Educational surveys members on mutual status

One of the last of the Irish mutuals, the Educational Building Society (EBS), is asking its members if they agree with what it terms its longstanding commitment to mutuality, and whether the society should maintain that status.

EBS insists that the question, contained in a membership survey, does not imply a change in the present position and “is just one element of a broad-ranging member engagement programme”.

Nevertheless, the development is being seen as significant, given that calls for the society to be sold were enthusiastically supported at last year’s annual general meeting.

One member, competing for a place on the board, was loudly applauded when she suggested independent consultants should be recruited to analyse the pros and cons of remaining a mutual, with the issue of whether to sell being decided by a members’ vote.

It is not clear what the board’s reaction will be if the survey re-sults in an overwhelming majority in favour of change.

In a message accompanying the survey, EBS chief executive Fergus Murphy stressed the need to cut costs in the economic downturn and to have access to cheaper and more diversified funding.

He said: “In the coming months we plan to meet these challenges by putting in place new structures while ruling out job cuts or branch closures.”

The society reported a 37% drop in pre-tax profits to €27m for the first half of this year as a result of a substantial increase in funding costs caused by the credit crisis.

According to chief financial officer Alan Merriman, funding costs rose from “historic lows” in the first half of last year to “historic highs” in the same period this year.

The society now owes €2.2bn under the European Central Bank (ECB) funding scheme but expects to cut this over the remainder of the year. Its loan book grew by 4.5% to €16.5bn, compared with 9% last year, as demand for mortgages slowed due to higher borrowing costs and a change of attitude among buyers.

The situation on arrears has also deteriorated, with losses doubling to €5m in the first six months of 2008 and the number of cases rising by 200.

The society warned: “A continuation of higher loan-loss charges is likely if the property market and economy remain stressed. People are struggling and we have to be more active on that front.”

EBS isn’t alone in its ECB debt. Irish bank borrowing from the ECB has doubled in the past 12 months to a record €44.1bn, second only to Spain which took out €49.4bn. ECB rules are likely to be tightened, imposing tougher conditions on eurozone members.

2012 deadline for EU recommendation on property valuation

On September 10 the European Commission released the first draft of EU recommendations on property valuation, foreclosure procedures and land registrations in mortgage credit markets. But it does not seem to be in a great hurry to set any reform in motion as the deadline for member states to respond to the recommendations is January 1 2012.

The draft recommends the promotion of reliable property valuation standards for mortgage lending purposes at national level, and compliance with minimum standards.

It also recommends completing foreclosure procedures in the shortest time possible, and will define an appropriate maximum for the period between a writ of execution and the completion of sale proceedings.