Oireachtas Joint and Select Committees
Thursday, 10 April 2014
Joint Oireachtas Committee on Finance, Public Expenditure and Reform
Mortgage Arrears Resolution Process: (Resumed) Bank of Ireland
10:00 am
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Before we commence business, I remind members, witnesses and those in the Visitors Gallery that all mobile phones must be switched off completely to avoid interference with the broadcasting of the meeting.
I welcome the representatives of Bank of Ireland. We are joined by Mr. Richie Boucher, group chief executive; Mr. Liam McLoughlin, chief executive, retail Ireland; Mr. Stephen Mason, director, mortgage arrears resolution strategy; and Mr. Pat Farrell, head of group communications. They are here to assist the joint committee in its examination of mortgage arrears and progress made in putting in place solutions aimed at resolving difficulties in the sector. I thank Mr. Boucher and his staff for the written material they provided for the committee. The discussion will begin with opening remarks by Mr. Boucher, following which members may put questions to the delegates, as appropriate. It is very important that we manage our time well to derive the maximum benefit from the meeting. Each member will have a strictly limited time slot within which questions may be put and replies given. Questions from members and replies by delegates should be clear and concise.
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person or an entity by name or in such a way as to make him, her or it identifiable.
I invite Mr. Boucher to make his opening remarks.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Certainly.
Mr. Richie Boucher:
Since we last met the joint committee, 2013 was a year in which there was significant progress for the group. Our strategic shape was maintained. We addressed the preference share issue, from which we incorporated a repayment of €1.8 billion to the taxpayer. We managed our exit from the eligible liabilities guarantee, ELG, scheme. We have achieved our net interest margin target and enhanced our net interest margin. We have continued to significantly reduce our costs, while investing in our businesses, our people and, in particular, our IT infrastructure. A feature of last year was our access to the funding markets right across our capital structure. Of particular relevance to the committee are the asset quality improvements we saw in the period, with a €1.2 billion reduction in defaulted loans. The Central Bank and some third parties conducted an asset quality review, AQR, balance sheet assessment, BSA, on behalf of the troika in the last quarter of the year, which we addressed in our year-end financial figures.
We had and still have a deficit in our defined pension benefit schemes, but we agreed with the various stakeholders that there would be some changes to benefit arrangements to address this. We ended the year with a strong capital ratio, a significant change in our financial performance and are now profitable and generating capital. There is ongoing improvement in the financial performance and the earnings power we are rebuilding in the company. Each of our four principal businesses is seeing improvement in financial performance, each half year, in particular our retail Ireland business. We have worked to continue to manage our cost base, including staff and other costs. The arrangements we have made with stakeholders will improve the pensions position.
We have a very significant business in Ireland but we also have roughly 46% of our assets outside the Republic of Ireland, primarily in the UK. The next slide shows the enhancements and improvements in our defaulted loans, reflecting an improvement in the economies in which we operate - the UK, the US and in Ireland. The work we have done in restructuring customer loans has begun to be reflected in our financial figures.
The next slide notes the position with regard to our SME loans, the Irish SME book. The number of defaulted loans has decreased, provision coverage has increased and we have end-state strategies agreed with nine out of ten of our challenged customers, thereby meeting the targets that the Central Bank of Ireland agreed with us.
The next slide shows what we have been able to achieve across the capital structure, while the next but one shows our business in Ireland. We have a very strong franchise position, with approximately 250 branches and more than 1,700 ATMs and self-service devices, and a very significant take-up of our online propositions and new banking propositions for our customers. We have significant market shares in consumer banking in that we did four out of ten new mortgages in 2013. We have significant life assurance business through New Ireland. We provided half of new SME property lending in the market in 2013 and that is reflected in our customer relationships.
I ask the committee to note the significance of our franchises outside of Ireland and in particular our relationship with the UK Post Office, which is a very attractive opportunity for us.
We have stated in our financial forecasts and capital plans for the period to the end of 2017 that Ireland is our core business and that to achieve our objectives and goals in our core business we need to meet lending targets for the economy that we have set for ourselves. We are receiving more than 1,000 credit applications per week from the SME sector. We approved €4 billion in new and increased funding. Bank of Ireland's case is that the only figures we count here are new and increased lending. We have supported almost 16,000 start-ups and we are on track to achieving our objectives. We receive about 1,000 applications a week in new business for home mortgages and we approved €2.2 billion in mortgage facilities in 2013. Our ambition is for gross new lending to home owners and consumers of about €12 billion in the period 2013 to 2017.
The significant improvement in our own financial performance has facilitated us in repaying taxpayers' investment in Bank of Ireland at a significant cash profit to the taxpayer, and the taxpayer continues to own a 14% share holding in Bank of Ireland, which is worth somewhere in excess of €1 billion as of today.
I will ask my colleague Stephen Mason to speak about the mortgage arrears situation.
10:10 am
Mr. Stephen Mason:
We have made significant progress in the resolution of mortgage arrears. We point out that the number of Bank of Ireland private dwelling-house accounts and balances in arrears decreased in 2013, and this positive trend has continued in the first quarter of 2014. The pace of increase in buy-to-let arrears accounts and balances slowed significantly in 2013 and stabilised during the second half of the year, and that overall trend improved in the first quarter of this year, with a reduction in buy-to-let accounts and balances. Nine out of ten of our PDH, private dwelling-house, accounts are up to date and eight out of ten of our buy-to-let accounts are up to date. The significant improvement in arrears trends during 2013 and to date in 2014 reflects the effectiveness of the group's operating infrastructure, the restructuring of customer mortgages on a sustainable basis, mortgage resolution activity and improving economic conditions. Bank of Ireland has one in five PDH mortgage accounts in the market while accounting for approximately one in ten of PDH mortgage accounts greater than 90 days in arrears. We also exceeded all our mortgage arrears resolution targets set for the end of the year. Bank of Ireland PDH mortgage accounts in arrears of greater than 90 days are running at fewer than half of the industry level. Our figure is 6.9% while that of the industry excluding Bank of Ireland is 14.1%. The graph attempts to show that proportion has improved year on year. In 2009 we were at 67% of the average, and this figure has fallen year on year down to 49% of the average, which is a reduction of 27%. Our figure was 53% of the average on the last occasion we appeared before this committee. We have improved again against the market in the short time since we were last with the committee.
Our percentage of PDH mortgage accounts in the market has risen over four years from 20.1% of the market to 21% of the market. This confirms our message of being open for business.
Page 26 of the presentation shows the forbearance stock on our book. In 2013 we offered forbearance to nine out of ten customers who, through completing an SFS with us, showed they had potential difficulties or were in difficulty. Eighty-six percent of our restructures are meeting the terms of their arrangement. The Central Bank figures show that the equivalent figure for the remainder of the industry is 77%. Our focus has been on concluding solutions with customers, and we have had to meet targets on proposed and concluded solutions. On the number of proposed solutions for PDH customers, we have proposed solutions to 64% of people against a target of 50%. We have achieved concluded solutions with 40% of PDH customers, against a target of 15%.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I thank Mr. Boucher and Mr. Mason for the presentation. I will begin the questions session by asking an obvious question. The State has a 14% holding in Bank of Ireland at a value of €1 billion. Has a timeframe been negotiated as to when the State will redeem its holding so that Bank of Ireland will then become a wholly privately owned company?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
It is estimated to be worth approximately €1 billion.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Is the State receiving a dividend?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
So it is a flat €1 billion.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
An issue that will be raised is Mr. Boucher's salary, which has been the subject of public discussion this week. Does Mr. Boucher wish to comment?
Mr. Richie Boucher:
My salary is set out in the annual report which goes to our shareholders. A shareholders' meeting will be held towards the end of this month. What I am paid is clearly and transparently set out. Under the rules of our company, as a director I stand for election every year and the shareholders decide whether I remain on the board of the company. At the same time, the board's review of my salary also goes for a vote to our shareholders. It is very transparent and clearly set out, and those are the rules of our company.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Other members of the committee may wish to comment on that matter.
The target for resolutions is 86%.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
The committee has been trying to establish whether there is some level of consistency between the different banks under the regulation of the Central Bank. That is not to say there has to be a similarity of approach by every bank, but rather, there should be a consistency of approach. It is very noticeable that in the area of split mortgages and mortgage-to-rent arrangements Bank of Ireland is below par compared to AIB and Permanent TSB.
Ulster Bank is operating a concessionary type of mortgage, which its representatives gave as the explanation as to why the split mortgage option is not being availed of by its customers. Why is the figure for Bank of Ireland so low compared with those for AIB and Permanent TSB in respect of split mortgages?
10:20 am
Mr. Stephen Mason:
On page 27 of our presentation, the Chairman will see the Central Bank figures in terms of the number of forbearances in the marketplace. These show that there were 3,300 split mortgages in place at the end of December, of which we have 21%. That is a fairly significant share of the split mortgages that are in the market.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
However, the figures provided to the committee indicated that only 81 split mortgage arrangements have been agreed by Bank of Ireland, amounting to 2.1% of the bank's total distressed book of 4,683 loans.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
They were moved down to the resolution side?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
What is the figure for mortgage-to-rent arrangements?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Some of the other financial institutions indicated there have been difficulties with this particular option because it involves bringing together a large number of stakeholders. What is Bank of Ireland's experience in this regard?
Mr. Liam McLoughlin:
Our experience is similar in many ways. A broad range of stakeholders is involved, including the Housing Authority, more than 30 local authorities and several banks. There are difficulties with the process in that it takes so long. Some of the cases have been in the process for 12 to 18 months, which is unacceptably long.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Are there any obvious actions which might reconcile that?
Mr. Liam McLoughlin:
We are participating in talks with the Housing Agency and are keen to see that engagement progress to a resolution as quickly as possible. There are probably too many players involved in coming to a decision. Reaching an agreement with the Housing Agency and reducing the number of players are two of they key actions we are seeking.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
In his opening statement Mr. Boucher acknowledges the State's 14% stake in Bank of Ireland. When Mr. David Duffy of AIB was before the committee yesterday afternoon, I asked him whether the State's 99% ownership of that bank afforded it a certain level of flexibility not available to other banks operating in a more private capacity. He refuted that, however, maintaining that his bank is operating in very much the same line as its competitors. There has been a great deal of comment on the disparity between decisions made by the different banks. Do the delegates see themselves as having the same types of flexibilities as AIB has in regard to resolution processes and dealing with the distressed book?
