Irish banks may face pressure to write off loans

Bloomberg

Irish banks are set to face mounting pressure from regulators to write off bad loans, a person familiar with the matter said.
European authorities that now oversee the biggest Irish lenders have consistently pushed bankers to deal with the legacy of non-performing assets left over from the nation’s financial crash through measures such as loan sales. Regulators are beginning to lose patience with some lenders, meaning more urgent solutions may be sought unless convincing plans are laid out, according to the person, who asked not to be named as the deliberations are private.
The plunge in Permanent TSB Group Holdings Plc’s share price over the past three weeks underscores the need for action, the person said. Some Irish officials have pushed back against wide-scale write offs, arguing the European regulators failed to recognise progress made on reducing bad loans and the potential for the assets to rebound in value, a second person said. Write-offs would also crystallise losses, hurting banks’ capital ratios.
Bad loans remain a $1 trillion burden on Europe’s banking sector and a millstone crimping economic growth. They remain concentrated unevenly among countries, with Ireland still among the worst affected. In Spain, Banco Popular Espanol SA collapsed this year under a mountain of bad property debt and was sold for 1 euro in a European-brokered fire sale.
A spokesman for PTSB declined to comment. In an e-mail response to a request for comment, the Irish finance ministry said the recent momentum in bad loan reduction has been “strong,” and the nation’s banks are dealing with non-performing assets at one of the fastest clips in the euro region.
“Further work is required by all banks to continue the momentum generated since 2013, all of which is supported by a large volumes of restructures, positive economic backdrop with rising employment, lower unemployment and improving collateral values and yields,” the ministry said.