ECB Picks Irish Regulator to Help Tackle Soured Euro-Area Loans

  • Sharon Donnery leads ECB working group on non-performing loans
  • ECB supervisory chief Daniele Nouy speaks in an interview

The European Central Bank’s oversight arm chose Ireland’s head of banking regulation, Sharon Donnery, to lead a charge on tackling soured loans across the euro area.

Donnery, director of credit institutions at the Irish central bank, is leading a working group on resolving loans in partial or full default across euro-region banks, Daniele Nouy, chair of the ECB supervisory board, said in an interview on Oct. 22 in London. An average 12 percent of loans across 123 lenders under direct ECB supervision are non performing, Nouy said earlier this month.

The working group aims “to implement at SSM level the good work done in the Irish system” to reduce its amount of loans in default, Nouy said, referring to the Single Supervisory Mechanism, as the ECB’s oversight arm is known. She didn’t give a target for the reduction.

Irish banks, cast into the epicenter of the European banking crisis following a domestic real-estate crash in 2008, were set quarterly targets in 2013 to restructure troubled mortgage and business loans or face provisioning and capital penalties. The government took over most of their commercial real estate loans in 2010. Defaulted loans at Bank of Ireland Plc, the nation’s largest lender, fell 27 percent in the two years through June, according to company filings.

Non-performing loans at Allied Irish Banks Plc, the country’s second-largest lender, have declined 38 percent over the same period. Still, some 25 percent of AIB’s loans remained impaired at the end of June, according to its interim report.

Ireland’s banks, which cost taxpayers a gross 64 billion euros ($71 billion) to rescue during the financial crisis, returned to underlying profit last year for the first time since 2008, partly as loan-loss charges decreased.