Mr. Richie Boucher:
I cannot speak for AIB. We are a commercial organisation which must operate on a commercial basis while also ensuring we meet the full requirements of legislation and regulatory provisions. We also must consider our mortgage book relative to the industry and relative to our competitors. I do not believe our competitors can point to the same progress as we have made, year on year, in terms of challenged mortgages and the level of arrears reduction. On the whole, the progress we are making is reflected in the numbers. Where a standard financial statement is submitted - which includes customers who are not in arrears - in nine out of ten cases, we are able to offer a solution. As Mr. Mason pointed out, 86% of our solutions are working. We feel we are making progress in terms of the way we deal with these issues. Other banks are in different positions, with significantly higher arrears situations and larger mortgage books. Everybody must make their own decisions as to what they feel is best for their business.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
In regard to legal proceedings, we have seen a figure of 3,478 for Bank of Ireland. Reference was made today to there being some 2,200 court proceedings initiated, judgments obtained and so on, but the way the figure has been presented to us does not include court letters. Will the delegates clarify whether the sum of 3,478 excludes court letters issued? If so, the figure of 3,478 is actually an underestimation.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
So the first contact the customer will have from Bank of Ireland is a repossession letter?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
There is no attempt to engage with the customer and bring him or her into the bank.
Mr. Stephen Mason:
Before we get to the legal process, we go through what is called our non-co-operation process. Where customers have not engaged with us over a period of time, we inform them in writing that they will be dealt with as non-co-operating customers if they do not correspond with us within 25 days. We get a big return from that engagement, with many customers responding and proceeding to engage with us.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Does the letter include a threat of legal action?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I assume it does, along the lines of, if the customer does not get back to the bank he or she will be taken to court.
Mr. Richie Boucher:
We are required to point out to customers that lack of engagement could result in the loss of their home. The letter is in a format as required by the code of conduct on mortgage arrears. To clarify, the figures we have given are where the legal process has formally commenced, where an external party, that is, a solicitor, has written to the customer.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Do the witnesses have a figure for the number of letters that are not at the court letter stage?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
It would be helpful to get an overall feel for the scale of this. Some of the banks are including these letters in their resolution process figures, but the committee's position is that while they may represent a commencement of a process, they do not represent a process as such and certainly not a conclusion.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
That particular question was one of the questions the committee put specifically to the banks in advance of these hearings. Bank of Ireland indicated that it does not classify such letters as constituting a proposed solution, which is fine. It would be useful, however, if the delegates could give the committee even an estimate today. I accept they may not have the exact number, but an estimate would be helpful.
Mr. Richie Boucher:
I ask for the committee's indulgence in this matter. As a public company, any figure we provide needs to be verified. It is very important that any numbers we give to the committee are independently verified rather than off the top of somebody's head. We will get back to the clerk quickly with that figure.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Is Bank of Ireland engaging in debt write-down as part of its resolution process on a case-by-case basis?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
We heard the same from some of the other banks but, in fact, debt write-down is taking place after the disposal of property in a repossession or voluntary surrender. In some cases the remaining debt was left there as a legacy issue with no apparent decision as to what would happen with it. What is the situation if a Bank of Ireland mortgage holder goes into a voluntary surrender or the property is repossessed and there is a legacy debt of, say, €100,000? The property has been repossessed because the person cannot afford the payments. Where does he or she stand at the other side of that?
Mr. Stephen Mason:
We would have been engaging with the customer before the property was sold and would have told him or her what would happen after the sale. We would engage with the customer subsequently and go through the new conditions, whether he or she is paying rent or whatever. Based on the affordability left to the customer, we would look for a contribution towards the residual amount.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Will Mr. Mason elaborate on that?
If the residual amount were €100,000, would Bank of Ireland be seeking repayment on that amount or on an adjusted sum?
10:30 am
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Yes, I know that. I am trying to establish, however, whether flexibility has been shown in respect of that legacy debt or whether the bank is seeking to recoup it in its totality.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Is the bank seeking it in its totality?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
From the point of view of customers, I do not know whether that represents an opportunity for resolution. I do not know what would be the attraction of entering into a voluntary surrender if there is no redemption at the conclusion of the process and if the bank is seeking the total amount involved. How many personal insolvency arrangements has Bank of Ireland dealt with?
Mr. Stephen Mason:
From our records we can see that 70 protective certs have been issued by the ISI. We were involved in 22 of those cases. Some 11 cases were voted on and Bank of Ireland was involved in four of these. We voted for some and against others. However, we are very supportive of the insolvency process. We see it as being at an early stage and we expect - as has been the case in the UK - the numbers to increase.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
On the issue of new lending, am I correct in stating that Bank of Ireland has 21% of the mortgage market?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Everyone is of the view that there must be a return to normalisation in the market. When people hear the term "recovery" it could frighten them because they might interpret it as meaning that another housing bubble is coming down the tracks. With regard to normalising the housing market, in 2009 the Central Bank introduced additional prudential guidelines in respect of the home purchasing sector. Will our guests provide an indication of what is the loan-to-value, LTV, requirement in that area and outline the position regarding mortgage schedules? Are the periods of repayment relating to such schedules still 35 years or are they reducing to 20 or 25 years? What is the household income ratio in respect of the mortgages that are being issued?
Mr. Liam McLoughlin:
Clearly, Bank of Ireland is very keen to support the recovery of the economy. In that context, we have a desire to lend €33 billion to the economy during the next four years. Some €12 billion of that will go into the consumer and mortgage business. We have a €4 billion fund here at present into the mortgage market and almost four out of ten mortgages issued in 2013 were given out by Bank of Ireland.
We have a maximum LTV policy of 90%. The experience in respect of new drawdowns in 2013 was 70%. A total of eight out of ten applications submitted were approved. Our income multiples are arranged on the basis of a number of factors. The range is four and one quarter to four and three quarter times the amount of a customer's income. Again, this depends on whether the person is a first-time buyer or not a first-time buyer. The maximum period of a mortgage for a first-time buyer is 35 years, while the average is 29 years. The latter is based on what we have seen in 2013. The maximum term for someone who is not a first-time buyer is 30 years and the average is 25 years.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
There is no question but that Bank of Ireland has done quite well in the past 12 months in the context of expanding its mortgage book. That is a welcome development. Has the bank adopted a target-driven approach in this regard? Have branch managers and area managers been given targets to achieve in the context of their mortgage books?
Mr. Liam McLoughlin:
There is a significant desire to support the economy so clearly we focus our branch staff in terms of customers' experience and ensuring that we meet their financial needs. We look to our managers in the context of the number of meetings and engagements they have with customers. We also seek to ensure that our objective of lending €33 billion in total into the economy and €12 billion into the mortgage market is met across the country. We have a network of 250 branches-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I asked whether targets have been set.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I presume that the target is larger than that which obtained last year and that the bank would hope that it will rise to 22%, 24% or 25%.
Mr. Richie Boucher:
It depends on the conditions and the particular sector. In general terms we would hope to improve our lending. I wish to mention one matter which might be relevant in that context. Underwriting is dealt with separately. People will have targets and they will recommend loans but the underwriting system is separate and this means a second pair of eyes is cast on transactions in order to ensure that policies are being adhered to, that criteria are being met and that an independent assessment is carried out.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
That clarifies the position. I have put a particular question to the representatives of the other banks who came before us and I will now put it to our guests. The LTV requirement varies between the institutions. In Bank of Ireland's case it is 90%. It has been suggested to me that a particular practice is developing and I would like to know if it has gained traction within Bank of Ireland. Let us consider circumstances where a house is for sale of €200,000 and the person who wants to buy it cannot either satisfy the LTV requirement or come up with the deposit, which would be €20,000. Not too many people have that kind of money on account at present. In light of the significant increase in rents, it would be extremely difficult to save that amount. It has been brought to my attention that what is happening within some financial institutions is that the valuation of the property listed on the application is being increased to €220,000 and this means the mortgage can be granted because the LTV requirement has been met. Is that type of behaviour occurring within Bank of Ireland?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
That is not the question I asked. I inquired whether it would be possible for me to obtain a 100% mortgage of €200,000 because the property I am seeking to buy has been valued at €220,000.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I am going to be very explicit in the context of the question I am going to pose. I am using estimated figures but my question is very specific. Is it possible for a purchaser to buy a private dwelling by means of a 100% loan from the Bank of Ireland because a valuation that is greater than the purchase price has been attributed to the property?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I still do not know if that is the answer to the question I am asking.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
So the amount of the loan would be €180,000.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
So the bank will not lend €200,000 in such circumstances, it will only lend €180,000.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
That is the information I required. I thank Mr. Boucher.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
For all the good news to which our guests referred - including the reduction in arrears - the bottom line appears to be that approximately one third of private dwelling house owners whose mortgages are in arrears are subject to legal proceedings or to the threat thereof from the bank at present. In addition, almost half of those with buy-to-let properties who are in arrears are involved in legal proceedings. Is that correct?
Mr. Richie Boucher:
That is correct. In the context of owner-occupiers whose mortgages are in arrears for 90 days plus and default loans, we have SFSs outstanding of approximately 2,200. We have sought engagement with the customers involved and tried a variety of means to seek engagement with them. However, the desire for engagement has not been reciprocated by those customers for whatever reason. We cannot offer a restructuring solution where we do not have an SFS. We are not allowed to do that. Therefore, the customers in question have, by default, narrowed the options available to us.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Mr. Boucher can blame customers all he wants but the bank has offered 3,942 so-called solutions in respect of private dwelling houses. Of these, some 3,478 are in legal proceedings. It seems that if one is a customer of Bank of Ireland, one almost has an equal chance of being in legal proceedings or obtaining a solution. What are the criteria that are applied? Is Mr. Boucher stating that it is the customer's fault?
10:40 am
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Are all those involved in legal proceedings people who have not engaged?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Does Mr. Boucher include in that legal proceedings as a solution?
Mr. Stephen Mason:
If I could explain the process because the Senator has the figure 3,478 which is in terms of those who are legal-consensual as part of the mortgage arrears resolution targets. They are not all in the legal process, as the Senator will note from the number at the top of the table setting out the position, there are a number who are engaged in a voluntary surrender or a voluntary sale process.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
They will still lose their home.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Mr. Mason is talking about private dwelling houses, not buy-to-let properties, as they are covered in other figures.
Mr. Stephen Mason:
The process we go through before we get to this stage is that we try to engage with customers. We spend time writing to, phoning and texting customers. If they do not engage with us, then we move into our non-co-operation strategy. We give them 25 days to respond to that. If they do not respond to our non-co-operation strategy, we write to them telling them we will deem them non-co-operating. After that we would have to call in the debt and it is only after all that has happened that we would go into the legal process.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Notwithstanding all the talk about non-co-operation, if customers engage in an assisted voluntary sale or a voluntary surrender, and there are 741 such cases - I note that some of that some of the mortgage-to-rent cases are included in that - out of the 3,478 cases - 20%, I presume those customers have engaged in talks with the bank if they are engaged in an assisted voluntary sale or voluntary surrender.
