THE LAST TIME I wrote for TheJournal.ie, I addressed my concerns that the crisis in banking was continuing to cause us all stress and concern.
My new appointment, as a principal of GDP Partnership, a debt solution agency with new offices in Dublin, puts me in the position of addressing those concerns. In many ways it was a natural progression from observing and writing about the problems to actually trying to do something about them.
Financial difficulties are most often the hardest to deal with, they embarrass, overwhelm and push people into corners quite unlike any other form of problem that we face in our lifetime. I’ve witnessed this on many occasions – as well as experiencing my own difficulties many many years ago. They will never go away. They have to be dealt with.
The normal course of events sees people struggling to cope and, more often than not, failing quite miserably. It’s a problem that has existed equally as long as the world of Finance: wherever there is lending, there is difficulty in repaying and ultimately an amount of default. So what we are currently experiencing is nothing new, what is new is the widespread nature of the debt problem and, like you and I, the banks themselves have never experienced such an enormity of a problem.
There are solutions
However, there are solutions. The problem is that not everyone understands the problems and rather more worryingly, some of the misinformation and the sensational way that the small amount of information is reported causes further distress, rather than reducing the enormous pressure that everyone is already under. That is where a mediation service like the one I am working with can help, by engaging and communicating with the lender on your behalf and presenting solutions that will allow both parties to move forward.
It never ceases to amaze me listening to a number of economists and financial journalists who fail to understand the depth and scale of this issue. I am in no doubt that the island of Ireland, north and south, will not move forward economically until we deal with the debt problems facing the country. We have way too much debt in our society right now, from sovereign debt, to SME debt, to personal debt.
The favoured sovereign solution seems to be to kick the debt down the road over a longer period of time. Some might agree this is the best solution however it wouldn’t be my preference. From an SME point of view, I would suggest if you offered any CEO in the country an extended 20 years or so on their debt they would bite your arm off – I doubt there is any bank in Ireland in this space so that’s not an option.
There is a lot of bad advice out there
From a personal debt perspective, there is new legislation out this year in the Republic, and it is hoped that the new rules will be the answer to the debt problems out there. I suspect it won’t be that straightforward in practice as there is a lot of bad advice out there. Many people are fast-forwarding in the direction of the insolvency and bankruptcy option, I still maintain that this should and can be avoided in most circumstances.
The Central Bank came out this week in Ireland to say that SMEs had some €50bn of debt and more than half of this was impaired. The huge concern from the Central Bank’s perspective is that the majority of this debt is property-related. This is a major cause for concern for everyone. The lack of progress Irish banks are making in terms of dealing with these problems is now under scrutiny from the IMF and the Central Bank. Our view at GDP is that both borrower and bank need to fully engage and mediate a solution to each of the loan books under pressure. I feel that we can no longer sit back and expect the whole thing to blow over – it’s just not an option. There will be pain on both sides, and facts remain that until we sort these issues the economy is in a spiral.
Banks have their own policies in dealing with these matters and interestingly these vary greatly depending on the institution. Our practice has been making huge in roads on behalf of borrowers with our very unique approach to dealing with the debt problem in recent times and we would hope that as time moves on, the banks become more co-operative and transparent so that we can all arrive at the solutions much quicker.
The short to medium term for Ireland looks extremely challenging. However, I would prefer to approach this as an opportunity to solve the many issues that are currently out there.
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