The Irish Farmers Journal understands that farmers are being threatened with the sale of their loans to undisclosed third parties.

In recent days, farmers and small business owners across the island have been receiving phone calls and letters from Ulster Bank relating to outstanding loans.

In at least some cases, customers are being presented with three options – that the borrower repay the full amount, refinance elsewhere, or the loan may be repackaged for sale to a third party by Ulster Bank.

Tight window

Borrowers have only 30 days – until the end of March – to either pay up or refinance, a tight window for most farmers or small business owners.

Ulster Bank has an estimated 2,200 farmer customers in Northern Ireland, where it is the second- largest lender to the farming sector.

In the Republic it is a smaller player, with its core customers coming in the greater Ulster, midlands and western areas.

A bank spokesperson said: “Ulster Bank is in contact with a number of business customers, who are outside current arrangements or in arrears and under special management in our problem debt management unit, to discuss the potential inclusion of their debt in a future Ulster Bank loan disposal process together with their options for repaying or refinancing their debt in advance of any such process.”

Distressed loan books

While banks have sold distressed loan books to third parties in the past, there is concern over what Ulster Bank is labelling “non-performing” and at the speed at which this process is being handled, with limited time for farmers to restructure.

Worry

This is particularly worrying for many farmers who find themselves in difficulty. Interest-only payments are one option being offered, given the poor prices in dairy, beef and tillage. Once a farmer misses a payment or goes interest-only for a prolonged period, his credit rating may be downgraded to non-performing.

One of the main concerns for individuals who contacted the Irish Farmers Journal is the criteria of how a loan falls into the non-performing category. It appears that a farmer who may be interest-only, who has missed repayments or has not maintained engagement, is considered non-performing. It is understood that the bank is not communicating with customers where the value of the asset – for instance land – is less than the loan.

For farmers who find themselves in this situation, there are few options available to restructure in Ireland’s diminished banking sector.

Ulster Bank, which is owned by Royal Bank of Scotland, has sold distressed loans of much larger scale over the last year.