Mr. Stephen Mason:
That is right and their position would be unsustainable. We would not have a forbearance solution available to them. A number of them, as my colleague, Mr. McLoughlin, said, would be involved in the mortgage-to-rent process and we would hope that might be a solution for those and, if not, we would be looking for a voluntary sale or voluntary surrender of the property.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That brings me on to the mortgage-to-rent customers. Mr. Mason used the word "hope" in this respect, and that is the key word in regard to mortgage-to-rent customers. I think he said that the bank has only completed one. I certainly fault the Government for much of that, but the bottom line is that the first condition of the mortgage-to-rent scheme is that the customers must be approved by the bank. Is that not right, that the bank must put them forward?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
How many have looked to participate in a mortgage-to-rent scheme?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I ask for that figure to be forwarded to us.
Mr. Stephen Mason:
If I may once again explain our process, once a customer is deemed unsustainable, the first thing we do is have the mortgage-to-rent discussion with him or her. We would much prefer if more of these customers were mortgage-to-rent customers. We are not putting up any blockages to customers participating in mortgage-to-rent and we will propose as many people as are eligible.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I know that. Mr. Mason is saying that the bank puts forward everyone and that it is not trying to avoid the mortgage-to-rent scheme.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is the next stage getting the approval of the local authority?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That is holding it up then, as well as meeting the criteria.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Because the house is too big.
Mr. Stephen Mason:
There would not be demand in the locality for social housing and, therefore, even though the house might be the right size and the customer might be eligible, it would not qualify for mortgage-to-rent. The point we are trying to make is that there are many strict criteria that mitigate its usage. We are very supportive of it and we would like to see more of it happening.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Has the bank had discussions with the Minister of State with responsibility for housing or with the Department of the Environment, Community and Local Government in regard to it?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
There has been a reduction from 11,677 to 11,054 in mortgage arrears in the principal private dwellings category. What do those figures mean? Do they mean that 600 people are no longer in arrears? Have they suddenly paid off their mortgage? Have they come into money and been able to get three months of arrears wiped off? Has the bank given them a discount? I noted Mr. Boucher's language. He has been very careful with his language about discounts and write-offs, and maybe he has to be. He has said that the bank is a public company but he has been very careful. How many of these people would have got a reduction in the capital balance or a write-off of arrears?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
None. They are all people who have written a cheque to cover three months of their mortgage.
Mr. Stephen Mason:
No, that would not be correct. Some of the people would have cleared the arrears in their own right. The figures the Senator has before him are default customers, that is, those who are more than 90 days in arrears. We hear people talk about the arrears book and that is those who are over a day in arrears.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Those customers have brought their arrears down below 90 days.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Less than 90 days.
Mr. Stephen Mason:
Back into what we call the good book, that is, not in arrears. What we are seeing is a reduction in mortgage arrears for private dwelling homes both in our total arrears book and in our greater than 90 days arrears book. That can happen, as the Senator suggested, by a customer making a payment to clear their arrears-----
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
How many have done that?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
They go into the forbearance process and come out of it. The bank has repossessed 173 homes and there are 130 homes over which it has unexecuted possession orders. There are about 400 in that respect. In that reduction of 600, there are 400 over which the bank has repossession orders and it has executed that order in respect of some of them. Is that included in those figures?
Mr. Richie Boucher:
We also have an overpay category, that is, a customer who has not been through an SFS process, who might be three or four months in arrears and who would say to us: "I can pay you. I don't really want to through the SFS process. I can pay you an incremental €200 a month as an informal arrangement." At the end of December, we would have had 1,348 accounts in that overpay category. Quite a lot of people who would have been in the default category, that is, those who are 90 days plus in arrears, might not have gone through the SFS process but have entered into an informal overpay category. We keep track of those statistics and customers can move out on that basis as well.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Does the reduction of just over 600 who are 90 days in arrears include the 400 repossession orders?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
If the bank has a repossession order for a customer's home, does it still keep that customer in the 90 days arrears category?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We have noted that the take-up of split mortgages is very low. The bank has offered them in 17 cases in the buy-to-let category and 81 in the principal private dwelling homes category.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
How are they working out? The terms and conditions that Bank of Ireland is offering are considerably different from those being offered by the other banks, making them apparently less attractive. Will there be a problem in the future with a large interest bill being racked up?
Mr. Richie Boucher:
The key for us in how the market looks at the bank is whether the non-performing loans are reducing, whether our early arrears are reducing and the restructuring options that are in place. We gave very significant disclosure, which we have extracted from our annual report and put with the presentation. The most important thing the market looks at is the redefault ratio. Obviously we look at it and note it from a customer's perspective and from the Central Bank's perspective. We have said that 86% who are in a restructure have not met the full terms. That does not mean the other 14% have totally redefaulted. They could have missed half a payment or one payment. For us, the key criteria is that restructures stick. Otherwise, we are wasting our time, the customer's time and the market and investors would get nervous that we were putting place something whereby a problem might re-emerge in the future, which is the point the Senator made.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Mr. Boucher said that it is not the bank's policy to offer write-downs and he used language like that. How many Bank of Ireland customers have received a reduction in capital or a write-off of arrears in the past year?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Mr. Boucher does not have a policy but I ask him again how many have received-----
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I would have to draw some conclusions from the statement Mr. Boucher has made that maybe some people are getting them and that he does not want this to be revealed publicly.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Mr. Boucher, one of the things that we are trying to establish here is consistency among the banks.
Any level of ambiguity that exists as a result of people watching the proceedings does not help the bank, the committee or bank customers. Senator Byrne is trying to establish the bank's practice. Policy is one thing but when we asked questions of the other banks during the week about their policy, we did find that debt write-down was taking place.
10:50 am
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I will just ask the question again. Could Mr. Boucher provide us with the figures?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Could Mr. Boucher say that no one has got a debt write-down in capital or arrears in the past year?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Could Mr. Boucher tell us how many people did?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
But clearly people have received a debt write-down from Bank of Ireland and I would like Mr. Boucher to tell the committee how many have got one.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
So Mr. Boucher is not prepared to give the committee the figures in that regard.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I am sorry to be rude but Mr. Boucher is contradicting himself.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Senator Byrne-----
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Could I be helpful, as I have experience in this area?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
No, Deputy Mathews cannot.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I have 20 years’ experience in this area.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
No, you will not be helpful.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Could you withdraw that remark, Chairman?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
No, it will not be helpful. Senator Byrne is in possession.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
You said: “You will not be helpful.”
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I will rephrase my comment. It will not be helpful.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is Mr. Boucher prepared to give the figures to the committee for the amount of write-downs of capital and arrears that Bank of Ireland has given in the past year?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That is standard for banks.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Sure, but how many bankruptcies have taken place in the past year? Very few. That is not an issue.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
But the point is that reading between the lines, there clearly is a practice, even if it is an unofficial one, that Bank of Ireland offers write-downs on capital and arrears of mortgages.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I am sorry, but how many people have gone through the insolvency process with Bank of Ireland and agreed a write-off, or not agreed a write-off, as part of the process? I estimate it is very few. It is a handful.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
There are a lot of corporate write-downs and write-offs.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We are aware of the corporate write-downs, but I am interested in the mortgage book. Off the top of my head, the public cases of write-offs relate to corporate accounts, not individual customers. Reading between the lines I presume customers can avail of write-downs in Bank of Ireland if they push hard.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Has Bank of Ireland offered write-downs outside of the insolvency process or the bankruptcy process? We know there have not been that many of those processes.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Has Bank of Ireland never done it?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Yet.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
So the bank has clearly been offering write-downs of capital and arrears.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I did say in the last year in some of my questions-----
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
To anyone else's knowledge-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I ask Deputy Mathews to desist from interfering in proceedings.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I am helping.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
He is not helping.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I suggest.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Never in the last year.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
But the legal process for the bank includes the issuing of a legal threat.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Does anyone else have information, Richie?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Excuse me for one second. All responses are to the Chair or to the person who is in possession.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Members who continue to interject are not doing anyone any favour by disrupting the speaker. I say that to all committee members. In fact, they are creating confusion because there is too much noise. People are listening to the proceedings and when a speaker is in possession, they want to hear a clear and concise answer to the questions asked. I do not want any interjection by other members who think they might be smarter than the person asking the question. Members can wait for their turn and show us how smart they are. I hand back to Senator Byrne.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
It seems there clearly are people – Mr. Boucher admitted there was a public case of which I am aware in relation to corporates – who are getting debt write-downs from Bank of Ireland of capital and arrears who are mortgage customers. I propose that the committee write to Bank of Ireland seeking those figures if it is not prepared to give the information today. Mr. Boucher has not denied it in sufficiently strong terms.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Mr. Boucher mentioned insolvency and bankruptcy. We already put on record how few of those there were. Mr. Boucher included the issuing of legal letters in the legal process so one would presume-----
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Does Mr. Boucher mean by a court?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The language has been extremely vague and we should write to the bank and specify the exact information I seek today.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I will try to assist Mr. Boucher before we move on. Whatever Bank of Ireland’s policy is, has a customer got a write-down?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Not through the bank’s negotiation.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
No one will volunteer a write-down but if there is an exchange of legal correspondence or if there are negotiations-----
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We will write for the figures anyway.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
On the basis of what Mr. Boucher said, is it the case that he is not volunteering write-downs, but when the bank is forced during a legal process or a bankruptcy process, it makes the write-downs because someone else is telling it to do so?
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
But only when Bank of Ireland is absolutely forced to do so by the State through the legal process is the bank writing off people’s debts that they cannot afford.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Could I have a round figure for the amount the State invested in Bank of Ireland in recent years to underpin its losses?
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
What amount was required to save the bank?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
It was €3.5 billion.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
We can split hairs about language.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Does Mr. Boucher believe the spirit of giving the money was to assist the bank due to the difficulties caused by people who were not financially secure enough to maintain the financial arrangements for their loans, commercial loans and mortgages they took out?
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
We can split hairs in that regard. Of the 682 split mortgages that were reported on 31 December last year, it appears that many of them were not for people in the mortgage arrears resolution targets process. Why would the bank give a split mortgage to someone who was not in financial difficulties?
Based on the numbers, could someone explain why it is so much easier to give split mortgages to people who are not in difficulties compared with the 81 the bank has given to the 11,500 people who are in difficulties?
