Irish central bank worried about progress on non-performing loans

DUBLIN (Reuters) - Ireland's central bank is not satisfied with lenders' continued efforts to tackle high levels of non-performing loans, which remain a significant problem, a senior official said on Friday. Unlike in some other euro zone countries, non-performing loans (NPLs) have been falling in Ireland since peaking in late 2013, but at 45 billion euros (£38.73 billion), they still represented 19 percent of the five main Irish banks' combined loan books at the end of June. The loans, mostly extended for house purchases just before the bursting of Ireland's property bubble in 2008, remain a blight on lenders, borrowers and the wider economy, said Ed Sibley, director of Credit Institutions Supervision at the Central Bank of Ireland. "Notwithstanding the considerable work that has been done, we are not satisfied that progress and momentum is being maintained at an appropriate rate," Sibley said in a speech at a banking conference in Dublin. "I do recognise that individual cases may be getting harder, that management attention may have been diverted to other issues, and that the legal process is long. But that does not mean it is acceptable that the incentives to slow down efforts should start to impact on the efforts to address this blight." He also said that the central bank has seen some evidence of a return to the more aggressive lending practices and cultures of the past, saying some memories "appear to be surprisingly short". "Uncertainty of the future is increasing and there is no excuse for any of us to ease up on our efforts to address the high levels of NPLs that are still such a problem for the Irish economy and society," Sibley said. With Ireland's economy fast recovering, Sibley said the incentives to act more slowly to tackle bad loans include lenders waiting for underlying collateral values to rise or borrowers' circumstances to "miraculously" improve beyond what is reasonably expected. As a result, around 20 percent of the five banks' 43,000 residential mortgages in arrears for more than 90 days - and a similar amount of their troubled buy-to-let books - still have no reported resolution agreed between borrower and lender. Sibley warned that high levels of NPLs would continue to be reflected in higher regulatory capital requirements being placed on banks. There will also be knock-on effects for the pricing of new and existing lending as well as a likely stifling of competition as bad loans deter new entrants to Ireland's banking sector, he said. (Reporting by Padraic Halpin; Editing by Susan Fenton)