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Cures and Exits: the drivers of NPL resolution in Ireland from 2012 to 2017


  • McCann, Fergal

    (Central Bank of Ireland)

  • McGeever, Niall

    (Central Bank of Ireland)


Non-performing loan (NPL) balances in the Irish retail banking system declined from e85bn in 2013 to around e25bn in 2017. In this Note, we document how this decline came about using regulatory return data and loan-level data for all property-related lending segments. Firstly, we highlight that NPL resolution is a gradual process: the majority of NPL balances in one year remain as NPLs a year later. Secondly, we show that loan “cure” (the return of previously-defaulted balances to Performing Loan status) is the key driver of NPL reduction in the residential mortgage segment. This is particularly true for principal dwelling home mortgages, where loan restructuring has played a pivotal role. In contrast, loan exit —through liquidations, write-offs, and sales—accounts for a large majority of the NPL reduction in the commercial real estate segment, where concerns about borrowers’ access to housing are less central to the policy discussion. Buy-to-Let (BTL) mortgages, on the other hand, share some of the characteristics of each of the aforementioned asset classes: Exit plays a relatively more important role for BTLs than for PDH mortgages, while Cure plays a greater for BTLs than it does for CRE loans.

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  • McCann, Fergal & McGeever, Niall, 2018. "Cures and Exits: the drivers of NPL resolution in Ireland from 2012 to 2017," Financial Stability Notes 6/FS/18, Central Bank of Ireland.
  • Handle: RePEc:cbi:fsnote:6/fs/18

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    1. repec:cbi:qtbart:y:2018:m:04:p:54-70 is not listed on IDEAS
    2. Kelly, Robert & McCann, Fergal, 2016. "Some defaults are deeper than others: Understanding long-term mortgage arrears," Journal of Banking & Finance, Elsevier, vol. 72(C), pages 15-27.
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