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
A total of 81 of them were given this year.
Mr. Stephen Mason:
No, what happens is that these are point-in-time figures. What we were asked to do was to look at our default book at the end of September and give information as to where they are at the end of December. The numbers available are for people in default at the end of September but the other accounts could have been in default previous to that and have now gone back into the good book. Some of the accounts might not have been in arrears but others might have been in early arrears. Some accounts might have been in default before September. The figures we give are for those in default at the end of September and we show where they are at the end of December. That is what we were asked to do. It would not be true to say they were always up to date. They might have been up to date but some might have been in early arrears and others in default.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
It was far easier for the bank to give a split mortgage to the 601 people who went from the bad book at the end of September to the good book at the end of December than the 11,500 people who remained in the bad book, as only 81 of those people had split mortgage arrangements. Could someone explain to me the difficulty between-----
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
But Mr. Boucher’s colleague just said to me that 601 people were in arrears at the end of September but managed to get themselves out of arrears.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I am sorry.
Mr. Stephen Mason:
I was just making the point that they could have been. Some of them would have been in early arrears and some of them would have been in the good book. The MART system shows where the people who were in default at the end of September were at the end of December. That is what the figures show. We have a lot more split mortgages than that. Some would have emanated from the default book previous to September and some would have started in the good book.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Could Mr. Mason do me a favour? Could he break down the figures for us? It is important to clarify the position given that only 81 split mortgages have been offered to the 11,500 people who remained in the MART process at the end of December versus the 601 that were given to the other combination of people who either were not in financial difficulties, were in default for less than 90 days, had paid a few bob back themselves or removed themselves from the MART process by the end of December.
11:00 am
Mr. Richie Boucher:
I ask the Deputy to look at the bottom of page 185 of the presentation. The extract from our annual report sets out non-defaulted loans in quantum, the number of accounts, defaulted loans, the quantum number of accounts and the restructuring being provided. I have totalled them all and it gives significant detail between the non-defaulted and the defaulted-----
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Is this page 187?
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
It still does not relate to the figures in the other presentation on the last quarter. I am not splitting hairs. I am trying to get to the scenario that will make it easier for Mr. Boucher to answer the reason it was easier to give split mortgages to the 601 people than it was to the 11,500 people to whom only 81 split mortgages were given.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Regarding the people who clearly have not been able to afford sustainable solutions with the bank, namely, the 661 assisted voluntary sales or voluntary surrenders in the past year, how many of those were in the mortgage arrears resolution process, MARP, and had received a sustainable solution prior to the bank assisting them to voluntarily sell their home?
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Even a mortgage-to-rent solution would not have been offered to those people.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
All of those people, who knew that after the bank sold their house they would still have the remaining debt from the house hanging over them because the bank does not do debt write-off, saw fit to refuse a mortgage to rent solution. Is that what Mr. Mason is saying?
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Agreed.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The 661 assisted sales and surrenders did not qualify for the mortgage to rent process.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Of the people that would have found themselves at the very late stages in the bank's legal process, how many of them were offered mortgage to rent and took it?
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Of the 661, will Mr. Mason come back to the committee in writing and detail the sustainable solutions that were offered and the reasons they either did not work, as in they were not eligible, or they were refused by the client?
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I was classifying it as a solution for the family to remain in their family home so on that basis, yes.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
It is a resolution.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I have two more questions. How many PIP arrangements have Bank of Ireland entered into since the insolvency service started?
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Four.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Why did the bank refuse the two it refused? Obviously, it reviewed that and decided to go with it. Why would the bank have refused the PIA?
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
There were other creditors involved.
Mr. Stephen Mason:
Yes. We would have done it for commercial reasons. We are very supportive of the insolvency service. This is a very small sample from which to be drawing any extrapolation. We would have had commercial reasons for doing it. In one of the cases it was based on the conditions attached and the fees involved. We are working, through the Irish Banking Federation, on a protocol with the PIPs and the insolvency service so that we can get standard conditions agreed. That should remove that difficulty for us in the future.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Of the 500 in the books coming forward, does Mr. Mason see the process speeding up and getting easier?
Mr. Richie Boucher:
We have a very substantial business in Britain and our experience in Britain was that the process took quite a while for it to gain momentum. One of the key aspects was to establish protocols between various creditor parties, etc., and that enabled the process to speed up. We anticipate the momentum will pick up quite significantly. I cannot say it is exactly the same as what happened in the United Kingdom, but that was our experience in the United Kingdom.
Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I thank the witnesses.
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
In the presentations made to the committee last week it was interesting that some of the groups dealing with people in mortgage arrears have a concept that the banks are going after individuals with equity in that if they can get equity out of a solution they will go after those people. We have not heard much on this occasion about small and medium enterprises, SMEs, that have significant property debts. What solutions is the bank offering those people to help keep the core business working well? Many of the groups that came before us last week believe the banks do not have the expertise to deal with many of the difficult cases coming before them. They described some of the solutions given as computer programme solutions because they are not being done on a case-by-case basis. The figures are simply put into a computer programme and whatever is spat out is the resolution offered. Do the witnesses believe they have the expertise in this area, and do they genuinely engage with people to sort out these issues? That is important from the committee's point of view. I know the bank has a commercial mandate. That is its agenda but it is a different agenda from the one we heard about last week. When all of this area is discussed in private afterwards the committee will consider whether it should make recommendations to Government on using the legislative powers of this House to help out people more. Could the witnesses give me a quick answer on those points?
Mr. Liam McLoughlin:
We have almost 1,000 people working across our SME and our mortgage business in regard to working for solutions. As stated earlier, at the end of December just over nine out of ten of our SME customers had solutions in place, 28% of those were in the insolvency space but the remainder were solutions that kept the business operating in a trading manner after the initial arrangement was agreed with the customer.
About 750 of the 1,000 people are on the mortgage arrears side. All of them have been through an extensive training programme. In terms of the make-up of those staff, we have over 100 network account managers in branches who deal with customers in regard to dealing with their mortgage arrears. We have a similar number in regard to SMEs. All of them have been through a variety of training programmes on how to deal with customers in financial difficulty. Those programmes include us working closely with a number of experts outside the country who have experience in similar financial difficulty cases. We have worked closely with the UK asset resolution team in the midlands. That 86% of our solutions are still in place is testimony to the fact that there is a good process in place, and it is working.
Mr. Richie Boucher:
I will give a bit more detail in response to the SME question. In terms of the figures, €1.487 billion is for forbearance for the SME sector; term extension is €679 million of that. Adjustment or non-enforcement of covenance is €116 million. The figure for reduced payment but meeting full interest is €278 million. The figure for reduced payment greater than full payment is €277 million. The figure for capitalisation of arrears is €36 million, and there are hybrid solutions of about €37 million.
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Mr. Boucher is consistent in that he continues to push the bank's policy of no write-downs.
Why is Mr. Boucher so intransigent on that issue? What is wrong with saying that the bank is writing down loans? There are a considerable number of borrowers who are in arrears and not co-operating because they feel, because of what they read in the media, that the banks will not give them a fair hearing. Some of the groups last week stated that Mr. Boucher's bank, in comparison to others - they may be wrong - seem to hardball customers more than, maybe, some of the other banks and it is something of a lottery as to whom one has a loan with. Why is there such a problem with saying that the bank writes off sums, that it has written off so much money on home mortgages, it has written off so much money for SMEs that are in difficulty trading and it has written off so much money for SMEs that also happen to be hugely involved in the property sector where their core SME business is good but their property loans are clearly in trouble? Why is there a problem in saying that with those who have buy-to-lets where the bank is receiving the full rent of those properties, the bank has worked out solutions with these individuals where the bank has written off debt? The bank is doing it. I do not understand why there is such a hang-up about saying that it is doing it. If the bank did so rather than always giving this sense that it will provide no write-down and no debt relief, and the borrower pays back everything unless, of course, he or she goes broke, it might give a sense of hope to borrowers that the banks are working on their side to create solutions.
11:10 am
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The bank could still maximise its commercial mandate and tell the committee that it is making significant write-downs on bad loans. That does not interfere. It is happening out there. What is the big hang-up in telling the committee how much the bank has written off against home mortgages, SMEs, SMEs involved in property and others?
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The bank is doing it voluntarily, is it not?
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
How far does it go? Is it all the way to court?
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Even if it goes to legal - whatever "legal" is because Mr. Boucher has not defined that either - what is the issue in telling us how much was the write-down? Mr. Boucher states it is a commercial matter. I am not asking him for individual cases. I am asking for the overall aspect.
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
It would be good. It is merely our perception from what we hear from others.
Mr. Richie Boucher:
I have no problem, but I must ensure that there is no perception that we are being disingenuous. It is our practice as policy. I will show the quantum that we have written off in our accounts where the debt has been deemed irrecoverable. I will come back to the clerk to the committee on that. I am sorry I do not have the figures here. I will come back to the Chairman on it.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
On that, because we might need to take a break for a few moments, in that communication Mr. Boucher might clarify whether, as part of the recapitalisation of the bank, a percentage was to deal with what might be called residual debt difficulties that would require a write-down. I would have assumed that the bank has calculated a level of write-down that it has to have.
On the more specific issue of mortgage-to-rent, does that involve a write-down because at some stage or other somebody has to buy the property and who has the legacy residual debt of that write-down? If an approved housing body comes in and buys a property for €150,000 and the previous purchase price of it was €250,000, where lies that €100,000?
Mr. Richie Boucher:
If I could take the first question first, we create provisions. We give disclosure on the provisions stock we hold. A provision is the expectation of a loss. It does not mean we actually are taking the loss. Indeed, part of our responsibility is to ensure that we provide, through our accounts, for the potential loss but try to minimise that potential loss. If I go to the presentation that I gave earlier,-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
There is a vote in the Chamber. Does Deputy Pearse Doherty wish to continue speaking in which case I can pair with him, or does he want to go and vote?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Are we not going to suspend?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
That is what I am asking.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I propose the committee suspend. I presume the other members will want to hear the contribution.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
On that basis, we will suspend the meeting and pick up that point with Mr. Boucher when we come back.
11:20 am
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
We are back in public session. Mr. Boucher may conclude his remarks and we will then move on to Deputy Doherty.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
We were also speaking about the mortgage-to-rent issue and how debt is managed in such circumstances. Deputy Doherty might address this in his questioning.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Cuirim fáilte roimh an toscaireacht. We are probably at odds over its version of what happened to its bank consequent to the action of the Government. The delegates claimed the recapitalisation moneys were an investment. It was not a voluntary investment by the State; the bank would not have existed without it. It was bust and came knocking at the State’s door for taxpayers’ money at the time in question. It is not just a case of getting the tax money back. Owing to what occurred and the activity of Bank of Ireland and others, the State went bust. It was not able to borrow on the markets because its debt ratio was too big. The consequences are felt every day in every community. It is important that we have this discussion in the appropriate context. Today we are dealing with some of the consequences in terms of mortgage arrears.
