Mr. Jim Brown:

As the Chairman mentioned, I am joined by my colleagues, Mr. Bell, chief risk officer, and Mr. Ryan, head of branch banking for the Republic. I thank the committee for the opportunity to provide an update on Ulster Bank's progress in the areas outlined in its invitation to us. I will go through that invitation quickly, then respond to any specific topic that the committee wants to discuss.

I would like to say a few words about Ulster Bank at the outset. We are the No. 3 bank in the Republic of Ireland and the No. 1 bank in Northern Ireland. We are building a substantial market share in a number of key areas, including mortgages. Our clearly defined strategy is based on building a really good bank for our customers and addressing our legacy issues. Our strategy is working. We expect to return to profitability this year. Our customer focus is evident in our approach to the resolution of mortgage arrears. We provide transparent and equitable solutions that are tailored to the individual customer's circumstances. Our focus is equally evident in our approach to existing or new customers who are looking to buy or move.

During our last appearance at this committee, we set out our approach to assisting mortgage customers who are in arrears. We recognised the need to comply with regulatory targets. We explained that we were focusing on getting appropriate solutions in place for our customers, based on what is affordable after reasonable living expenses are taken into account. We have invested in people and systems. The range of supportive, fair and affordable solutions that we have developed enable the vast majority of customers who engage with us to remain in their homes. I am happy to report that our customer-based approach is working. Over 2,500 customers have moved out of arrears since we last met. Our innovative "economic concession" product continues to be the most popular structural solution for our customers. It features a discounted interest rate of as low as 0.5% over varying durations of up to seven years. The particular rate and duration are based on what the customer can afford. We also offer other options, including split mortgages, capitalisations and term extensions.

As we have told the committee previously, our starting point on this matter remains that there is a cost to living in a home and that customers need to engage with us. We recognise our responsibility to work with them to find the most effective solution that allows them to remain in their home where possible. Recent research on the Ulster Bank mortgage book shows that paying the mortgage is more affordable than paying the equivalent rent in the same community, particularly when more progressive restructuring methods are considered. This requires engagement, however.

Ulster Bank does not offer debt write-off. Writing down arbitrary amounts of debt for a small number of people while they remain in their home is not something we will do. We do not believe that it is an appropriate solution as it raises as many questions as it purports to resolve. We believe the write-down or write-off of debt is an unhelpful distraction that is likely to create issues around moral hazard, transparency and fair outcomes for customers. In our view, the focus should be on affordability and offering transparent solutions that can be made available to all mortgage arrears customers.

The figures we have provided to the committee indicate that we have exceeded our regulatory targets and that the number of our customers in mortgage arrears of 90 days or more has fallen every month since March 2013. This trend is not seen elsewhere in the market. We have provided the committee with additional information that shows our approach over the full mortgage arrears book, including early intervention which we believe is essential in addressing the mortgage arrears issue. This information establishes beyond doubt the success of our approach and the value of early engagement.

Since last summer, the number of customers in arrears who have not engaged with us and are not making any contribution to their mortgage has reduced significantly from 35% to 14%. This number is still unacceptably high. It is not fair to all other people who pay their mortgage that someone makes no contribution to the cost of their accommodation. We have no choice other than to pursue these customers through the legal route. Having said that, the primary intent of legal action is to encourage meaningful re-engagement so we can help. Any customer can take themselves out of the legal process at any stage by meaningfully re-engaging. We are pleased to advise the committee that almost half of our customers entering the legal process have re-engaged with us. Unfortunately, that means the same number are not engaging despite the seriousness of the situation.

We expect to see a continued substantial decrease in Ulster Bank arrears. We also expect to see a continued increase in the overall number of mortgages where a borrower is more than two years in arrears. This is not because the banks are slow to offer solutions to these customers, but because these customers are refusing to engage and legal action appears to be the only option. The longer it takes to move a case through the legal process, the longer these cases will sit in the reported serious arrears numbers. I acknowledge that progress has been facilitated by addressing the legal and administrative obstacles to resolving the mortgage arrears problem, for example by revisiting the Dunne judgment and revising the code of conduct on mortgage arrears. It would be remiss of me not to point out that real problems continue to impede the process. It can take more than two years to process a repossession case through the courts. This timescale seems to be increasing as the cases previously blocked by the Dunne ruling enter the system.

I would like to make a few comments on the personal insolvency arrangements. We have argued from the outset that we are dealing with a consumer debt issue, rather than a mortgage arrears issue alone. In these circumstances, the debt relief and debt settlement elements of the insolvency arrangement are a useful addition to the process, as they enable borrowers to put their debt burden on a more sustainable footing. The banks, which hold two thirds on the unsecured debt in the market, will deprioritise these unsecured loans so that customers can focus on paying their mortgages. We welcome the recent comments from Goodbody Stockbrokers, which confirmed the view unsecured debt is just that - unsecured. I note that, to date, Ulster Bank has not vetoed any protective certificate proposal put forward by a personal insolvency practitioner.

I will conclude on a positive note. The mortgage market is showing signs of improvement. We are well positioned to support the recovery. We are growing and actively gaining overall market share in key segments, particularly in the residential mortgage market. Our mortgage lending for 2013 has increased by 32%. We now support 14% of the market. We have close to €500 million to lend into the mortgage market in the Republic this year. We are approving eight out of every ten applications made to us. We also recently introduced a number of tracker porting products to enable customers to move house. I reiterate that Ulster Bank is committed to supporting the economy and building a really good bank for our customers. While there is more to do, I believe we are on the right path.