather than later.

I have a number of friends and customers in this situation and in recent months they have been experiencing extremely aggressive behaviour from the banks, who are basically in many cases trying to get blood from a stone!

Yes the borrowers made mistakes and borrowed what they can not now repay and the asset values of their properties are mostly well below their borrowings. The borrower has already been burnt. Their lives have been severely impacted on.

But what about the lender?

In Ireland the two Irish banks remaining are the AIB and the Bank of Ireland and they hold much of the borrowings that need to be either restructured or written off.

The Irish Government injected billions of Euros of tax payer’s money into our two banks to prevent them from collapsing. AIB is now almost totally owned by the Irish taxpayer, who still owns a much smaller stake in Bank of Ireland.

Everyone agrees that people in Ireland borrowed too much.  I think everyone also agrees that many bankers lent too aggressively.  In many cases the bonuses paid to them was not on the quality of the loans sanctioned but rather on the quantity.

My problem is that the same banks that have been saved by tax payer’s money and in many cases lent more than they should have are now making life hell for the borrowers that they lent the money to and this is just not right.

I am not talking here about the borrowers who have been ducking and diving and not facing up to the reality of their situation. No I am talking about the genuine people who have been in constant contact with their bankers to try to work out a workable solution so that they can get on with their lives.

One of the overseas banks that have since departed took a different view and has accepted the reality of the Irish property situation and in many cases has written off up to 50% of the outstanding loans and this has allowed both parties to move on.

The Irish banks appear reluctant to accept the reality of the situation and are spending a huge amount of their resources and indeed hiring new staff to try to force people to repay money that they simply cannot repay.

In some cases the banks are imposing the most stringent loan repayments possible and if the borrower is willing to comply then the bank will agree to write off an agreed sum at the end perhaps of a 5 year period. If everything agreed is not repaid by that time then the write down might not take place.

My view is that if the banks push the borrowers in trouble too far then the borrowers will take a different route and decide that the best thing to do is to get the total borrowings eliminated now for once and for all and go down the road of bankruptcy.  Unpleasant and all as the thought of bankruptcy might be it is an immediate and permanent solution and just might prove for many to be the best long term course of action.

Despite all of the outstanding loans arrears issues the Irish economy is proving resilient despite the very tough taxation measures that have been taken by the Government and endured without too much protest by all the citizens of Ireland.

The resolving of the loans arrears crisis needs to be politically addressed and the banks must be forced by the Minister for Finance, Michael Noonan acting on behalf of the Irish people to bring this economic tyranny to an end.

We need action and we need it now. It is time for the banks to make commercial loan reduction decisions in a sympathetic way to allow borrowers and their families to move on.

Ted Dwyer Family Business

August 2014

Ted Dwyer is the Founding Director of City Life Wealth Advisors a family business in Cork