Let me focus on some of the relevant issues. There was considerable talk about debt write-off. Does Bank of Ireland write-off unsecured debt?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
It does. In how many cases was this done in the past year?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Would there have been thousands of cases?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Does Bank of Ireland not write off voluntarily any other type of debt associated with mortgages for anybody outside the legal process?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
With regard to the legal process, how many bankruptcies were Bank of Ireland customers involved in over the past year?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Would it be in the region of ten or fewer?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
It was mentioned that 22 proposals from the PIPs involved Bank of Ireland. The delegates then stated 11 were voted on and that a further four were then voted on. Can the delegates explain those three figures again?
Mr. Stephen Mason:
It was I who mentioned the figures. Protective certificates have been issued in 70 instances. Of those, 22 involve some element of Bank of Ireland debt. The courts have issued 70 protective certificates. Only 11 of the 70 were voted on. The figures may have changed in the past day or so but these are the figures we have. We were involved in four of the 11.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
What does Mr. Mason mean by saying the bank was involved in four of the 11? It is 11 of the 70, not 11 of the 22.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Bank of Ireland is very supportive of the personal insolvency service, yet it has voted against half of its recommendations.
Mr. Stephen Mason:
Coming from PIPs rather than the Insolvency Service of Ireland. We had specific issues that we voted against. I still make the comment that we are supportive of the service. There are specific instances at play in the two cases. I do not believe the Deputy should extrapolate from a rate of two out of four when the sample is so small.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
It is the only sample we have. We know the system is not working. One reason is that the bank holds a veto. It has shown today it is very willing to use it. It has vetoed one proposal and voted against the other. When a proposal from a PIP comes forward and Bank of Ireland has the ability to veto it, and where a debt write-down could take place, will it exercise that veto? Mr. Boucher told us writing down is not the bank’s policy.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Bank of Ireland will veto any proposal from a PIP concerning a write-down where it has the opportunity.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Therefore, the only way the bank will allow a debt write-down is when that opportunity is taken from it owning to its being overruled by vote on the basis of its being a minority creditor.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
That is appalling. One cannot square it with the statement that Mr. Boucher made that the bank is supportive of the personal insolvency service. The delegation is telling the committee the bank will veto every opportunity involving a debt-write-down proposal of a PIP.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
For secured debt. The personal insolvency service told us an average of 19% of secured debt is written down on average based on PIPs' proposals. The bank is saying it will torpedo every single one of these through the veto the Government gave it if it has the opportunity.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
It is very rare that I am lost for words but I can tell the delegates they have done it again.
On the subject of repossessions, Mr. Boucher is the fourth CEO to appear at a meeting of the committee in the past three days. Between them, they have issued letters, including legal letters, seeking the surrender of 30,034 properties.
Bank of Ireland is responsible for 6,650 of those properties. Not one of the banks would have met the MART or mortgage arrears resolution targets if it was not for the abuse of repossessions and voluntary surrenders. Does Mr. Boucher have anything to say about that?
11:30 am
Mr. Stephen Mason:
Yes, the MART targets were set as such that one could put customers into forbearance or if one had customers in the legal process or the voluntary process they counted against the targets. That is what we have done. We have not changed our activities. Obviously, we wanted to achieve the targets but part of normal collections activity would be that if a customer is not engaging, one would go into the collections - the legal process. Also, if a customer is in an unsustainable position, one would look to agree voluntary surrender with them before entering into the legal process. That is what we have done.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
In my view, the bank has abused this situation. The Minister for Finance is on the record of the Dáil as saying this week that he does not view the threats of legal repossession as the banks meeting their targets. He told me two months ago that he was going to communicate that to Bank of Ireland. I know he is playing politics in this and he hides behind the Central Bank, but has he written to the bank expressing the opinion he expressed in the Dáil - that the threats of legal repossession should not be used to reach the MART targets?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Yes. Has the Minister corresponded with Bank of Ireland about this issue?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Is the CEO aware of that correspondence?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The Minister informed us in the Dáil about two months ago that he was going to make that known to the banks. Mr. Boucher is not aware of it, either formally or informally?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Between the bank's voluntary surrender and repossession efforts it is 6,650. I have a piece of legislation that will be debated in the Dáil on Friday which I hope will frustrate the bank's efforts to put people out of their homes. We will wait and see how that transpires on Friday evening. As regards the 6,650 cases in the legal process or voluntary surrender, how many does the bank expect to repossess? What percentage of them does the bank expect to repossess at the end of the day?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
None at all?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Mr. Mason has no estimate whatsoever?
Mr. Stephen Mason:
No. One can see that a lot of the customers are at the early stages of the legal process where we have gone for demand for possession. We would be hopeful that many of those customers will engage with us. As we have already told the committee, when a customer completes an SFS, in nine out of ten cases we are able to offer a forbearance. We would not therefore be in a position to offer a forecast.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Would the bank expect to repossess at least 10% of those? Would it be normal to expect that?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Okay. As regards voluntary surrender, 545 people in family homes have given up their houses as a result of the bank requesting them to do so. As I said yesterday, many of them do so through fear that the bank will bring them before a judge and jury to have their houses repossessed.
Mr. Mason has told us that he is not writing off any of the residual debt. What steps, if any, has the bank taken to ensure that families who are forced to leave their family home have suitable accommodation to move into?
Mr. Stephen Mason:
As part of the process, when we talk to customers who have unsustainable mortgages - and most customers realise at that stage that their mortgage is unsustainable - we give them information concerning local authorities and MABS. We also give them contact details of people they should be talking to. In addition, we give them time to come to arrangements with us as to when they might leave the property. The majority of these customers will stay in the property when it is going through the sales process. One case manager will deal with them throughout the process. We deal with it as sympathetically and empathetically as possible.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I would say many of those would not believe that the bank is very sympathetic at that level. Many people who have spoken to me do not believe there is much sympathy within the institution. We see that right from CEO level down to senior management. Would Mr. Mason have heard comments from customers that there is an absence or lack of sympathy in the institution?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
As regards residual debt, a thread running through the committee hearings is that the mortgage to rent scheme is simply not working. If a customer were deemed by the bank to be suitable for mortgage to rent, they would therefore surrender their home which would be sold to the housing agency. If there was €100,000 of residual debt, the customer remains in their home but would pay a rent to the housing authority. In all cases, however, the bank will continue to demand that they pay back the residual €100,000.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
There is no write-off on mortgage to rent either.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The mortgage to rent scheme is supposed to involve coming to an arrangement with one's bank, but the only arrangement the bank has is that it wants all of the money back on a mortgage to rent scheme.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Does Mr. Mason think that is fair?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The bank has announced a new product whereby it will refund 1% of stamp duty for first-time buyers who buy before the end of September. So if somebody comes to the bank seeking a mortgage of €200,000, the bank will refund them €2,000, is that correct?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Therefore that person must be deemed by the bank to be able to afford the €200,000 mortgage in the first place.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Does Mr. McLoughlin believe that it is right, proper and fair to give them €2,000 in those circumstances?
Mr. Liam McLoughlin:
I will explain the context and background to it. We have an EU-approved plan concerning the bank for a number of years. Part of that EU plan is that, from the end of June this year, we are prohibited from engaging in paying broker commissions. Broker commissions are a common feature of the Irish marketplace. Those commissions are generally in the range of 75 to 100 basis points. Our view was that if we cannot pay broker commissions, we would then pay that money directly to the customer.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The bank believes it is fair to pay €2,000 to those who can afford a €200,000 mortgage. Bank of Ireland sees that as fair, right and proper for those who can afford such a loan. Let us look at the person whose family home has been repossessed. The bank has put them and their family out of their house and the residual debt is €200,000. The bank has deemed that they cannot afford to stay in their home because they obviously cannot afford to pay €200,000. However, the bank does not see it as fair to write off €2,000 for them. How does the bank square that circle? If a person who can afford a €200,000 mortgage comes to the bank before the end of September, the bank will give them a cheque for €2,000 to pay their stamp duty. However, a person turfed out of their house with a residual debt of €200,000 will be chased by the bank until the end of their lives for that sum and, as Mr. Boucher said, not a penny will be written down. How is that fair?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Are you?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Mr. Boucher is handing out a cheque to somebody he deems can afford a €200,000 mortgage, while at the same time screwing the person he has turfed out of their house for €200,000 of residual debt that his bank deems they cannot pay. That is not fair in my book.
I have two minutes left and I want to focus on Mr. Boucher's own remuneration. He knows that the Government will vote and use its 14% shareholding on 25 April. I am sure many others in this State believe that Mr. Boucher's salary should not be endorsed by the Government. Mr. Boucher earns in a fortnight what a teacher or nurse earns in a year. He believes he is worthy of it. On the day of the Bank of Ireland's annual general meeting last year, the Taoiseach, Deputy Enda Kenny, said he believed there would be a significant contribution from the leadership of the banks concerning remuneration.
He also referred to "extraordinary salaries". Can Mr. Boucher confirm that his salary has not been reduced by even one penny since last year?
11:40 am
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
So, the answer is "Yes". Can Mr. Boucher also confirm that the 15 directors of his banks have seen a collective increase in their remuneration since last year?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
No, but the amount of money the bank pays its staff has reduced by €80 million, is that correct?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
That is because the bank let 2,000 people go.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Nevertheless, the directors have seen an increase of €207,000 combined in the past year. Is that correct?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Yes, but the combined amount being paid to the directors has increased. Mr. Boucher has received an increase in his salary in the past two years. Is that correct?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I have the figures. In 2011, Mr. Boucher took home €831,000. This year, he takes home €843,000.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I need to push Deputy Doherty to conclude as we are out of time.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
How would Mr. Boucher see it if the Irish State voted against his salary given that the only reason he is sitting in front of us as CEO is because the people rescued his bank during a crisis at which time he was at a very senior level?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Would Mr. Boucher have a problem with the State voting against his remuneration package in two weeks?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
The Deputy is over time.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Is Deputy Humphreys sharing his 15 minutes?
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
No. It would be remiss of me not to refer to the College Green branch of Bank of Ireland as I have raised it with Mr. Boucher several times. I welcome the initiative that is taking place in opening it to the public. One hopes that can be built on. I acknowledge there was some movement. It is to be hoped we can work on it.
