Irish Banks Aiming to Revive Mortgage 'Bad Bank' Concept: Report

Irish state-controlled banks Allied Irish Banks and permanent tsb (formerly Irish Permanent and TSB bank) are in advanced talks with officials about putting their loss-making tracker mortgages in off-balance-sheet vehicles or in the former Anglo Irish Bank, The Sunday Business Post in Ireland 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 European Central Bank rate that the products track.

AIB declined to comment. No one from permanent tsb was immediately available 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 International Monetary Fund, and the European Commission, as well as the country's central bank and finance department.