BANK OF SCOTLAND has become the first lender in Ireland to announce that it is to ‘restructure’ the debts held by Irish borrowers – acknowledging that many of its customers may never repay their loans.

The bank told RTÉ News that while its overall policy was still to demand that loans be repaid in full, the bank would be willing to work with customers on a case-by-case basis to negotiate on their repayments if there was a bona fide probability that their debt could not be honoured.

In exceptional circumstances, RTÉ explains, BoS will now write off a portion of the loans owed by individual borrowers.

At present, the offer only extends to borrowers who who bought premises with the specific intent of letting them out; such buy-to-let borrowers have been particularly hit in the economic downturn, given the collapse in the retail trade.

Many of those borrowers, RTÉ adds, are now in negative equity – meaning the amount outstanding on their loans is greater than the current value of their properties.

With other lenders likely to be at least equally exposed to the commercial market, BoS may be the first to offer a restructure, but it will almost certainly not be the only one.

When it shut, BoS said just under half of the €13.3bn in total that it lent out in its Irish operation was invested in property development. Though the bank no longer operates retail stores, its outstanding loans are managed by its former staff which are now employed by a new company.

Watch RTÉ’s David Murphy explain the news >