Can Mr. Mason take the committee through assisted voluntary surrender in a way we can all understand? How does the bank deal with that and the hangover debt that remains after it has taken place? Can Mr. Mason provide an example of how it is dealt with?
Mr. Stephen Mason:
The most likely situation is that a customer is in arrears and has completed an SFS and provided the bank with full information. Unfortunately, in the circumstances, we would not have a forbearance solution that would work for the customer and the mortgage would be deemed unsustainable. We would then look at whether the property and personal circumstances of the customer indicated that it was a suitable case for mortgage-to-rent. If it were a suitable case, that is what we would propose. If not, we would have discussions with the customer on voluntarily selling or surrendering the property.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
We have heard about problems regarding mortgage-to-rent, but if the property is suitable, how long does the bank wait for the procedure to go through? Is it eight or ten months? What is the average?
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
Can we put figures on it? For example, if I have a mortgage for €200,000, mortgage-to-rent is not a viable option and the property is worth €150,000, when does the bank enter into an agreement with me on the residual debt of €50,000?
Mr. Stephen Mason:
After the property has been sold, we will talk to the customer about their circumstances. We will go through a similar process to the process we go through to determine whether we can make a sustainable mortgage out of it, taking into account a reasonable standard of living and household income. If there is any surplus income above the reasonable standard of living, we will ask the customer to pay that towards the residual balance.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
Over what period?
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
Could it be over decades?
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
Do the witnesses not consider from their experience that to assist a voluntary sale actually weakens their position and that the customer would be better off to go down the bankruptcy road?
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
From what has been explained to me in the earlier evidence of the witnesses, if someone came to me who was dealing with the Bank of Ireland and he or she was in that situation, I would recommend bankruptcy. He or she is not getting a fair deal, as things have been explained. We have had other people in before from AIB and Ulster Bank to explain their procedures. The Bank of Ireland's procedures are much harsher than those of the other banks which have come before us. The witnesses have said they want to maximise the return to the bank, but the result of playing hardball with customers is that returns will be reduced. Certainly, I would not recommend that people deal with the bank.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
I am looking at this from the taxpayers' perspective.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
There are many reasons. We can go into that. The Bank of Ireland was very late to the party in terms of the reckless lending that went on. Deputy Pearse Doherty mentioned the position the bank was in at that stage. Can Mr. Boucher go through his understanding of the interbank protocol on arrears where there is a deal done on a mortgage? If the Bank of Ireland has an unsustainable mortgage on its books, there may be multiple other loans, including a car loan and a holiday loan and accrued arrears. When the bank is calculating whether a mortgage is unsustainable, does it write off the unsecured element first?
Mr. Stephen Mason:
Whether the customer has the unsecured debt with us or another bank which has signed up to the protocol, we all understand that the secured debt - the mortgage - takes priority. Keeping people in their homes takes priority. If that means we must write off unsecured debt, we will write it off.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
The practice is that unsecured debt is written off to make the mortgage viable.
Mr. Stephen Mason:
Yes. Unsecured debt can be a significant issue. If one looks at the number of SFSs we took in across 2013, the average customer presenting with difficulties had €36,000 of unsecured debt. If that is being repaid over a five or six year timeframe, it can be quite a drain. Dealing with the unsecured debt allows us to offer sustainable solutions to more mortgage customers in difficulty.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
How much unsecured debt has Bank of Ireland written off with reference to the viability of mortgages?
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
Every bank and institution has told the committee that there are difficulties with mortgage-to-rent. They have said there are too many players. How many players does the bank have to deal with in a typical mortgage-to-rent scenario?
11:50 am
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
Would Mr. McLoughlin have recommendations about how this could work better for the individual and institution?
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
Are the approved housing agency, the local authority and the bank the three players?
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
So there needs to be a template or protocol relating to that within the local authority that would be very clear from the beginning?
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
When a mortgage is written off, does that not keep pushing people into bankruptcy? If a solution is proposed, the bank uses its veto because it is a write off on the mortgage. If the bank keeps using its veto in the manner in which it says it is going to use it because it says it does not do write offs on mortgage, does it accept that the only solution is bankruptcy?
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
Let us be reasonable. The bank has obviously investigated this and knows what the options for customers are. Has it looked to see exactly what the options are? If the bank exercises its veto, surely it has done the work to decide what the customer's other option is. When the bank has done that due diligence and examined it, it knows it is pushing people into bankruptcy. The only option it is leaving that customer is bankruptcy. I am trying to be fair - Mr. Boucher should not give me glib answers but give us honest answers. Mr. Boucher was before us previously and issued a denial in respect of a Red C opinion poll done for the bank. When we received the paperwork, it contradicted Mr. Boucher's position. I am asking him to be honest with me and to tell me that the bank has at least looked at this and understands very clearly that if it exercises its veto on the mortgage on a constant basis, it is leaving the customer with no other option but bankruptcy.
Mr. Richie Boucher:
All I am saying is that bankruptcy is a very significant decision that depends on one's individual circumstances, how one feels one can come out of it and how one's credit rating will appear after it. It depends on the individual circumstances of the customer. We would recommend that a customer gets independent advice, not advice from the bank, as to what the option at that stage is. The customer should get independent advice from MABS or someone else. They need to understand the implications of bankruptcy. That is the only point I am making.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
I want to stick with this issue because I do not see any benefit to the bank in acting in this manner and exercising that veto. It is not good for the customer or the bank. Could Mr. Boucher explain the logic to me and explain where there is a better financial outcome for the bank when it exercises that veto?
Mr. Richie Boucher:
We have to look at the wide range of issues with which we must deal. We must ensure the viability of the bank and in particular take into consideration those customers who are meeting their mortgage repayments and those who are in restructures and sticking to them. I presume that paying a mortgage is not easy for quite a lot of those customers. A total of 86% of our customers fully meet the terms of a restructure, while the other 14% are probably meeting quite a lot of the terms. We also have the providers of capital to the bank. We need capital to be able to lend into the economy. Our ambition is to lend over €33 billion into the economy and we need the capital to do that. We have ensured that the way we have run the bank means that how taxpayers' money is spent with Bank of Ireland is not our decision. The bank should never have got into the position where we had to get taxpayer support and we worked hard to make sure that the taxpayers got €6 billion back. That €6 billion is for the taxpayers to decide through their elected representatives how that money is spent. It is not for Bank of Ireland to decide how taxpayers' money is spent. Those are the considerations we must take into account. Sometimes we can look at something and say that it is not fair in isolation but one cannot look at situations in complete isolation. One must take into consideration one's broad range of responsibilities and how one runs a bank and takes into consideration those broad range of responsibilities. It is very easy sometimes to hone in and say that something is very difficult and harsh. Sometimes it is but we must take everything into consideration. In taking everything into consideration, we have managed to restructure the bank and ensure we are lending into the economy, that we are the only bank with an EU viability and restructuring plan and that we are the only bank that got support that has repaid the taxpayer.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
That was a lovely speech. I am interested on the taxpayers' behalf because they have a 14% stake in the bank and saved the bank from the results of reckless lending so let us come back to the customer. The customer has gone through the procedures and there is an independent recommendation that there should be a write down on the mortgage where the bank still receives some payment. The bank's policy is to say that there is no write off yet it would probably get a better return if it accepted the recommendation.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
The Deputy has only a few minutes left. I will give him a bit of space.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
The recommendation is good for the bank, the taxpayer and the bank's shareholders but because Bank of Ireland says it is going to play hardball, that it is the hardest one in the market and that it does not do write downs, it does not let that happen. That customer has gone through all the procedures. We know the mortgage is unviable and that the customer does not have the means to repay it. The customer has an independent recommendation that there should be a write down, which gives the bank some return, but Bank of Ireland says that it wants a certain image, that it is the hardest guy in the market and that the customer will get no write down.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
This gives a return to the bank. The customer has gone through the procedures. This is not a customer who has not engaged with the bank. They have gone all the way through.
Mr. Richie Boucher:
The consistent application of our process, procedures and policies has ensured that defaults have reduced and that non-performing loans have come down relative to the entire sector. We are performing better than the entire sector. Our arrears and non-performing loans are coming down because we consistently apply our policies. We hear other banks come in with a different story. Our story has not changed. The consistent application of our policy ensures that for the broad issues, we are delivering.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
The logic of what Mr. Boucher is saying is that because we are so tough, we have scared everybody else into performing. The bank is not acting in its best interests. It is not acting in the best interests of shareholders and it is certainly not acting in the best interests of the customer because they have engaged with the bank. The banks sends letters to them telling them to engage, which they have done. They have gone the full way and engaged with the insolvency mechanism, of which Bank of Ireland is a supporter. When it comes to the last hurdle, somebody who has played by all the rules is told by the bank to take a running jump.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
The last thing is not consistent with the bank's policy. This is important. We are not talking about a person who has not engaged. The customer has engaged with the service Bank of Ireland says it supports and advocates for. When it gives a recommendation at the very end when the person is put to the pin of their collar, the bank tells them to take a running jump.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
Some months ago, I wrote to this committee and it was agreed that we would invite the Minister for Finance to come in to see how we would exercise this 14% shareholding in Bank of Ireland. I ask that we contact the Minister again and see if he will come in and attend this committee meeting to discuss how we will exercise the 14% shareholding by the taxpayer over which he exercises the voting right and that he explains how he is going to use it.
I do not think Mr. Boucher is acting in the best interests of the taxpayer, the bank or its shareholders, and I want the Minister of Finance to come before this committee at the earliest opportunity.
12:00 pm
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
I was addressing the Chair.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Last week we met representatives from organisations that are trying to support borrowers in distress. When we asked them whether any of the four banks we met this week, AIB, Ulster Bank, Permanent-TSB and Bank of Ireland, stood out from the others in terms of playing hard ball or being tough on borrowers, they identified Bank of Ireland. I do not know what my committee colleagues think but based on the evidence I have heard thus far I can see why they said that.
The figures provided to the committee indicate that as of the end of last year, 5,321 legal proceedings had been commenced. What is the total number of legal proceedings commenced by the bank? The figure is based on the end of the year and applies only to mortgages that were in arrears at a particular time. There is a bigger figure, namely, the total number of legal proceedings by the end of the first quarter of 2014 across all mortgages. What is that figure?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Legal proceedings may have been commenced against some of them since 1 January 2014.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Is the figure in the hundreds or the thousands?
