The European Central Bank (ECB) has urged the government to reduce the scope of our new insolvency laws.

In an opinion paper the ECB suggests narrowing the category of debtors who will be eligible for the scheme.

It wants see the level of secured debt that can avail of new insolvency regime cut from €3 million to €1 million.

The bank says it generally supports the reforms but recommends the limit for personal insolvency be reduced.

This is the category dealing with the biggest debtors.

It believes that any inclusion of such large amounts of secured debt including ‘buy-to-let’ mortgages may have implications for creditors and could impact on lenders.

“The potential inclusion of such large amounts of secured debt in the (personal insolvency arrangements), including ‘buy-to-let’ mortgage loans, is unprecedented and may have significant financial implications for creditor banks if it results in deteriorating payment morale of debtors” the paper said.

The ECB also advised that the review period for the new regime should be shortened to 1 or 2 years from the current 5 proposed.

But it noted that no detailed assessment had been made of how the new provisions would affect creditor banks.

The Cabinet approved new personal insolvency laws back in June.

It also made provisions to cut the length of bankruptcy from 12 to 3 years.

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