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IRISH BANKS ARE required to hold about three times the amount of capital as their European counterparts, according to a new report published today by the Banking and Payments Federation Ireland (BPFI).
The report - commissioned by BPFI and conducted by Martello Strategic Consulting - says that capital requirements introduced after the financial crash have not changed, and this in turn is driving up the cost of lending and mortgages in Ireland.
These requirements brought in after the crisis led to a “vast increase in higher quality loans and a significant reduction in problem loans”, the BPFI said. But the banking system was not seeing the benefit of this reduced risk as the capital requirements have remained static.
Irish mortgage applicants face some of the highest interest rates in Europe. According to data from the Central Bank last month, Ireland had the joint highest mortgage interest rate in the Eurozone, along with Greece.
The BPFI said the situation regarding capital requirements will mean little changes over the next five years.
Its chief executive Brian Hayes said: “Even when we take mortgages issued in recent years which have significantly better underlying quality, Irish banks are required to hold more than twice the level of average capital of European banks.
“In Austria or Belgium, consumers can borrow up to six times their income level compared to 3.5 times in Ireland, based on a similar Loan-to-Value ratio. However Irish banks who are using stricter mortgage lending rules are required to hold more than twice the level of capital than banks in these two countries.”
The research is based on a study of over 600,000 mortgages valued at €83 million across the five Irish retail banks.
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Of course they are, just like everything in this country. Theres always an excuse to why its more expensive, never to why its cheaper
@Kyle: There is never any hesitation when it comes to raising prices or rates but there is always excuses and regulations to stop them decreasing.
@David Corrigan: Back to the good old rip off Republic. If history repeats like it naturally does in this country. We will all be loaded up to the eyeballs in dept, and jobless in about 5 years time.
@Kyle: Cost of living is way too high here and they are not finished adding more and more to it. The country has great potential but its resources are managed by two bit wasters who have no interest in improving the country for everyone.
@David Corrigan: thats why the people want change David. Alot of people attack Sinn Fein in this country but they are the only people offering any glimmer of hope for a change in attitude. Under FF/FG this is exactly what you can expect
@Kyle: I agree Kyle. FF and FG need to be put on the subs bench for a few years as clearly, they have no interest in changing their ways as things stand.
@David Corrigan: Yep. There is only 1 way to do it. They are to bullheaded to be convinced. They have to be benched
@David Corrigan: 4.50€ for sourdough bread in dunnes.
Same quality bread in Lisbon 1€
@Kyle: why are SF planning on changing the capital rules for banks?
@Ro-your-nan: I’m not quite sure about their policies on banks. The banking system is just following every other sector. Ripping people off. It seems to be a culture across the board built up and tolerated by the establishment in this state. And they won’t even try to change it
@Kyle: Are SF suggesting we losen credit controls so that we can have another housing ponzi pyramid in this country? I don’t think so. Prices are already unaffordable. What do you think borrowing at 6 times income will result in except even higher prices but built on shakier foundations. The Troika would be back telling us that, as before, we brought the next housing crash on ourselves for no good reason except greed.
@transik: Sourdough bread – surely a “first world problem.”
@mmz: yes MMZ I am aware of the excuses. Which is what this original thread is about. the question i have for you is do you believe it? What is your excuse for the insurance fraud? What about the healthcare fraud? What about everything else?
I don’t know about you but I’m sick of hearing excuses. What I want to hear is solutions and to see an effort been made at least.
@mmz: while we are at it we might aswell talk about the housing crisis. We rents and prices are being pushed out of the normal citizens reach, while being blamed on a shortage of supply. While at the same time hedge funds are buying up over half our new stock off plans. Before they ever reach market. I wonder what the excuse for that is?
Do you see where I’m going with all this?
@Kyle: ……no need for excuses Kyle. The electorate voted for a neoliberal conservative government they have what they wanted. The problem with the costs of insurance and of lawyers lays at the feet of the equally neoliberal oriented Troika. They came in saying they were going to enforce reform in these synacure dominated businesses. They walked away having done nothing except lay austerity on the population. The answers to the housing crisis have been laid out many times in many arenas but the ruling elite are not willing to upset themselves or their foreign rentier capitalist investors or the compliant mainstream media by changing anything much. Unfortunately the electorate seem to support this. The answers are for direct construction of houses for rent on public land with the tenders offered to EU companies if necessary. Also the construction for sale of houses at 3.5 times the average wage 3.5 times the average wage just as this was done by DCC in the 70′s. Also tax empty sites or seizure of them when the owners are unwilling to come forward and identify themselves.
Yeah, those tracker scandal provisions are really biting into profitability.
Maybe if it had invested in new tech rather than ripping off its retail customers it would be in better shape.
I have zero faith that lower capital requirements would be passed on to customers in the form of lower interest rates. Such a situation would require a functioning competitive market.
The article does not question why it is cheaper in other countries. In most cases it is that when there is no payment of a mortgage it is “easier” for the bank to take back the house. In Ireland, it takes years for the bank to be allowed to take back a house in the case of no payment. Look at the number of cases where the bank has received no payment for years.
@Bleurgh: Would it not be a case that if mortgage rates were lower, people wouldn’t struggle with their repayments, hence more unlikely to default on their repayments.
@The Bolt:
Housing supply side needs fixing fast before any equilibrium can appear in marketplace.
It doesn’t help when left-leaning political party members point-black refuse to allow ‘000 of houses secure Planning for a major dev in North city, with a good mix of Social, Aff. & for-Market for purely narrow vote-catching ideological reasons. (Get a grip on reality here, Eoin!)
3.5 times income rule should in theory be keeping a lid on prices in a very tight mkt. If multiple was eased to 6, the mkt would only go one way; upwards!
The EST has made such a blx of things in 1st decade of century-gaining traction & pace since 70’s – with its own narrow policies favoring fatcats -that it’s going to take yrs to refloat the boat towards a properly functioning Res marketplace. Rant over!
@Rory J Leonard: But they’re not affordable. Parties looking for widespread housing reform are not going to vote on these policies as it does not represent their voter base. Apartments for 300k… But I agree with your lending cap point. Banks have a way round this by bundling two buyers together. In older times this would have added a security in the loan – a second person to cover payment. Now they use it as a pricing tool to load up working families with debt.
The report states that in Ireland that if a Mortgage defaults the property is reposed only 11% of the time, where as in the rest of Europe it is up to 50%. That is why Irish mortgage lenders must put by a lot more money to cover defaults and hence the higher rates.
@John McG: does it happen to mention that Irish taxpayers bailed the banks out to the tune of €64bn because the heads of the banks lied about having a temporary liquidity issue and that half of this money has never been and will never been repaid? These lending policies are why banks went broke and why they can’t be trusted and why they are now required to hold three times the capital than their European neighbours.
That the Poacher turned game keeper Brian Hayes would defend this is absolutely absurd yet not surprising. He was in cabinet for the worst effects of banking malpractice. We know now that banks cannot be trusted, just as we know borrowers cannot be trusted to borrow responsibly, yet he is in favour of opening flood gates again to facilitate more profiteering. Says all you need to know about that guy.
Cheap mortgages: 600,000 of them for 83m euros.
@john mounsey: each mortgage costing on average 138 euro. Not bad if you ask me.
Would you expect an unbiased report written by Banking industry? Either way the CB should step in and confirm the veracity of the report and if found to be correct, is the level of required capital justified.
Tripe. The lies just flow to justify robbing us blind.
Still trying to get the final draw down. Been a year.
have your say