Mr. Stephen Mason:
I certainly would not expect that it is in the thousands. As the movement between this return and the previous return was not in the thousands, I do not expect the new figure to be in the thousands. I do not have the figure, however. We have to send the numbers to the Central Bank by the end of April and that is what we will be working on.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Bank of Ireland does not have figures for the legal letters issued, although the other banks provided that information. When the representatives were asked for the information, their response was that they do not consider it a long-term solution. It would have been more helpful to give us the figure we sought while adding the caveat that they do not regard it as a long-term solution.
If we take a broad comparison with the other banks and the letters they issued to initiate or threaten legal proceedings, it would not be unreasonable to suggest a figure of 4,000 to 5,000. If that is true, it means the total number of legal proceedings and letters threatening legal proceedings is approximately 8,700. The representatives might provide an estimate of the number of repossessions that Bank of Ireland is likely to complete. I am very surprised that a bank which is initiating thousands of legal proceedings that may ultimately end up with repossession has not made an estimate in this regard. However, a reasonably conservative estimate is that one in five legal proceedings will end up in repossession. That would suggest a total repossession figure of approximately 1,700. Does that jar significantly with what Bank of Ireland expects?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
What figure would Mr. Boucher suggest?
Mr. Stephen Mason:
The question is based on the premise that 4,000 letters have been issued but were not included in this return. Quite simply, that is not the case. We wanted to give the committee every piece of information it sought. Suggestions were made previously that people could count warnings of legal proceedings as proposed solutions. We did not do that. We submitted to the committee what we had submitted to the Central Bank as our MART return and anything in terms of our non-co-operation strategy would not qualify as MART and was not included in this return. Our intention was not in any way to withhold information from the committee and we will provide the information sought.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Just taking the figure of 5,321 legal proceedings, if we assume that one in five legal proceedings, not including threatening letters, will end up in repossession, the figure is still in excess of 1,000. Would that figure jar with Mr. Boucher's sense of what is going to happen in the coming months and years?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
When one compares the number of legal proceedings initiated relative to the overall number of mortgages, Bank of Ireland has initiated twice as many legal proceedings as any of the other three banks. Can the representatives explain why that is the case?
Mr. Stephen Mason:
That figure does not bear any comparison with any figures I have seen. When the Central Bank issued figures in September based on the MARP returns, it suggested that 55% of cases across the banks were legal and 45% were forbearance. That was a combination of buy-to-let and principal dwelling home cases. Our figures were exactly the same. I cannot comment on the Deputy's figures because I am not aware of them.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Let us compare Bank of Ireland and AIB in respect of the principal dwelling home category. Of approximately 11,000 mortgages in this category, Bank of Ireland has initiated 3,500 legal proceedings. AIB has approximately 25,000 mortgages and has initiated 2,800 legal proceedings. Despite having over twice the number of mortgages under consideration, AIB has initiated fewer legal proceedings.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Mr. Mason expects AIB's figures to increase.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Ulster Bank's representatives did not say that to the committee. Ulster Bank has 14,000 mortgages, compared to Bank of Ireland's 11,000, and it has initiated 1,700 legal proceedings. Again, Bank of Ireland's has initiated more than twice as many legal proceedings relative to the number of mortgages under consideration.
Mr. Stephen Mason:
I cannot comment on other banks because I do not know how they operate their collections policies. We have tried to explain that Bank of Ireland is able to offer forbearance for nine out of ten customers who engage with us. If customers do not engage with us we move on to the legal process. Most of the figures quoted pertain to the early stage of the legal process, that is, the demand for possession stage, and if the customers engage we hope many of these cases would end up in forbearance rather than advanced legal proceedings.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
If we proceed on the basis of Bank of Ireland's figure that nine out of ten customers with principal dwelling home mortgages are offered sustainable solutions and that legal proceedings and assisted voluntary sales account for more than 60% of all mortgages, how can the bank have offered long-term solutions to nine out of ten mortgage holders if in respect of more than 60% of the mortgages under consideration the borrowers have either agreed to sell the house or are now facing legal proceedings?
Mr. Stephen Mason:
It is a different population. We are looking at customers who were still in default on 30 September. Many of the customers to whom we offered forbearance were in default, and the forbearance would have sorted out their issues and moved them back into the good book. Unfortunately, the way the figures are presented does not tell the full story because they represent a point in time. Ultimately, what one will be left with in terms of default is that more of the customers will be in the legal process because forbearance should be curing customers and taking them out of default. The figures I have presented pertain to the more than 10,000 customers who completed standard financial statements over the year. They were a mix of pre-arrears, early arrears and late arrears. Where they either had difficulties or expected difficulties, we were able to offer forbearance in nine out of ten cases.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
When we met six months ago members of the committee expressed their views on the approaches being taken by Bank of Ireland. Did the bank make any changes to its resolution processes or offers based on the views it heard six months ago?
Did the bank make any changes to its resolution processes, offers or anything else based on what the witnesses heard from the committee members six months ago?
12:10 pm
Mr. Richie Boucher:
On an ongoing basis, as with all our other businesses, we examine how to improve. We never think we are perfect, but must continue to enhance our processes and procedures and examine advice from a range of parties. Therefore it is hard for us to say exactly what is a combination of our view of what is working and where we do and do not have to improve. I cannot identify some specific point. It may be that a point was made which was already under consideration.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
I am slightly confused about writedowns. The bank's unambiguous position is that there will never be any writedown by the bank outside of a bankruptcy on secured debt. Is that correct?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Is that also the case for unsecured debt?
Mr. Richie Boucher:
In answer to a question from Deputy Kevin Humphreys we said the bank was a mover to say unsecured debt is a significant issue. If the banks agreed a protocol among themselves that if a customer had a Bank of Ireland credit card and a mortgage with Ulster Bank we would agree that reciprocation would apply, and vice versa. We take writedowns on unsecured debt. That is the nature of lending. Unsecured debt, by its nature, is lower down in the waterfall-----
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Say a borrower has an unsustainable portfolio of debt with Bank of Ireland comprising a mortgage and a credit card. Might Bank of Ireland enter into an arrangement with the customer to write down the credit card debt but not the mortgage debt?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Might the bank offer to continue with the mortgage as it is but write down a credit card debt of, say, €10,000 to €2,000?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Am I correct that any personal insolvency arrangement, PIA, proposed that includes a writedown of mortgage debt would be, and is, vetoed by Bank of Ireland?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
On a voluntary sale where there is residual debt, does Bank of Ireland consider that to have been secured and not eligible to be written down, or is it deemed unsecured and eligible to be written down?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Say somebody has a house worth €200,000 and owes Bank of Ireland €300,000. There is an assisted voluntary sale leaving a residual debt of €100,000. That is clearly unsecured debt because there is no asset against it. Am I right that Bank of Ireland will not write down that unsecured debt under any circumstances that do not involve bankruptcy?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
While I appreciate that, after the sale there is no security. Will Bank of Ireland not write down any residual debt, which is by definition unsecured and would have to be carried as such in the bank's accounts?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Will Bank of Ireland not write down that unsecured debt?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
The auditors would force the bank to provide-----
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
What does "follow through" mean? Will the bank not write down that debt?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
What interest rate would Bank of Ireland apply to this unsecured debt?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Bank of Ireland obviously has responsibilities to its shareholders. If Bank of Ireland customers began to withdraw their deposits on the stated reason that the bank was playing hard ball in a way that none of the other banks appears to be, would that potentially change the policy on residual unsecured debt in assisted voluntary sales?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
I appreciate that and I agree. Could Mr. Boucher answer the question I asked him?
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
What interest does Bank of Ireland charge on the shelved portion of a split mortgage?
Mr. Richie Boucher:
At the last committee meeting the Chairman made a suggestion which I said I would think about. When we say we will think about something that means we do, and we take it seriously. We recognised there was a concern. The vast majority of defaulting customers are on trackers and we felt there was a perception that we were seeking to make a profit. Therefore we said that for the period of the warehousing, for three years subject to review, it would be the cost of three-year unsecured money to the bank at that time. That was transparent because we issued a bond to the market at a rate of approximately 2.5% to 2.6%.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
So if a tracker customer pays 2%, the bank will shelve a portion of that mortgage and charge the same rate on the shelved portion as on the portion that the customer is paying.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
There is no interest rate reduction on the shelved portion.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Therefore, the total payment commitment does not fall but is simply deferred.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
Earlier somebody asked why Bank of Ireland has 81 split mortgages compared to Permanent TSB's 3,955 and Mr. Mason said the split mortgage is not affordable for many of the bank's customers. If the bank takes somebody's mortgage at 2.25%, splits the two pieces of capital in half and charges the same interest on both, there is no financial change for the customer. It is unaffordable because Bank of Ireland's split mortgage is completely meaningless.
Stephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context | Oireachtas source
In the short term, but the full amount of capital is accruing a full amount of interest.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Is there a variation on the variable interest rate? Mr. Boucher referred to a set rate for tracker mortgages.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Please excuse me from the Chair for a few moments. The Vice Chairman, Deputy Liam Twomey, will cover proceedings in my absence.
Michael Creed (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Much of the debate has been on the mortgage side. I refer to the SME sector. Bank of Ireland's presentation referred to sustainable solutions having been put in place for nine out of ten of its SME borrowers who were in arrears. I want to zone in on the 10% of the SME sector for whom no solution is in place. The SME sector is a broad church. Fortunately it is a real engine of our economy. From my constituency experience I suspect the 10% which are a residual problem for the bank by and large fall into the microenterprise sector, for example sole traders, corner shops, petrol stations, publicans and small builders who might have no employee other than themselves.
They are key to provincial Ireland's economic recovery and the problem we have is that while a recovery is under way, it is patchy.
With regard to Bank of Ireland's profiling of the SME sector and companies that remain in difficulty, is it borne out by its analysis of the sector? Does the bank have a specific programme to deal with the microenterprise sector, as opposed to the SME sector generally? Some businesses may have in-house accountants and a range of legal and financial services at their disposal, but others do not have the expertise and may have made imprudent investments in the good times. It may not have been buy-to-let properties but a range of foolish investments. That leaves them with a debt that is dragging the core business down. If it is not a tangible asset, how can the bank ensure the viable core business survives when the debt it carries from a non-core business investment is in danger of dragging it down?
12:20 pm
Mr. Liam McLoughlin:
The SME sector is critical to the bank and we are investing significantly in it in terms of both resources and supports. More than €12 billion of the €33 billion about which we spoke is geared towards supporting the sector, which is a support for jobs and employment in the economy.
I would like to clarify that at the end of December we reached a target of nine out of ten where we had in place solutions and that we are now working through these customers. The figure of one in ten relates to time. We tend to get to all of these customers also. It is not the case that they are not for saving or proper resolution. It is a case of we reached nine out of ten and are now working in 2014 through the remainder of the portfolio and will do so in a proactive manner.
