Irish state-controlled banks Allied Irish Banks and permanent tsb are in advanced talks with officials about putting their loss-making tracker mortgages in off-balance sheet vehicles or the former Anglo Irish Bank, The Sunday Business Post reported.
Citing informed industry sources, the newspaper said the solutions being considered would allow AIB and permanent tsb to get rid of the portfolios, which are performing but not earning due to a mismatch between high funding costs and the low ECB rate which the products track.
AIB and permanent tsb declined to comment. Ireland's government wants to attract private investment to its banking sector and the newspaper, citing a senior banking source, said moving the loans off-balance-sheet was seen as a more realistic way of providing certainty to investors than a government-backed loss guarantee.
Any move off-balance-sheet would require the approval of Ireland's official creditors at the ECB, the IMF and the EC as well as the country's central bank and the Department of Finance. Tracker mortgages make up more than 50 percent of Irish banks' residential propert loans. Some 60 percent of permanent tsb's 26 billion euros ($33.6 billion) Irish mortgage book tracks the ECB rate. AIB's Irish residential mortgage book is around 43 billion euros.
The former Anglo Irish Bank, renamed Irish Bank Resolution Corporation (IBRC), is not currently party to any talks, the newspaper said.
IBRC, which is being wound down, has cost the state nearly 35 billion euros to keep afloat.
During Ireland's property boom, the then Anglo Irish Bank focused largely on commercial property and development loans but it has experience in dealing with residential mortgages since taking over the former Irish Nation-wide Building Society last year.
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