* Elderfield says arrears situation still short of ideal
* Arrears continue to rise, but within stress levels
* Outlook difficult on profitability, progress will be slow
DUBLIN, Feb 22 Ireland's banks have made big
improvements in preparing to deal with the problem of mortgage
arrears but the situation is still short of ideal and they need
to deliver results now, the country's head of financial
regulation said on Friday.
Ireland's almost fully state-owned and heavily recapitalised
banks have been slow to deal with residential loans imperilled
by high unemployment and falling house prices, and have faced
tough criticism from the central bank.
The regulator, Matthew Elderfield, who called a year ago for
lenders to make substantial progress on arrears, struck a rare
positive tone in his assessment of what he described as an
intense period of engagement with the banks, involving a series
"While the situation is still short of ideal, this has led
to significant improvements from where the system was 15 months
ago and so now is the time to see real delivery," Elderfield
said in a speech, referring to the banks' strategies on arrears.
"It is important that this involves a more realistic mix of
solutions for borrowers."
The proportion of residential mortgages in arrears for more
than 90 days was 11.3 percent at the end of September. While
Elderfield said arrears continued to rise, it was at a slower
pace and remained within stress levels earmarked in strict tests
two years ago.
Elderfield, who is also a deputy governor at the central
bank, added that there had been some encouraging signs for the
country's banks, pointing to recent private investment in Bank
of Ireland and a limited return to debt markets by
However he said the outlook for making the banks profitable
again, something he described as an essential part of Ireland's
economic recovery, remained difficult because of low margins and
weak domestic economic activity.
"Clearly the path ahead remains a difficult one and progress
will inevitably continue to be slow given the significant
dislocation that has occurred to the banking sector and the
economy as a whole," he said.