The Irish Banking Federation (IBF) has commissioned two senior ex-bankers to develop proposals for industry-wide initiatives to deal with the growing mortgage arrears problem and the shortage of credit to small- and medium-sized enterprises (SMEs).

Former KBC Homeloans chief executive Tom Foley and former Bank of Scotland Ireland head of executive projects Jim Rourke are expected to deliver reports within weeks outlining how the banks can develop common approaches to what are considered the two biggest challenges in the market.

According to the IBF, Foley is investigating whether there is scope for another initiative on behalf of all lenders to complement both the IBF-Mabs protocol on debt management and the IBF's own pledge to refrain from repossession action as long as delinquent borrowers agree arrangements to repay loans. Rourke is understood to be seeking a broad-based solution to enhance and improve SME access to credit.

Momentum has been gathering in both the financial industry and in government to find some form
of mortgage-rescue scheme for
borrowers in financial difficulty. Energy minister Eamon Ryan got the issue into the Programme for Government in October and has put together an interdepartmental group of senior civil servants to explore options for easing the debt burden on homeowners.

Likewise the Department of Finance has appointed former National Irish Bank director John Trethowan to set up a credit review agency for SMEs to appeal loan refusals, while the Department of Enterprise, Trade and Employment has been operating the Credit Supply Clearing Group since last summer.

While Ryan's mortgage group has not met with the IBF or individual banks, Trethowan has consulted widely with the industry since taking up his role in early December. However, the IBF said Foley and Rourke will share their reports with all key stakeholders when they are finished next month.

More than 26,000 mortgage accounts, or 3.3% of the total, with a combined value of €4.8bn, were in arrears for more than 90 days at the end of last year, according to figures compiled by the Financial Regulator. Repossessions and court actions amounted to only a few hundred homes and a tiny fraction of the outstanding amounts.

Research published last year by consultants Mazars showed small businesses reported a 24% decline in credit availability, while banks said the decrease was 14%.