The Central Bank’s admission that it does not know how many business loans have been sold to vulture funds has been described as incredible by Fianna Fail’s finance spokesman.
Michael McGrath called on the regulator to establish a register of banks’ loan sales after it told Michael Noonan, the finance minister, that it had no record of the number of commercial loans sold by banks. Vulture funds invest in struggling companies and may then force them to repay debts with interest.
Mr McGrath said: “We know that a very significant number of SME business loans have been sold on by banks, the IBRC special liquidator and Nama in recent years and these have generally been bought by private equity funds or so-called vulture funds.
“Typically, these funds adopt a shorter time horizon when making decisions and may well be more inclined to move on the borrower in order to get control of the business or the underlying assets.”
He also described the lack of transparency over the sale of banks’ loan books as worrying. “It is incredible that the Central Bank has no record of the number of business loans that have been sold on to vulture funds.
“Further, the loans may well be sold on again by the funds themselves and the Central Bank will have no knowledge of where they end up. An SME could find that its loans have been bought by pretty much anyone who merely has to appoint a credit servicing firm to comply with the existing law.”
Separately, figures released by the Banking and Payments Federation showed that close to 3,400 new mortgages were approved in the three months to the end of November — an increase of 30.8 per cent on the same period last year. The value of mortgage approvals surged by 61 per cent year on year in November, following a 29 per cent increase the previous month.
A combination of higher volume growth, which was up 46 per cent, and average loan sizes, which were 13 per cent larger, contributed to the growth in the total value of loans approved last month.
Dermot O’Leary, the chief economist at Goodbody Stockbrokers, said the government’s help-to-buy mortgage rebate scheme and looser Central Bank lending rules should result in a significant increase in the number of mortgage drawdowns next year. “The latest mortgage approval trends bode well for mortgage activity in Ireland in 2017. We are forecasting growth of 19 per cent in mortgage drawdowns in 2017. Recent approval trends suggest that this forecast might prove to be conservative,” Mr O’Leary said.