Michael Creed (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Does the bank require a different slate of solutions for microenterprises the debt level of which may not be associated with a tangible asset, for example, buy-to-let properties, in which many other SMEs may have invested? The debt may relate to the expansion of the business that did not work out, but a viable core business remains. I can think of a number of such businesses in my area which still have a viable core business but a debt owing to an investment is dragging them down. I take on board what Mr. Boucher says about it not being policy to write down, but in circumstances such as this where there is no debt solution, the business will fail. That is not beneficial to anybody but particularly provincial Ireland where there is a preponderance of such enterprises.
Mr. Liam McLoughlin:
We have a range of solutions that have been successful in the cases we have worked so far. They include getting the small business back up and running and, in some cases, debt parking similar to the split on mortgages on the consumer side. These solutions will be applied to the micro sector.
Michael Creed (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Is it policy that Bank of Ireland will not close the core business?
Mr. Richie Boucher:
Our experience has probably been significantly less than we have seen elsewhere in terms of Bank of Ireland buy-to-let lending and being banker to the core business. We come across situations where we are the banker to the core business but buy-to-let borrowings have been provided by other banks and we were uncomfortable with providing them at the time they were given. We try to ensure cashflow is retained within that business and the buy-to-let aspect must be dealt with by the bank that lent the money.
Michael Creed (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source
However, there is an excessive concentration on buy-to-let lending. Businesses have debts on other investments that are no longer tangible assets which are in danger of dragging down the core business. They may have made myriad non-productive investments, but they cannot repay the debts associated with them. Every business did not purchase a buy-to-let property and there are debts not associated with the core business, particularly in microenterprises, that need a different template to work out a solution. I take some comfort from the bank's commitment to keep the business open in all circumstances.
The representatives of the four banks who have now appeared before us agree that the mortgage-to-rent scheme is not working and that there are too many road blocks, but I am unclear as to where and what are these road blocks. Will the bank outline a brief summary of them? When it recommends people, what hurdles must be cleared? Where are the impediments to progress? Is it the local authority? We need more information if we are to work with the banks to refine the process because the scheme is one of the preferred solutions to ensure people stay in the house they call home. If we can do that in the context of this scheme------
Mr. Stephen Mason:
I understand why the question keeps coming up, but the process is long. I do not have the criteria with me and they are part of the issue, but I will bring the Deputy briefly through the process from a couple of months ago and I do not believe it has changed. We see if a customer's position is unsustainable. We check against the qualifying criteria to see if the customer would meet them. They have to do with property value, size of property, household income, etc. It is then approved by Bank of Ireland management if we believe it meets the criteria; the mortgage is unsustainable and we see if we can it get into mortgage-for-rent sector. The case is anonymised and sent to the housing agency for approval. Without the customer's details, it looks to see if it meets the profile. That is the first part of the process.
Once approved as being eligible, the customer is contacted and advised. The mortgage-to-rent consent to participate letter and appropriate pack with relevant information and the next steps are sent to the customer. Part of the process allows the customer 60 days in which to lodge a social housing application with his or her local authority and return the signed consent to participate letter to the bank. Once the bank receives the social housing approval letter to proceed, it obtains consent from the customer and the customer's details are then forwarded to the relevant housing association. We issue our mortgage-to-rent letter. The customer has 28 days to obtain both legal and financial advice, for which we pay under the scheme, and return the signed copy indicating that he or she wants to participate. The voluntary surrender of the property by the customer to the bank takes place and the bank then sells the property to the housing association.
From that brief description of the process, the Deputy can see that many people are involved, that there are many hand-offs and that the criteria are restrictive. The whole thing needs to be looked at.
Michael Creed (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The representatives might give us the benefit of their experience in operating the scheme, indicating which gatekeepers are superfluous in the process and how it might be streamlined more effectively because it is a good solution which allows people to remain in the house that they call home. There are too many gatekeepers along the line based on what Mr. Mason said and if we can streamline the process, we should learn from this.
Mr. Richie Boucher:
We will try to help. We would be careful not to criticise people who are doing their own jobs in difficult circumstances, but if we set out the steps involved, the criteria used and a flow chart of what has to happen, perhaps different parties might look at the flow chart and say what parts are adding to the solution or causing issues to arise.
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
There is nothing wrong with Mr. Boucher giving his opinion on where he sees impediments in the process. We would appreciate it.
Michael Creed (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source
How many assisted voluntary sales involve candidates in positive equity? Does someone in positive equity run a higher risk of being a candidate for such a sale?
Mr. Stephen Mason:
I suspect it is very small, but I do not have the figure.
Our forbearance assessment is based on the sustainability and whether the customer has the repayment capacity for us to put a forbearance in place. It is only after the event that whether it is in positive or negative equity would enter into the picture. I do not know but I suspect it is very few.
12:30 pm
Michael Creed (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Is it not the case, given the bank's reluctance to write-off the residual debt in an assisted voluntary sale, that the bank's balance sheet benefits substantially more when there is an assisted voluntary sale where there is positive equity?
Michael Creed (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I have a final question. Mr. McLoughlin said earlier in reply to a question from Deputy Lynch that bank staff do not get incentive pay. Does that apply across all staff?
Joe Higgins (Dublin West, Socialist Party)
Link to this: Individually | In context | Oireachtas source
In justifying the very hard line Bank of Ireland is taking with home owners who are in mortgage distress and in defending his own exorbitant annual income, Mr. Boucher keeps referring to the shareholders of the bank as justification for everything. As a major bank, does he feel it has any responsibility to Irish society more generally in respect of what Bank of Ireland and the other banks have got the Irish people into, or to its customers who were and are the victims of being ensnared in the property bubble, the profiteering that happened there and the prices they were forced to pay for a home? Does he feel that any such consideration should come into the decisions made by Bank of Ireland in regard to home owners who are in distress? From listening to Mr. Boucher on the last occasion and now, my sense is that if we brought in a stone wall from Connemara and placed it over there, I would get as much change from it regarding the interests of people who are suffering and in distress as I am getting from Bank of Ireland and Mr. Boucher as chief executive.
Mr. Richie Boucher:
It is correct that we are a commercial business, but it is very important to us that our business is from Ireland. We would not have a future as a business if Ireland, as a country, did not have a robust and strong economy. We were supported by the taxpayer so we had a couple of criteria. We had to survive. What did survival mean? It meant that we participated in supporting economic recovery whilst we repaid the taxpayer. It is, and has been, extremely important to us in Bank of Ireland that we do not decide how the taxpayers' money is spent. The taxpayers should never have been put in a position that they had to invest in Bank of Ireland, so we worked hard to ensure that the cash went back quickly. We had to take difficult decisions to run a business to ensure, first, that the taxpayers got back €6 billion in cash. That is €6 billion in cash from Bank of Ireland. None of the other banks has done that. That €6 billion means that either tax rates can be kept lower or more services can be provided.
For the economy as a whole, we must take into consideration our reputation in wider society and our ability to support the economy. We must have capital and the provision of capital to us should never come from taxpayers but from the private sector. However, our private sector investors are investing for the long term. We have sold the bank to private sector investors on the basis of the growth story in Ireland and the growth story in our bank. We have clearly set out to our investors our ambition to lend into this economy and support it, because if we do not support the economy we do not achieve our financial and business objectives. That is as simply put as I can put it. We have a responsibility to support the economy in a way that makes commercial sense.
Joe Higgins (Dublin West, Socialist Party)
Link to this: Individually | In context | Oireachtas source
The problem is that the unsustainable level of mortgage repayments means that far more money is going to the banks than should be going to them, money which would otherwise be going into services, employment creation, shops and so forth on a local basis. In fact, it is quite damaging to the economy. The 4.5 million taxpayers would be quite interested in having a global solution to this crisis. However, the circular sent to the committee by Mr. Boucher is clearly in the very narrow interests of the bank's shareholders. Even issues such as temporary interest rate reduction, deferred interest, reduced payment less than interest rate, payment moratorium and permanent interest rate reduction are out. Anything that might give more flexibility to people, even on a temporary basis, has been ruled out. Among the major banks there are 30,000 home owners who are in danger of losing their homes. Does Mr. Boucher not see the benefit of a global solution? Does he not think he should be talking to other banks and the Central Bank about a global response, rather than this very narrow way with which not just Bank of Ireland but all the banks are approaching it?
Mr. Richie Boucher:
Again, we received support from the taxpayer. A total of €6,000 million in cash has come back from Bank of Ireland to society, to all of the taxpayers. It is paid to the broad base of taxpayers. Our responsibility is to all of the taxpayers. I could empathise, and Deputy Humphreys thought that I was not focusing on his question, but we must take into consideration our responsibilities to a wide range of factors. If we focus on the particular point the Deputy is representing, which is the taxpayers, our bank formally believes it is not up to our bank to decide how the taxpayers' money should be spent. It is up to our bank to ensure the taxpayers have no risk to Bank of Ireland, that they have got their money back and that they have a profitable investment. Then the taxpayers decide how that money is spent, not Bank of Ireland. All of the taxpayers, through their elected representatives, decide how that money is spent. That is how we address the situation.
Joe Higgins (Dublin West, Socialist Party)
Link to this: Individually | In context | Oireachtas source
Unfortunately, the €6 billion goes straight into redeeming banker and bondholder debt in the European financial markets, for which the Irish people have no responsibility whatsoever. However, that is a more general question.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
That is for the euro system-----
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Deputy, do not interrupt.
Joe Higgins (Dublin West, Socialist Party)
Link to this: Individually | In context | Oireachtas source
In conclusion, could Mr. Boucher put a value on the total amount of negative equity in the bank's owner-occupied mortgage book? Lastly, I have a question which I put to the representatives of all the banks. Does Mr. Boucher not see the common sense that ordinary people see, that rather than putting tens of thousands of people through the torture and distress there should be a global write-down to today's home values, with a clawback built in should the prices go very high again?
A calibration downwards of monthly repayments is the way to achieve a global solution to what is a nightmare for many people, thereby releasing millions of euro for the real economy.
12:40 pm
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I know the system.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
No, creditors in the euro system.
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Deputy Mathews, stop interrupting.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Stop interrupting? I am helpfully giving Mr. Boucher-----
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The Deputy is being far from helpful. Stop it.
Mr. Richie Boucher:
I am sorry. I have lost my train of thought. That is how we view the situation. To answer Deputy Higgins's specific question, in the case of Bank of Ireland and defaulted mortgages - 90 days plus and-or impaired - the quantum of negative equity is €397 million and the quantum of total negative equity in our owner-occupied book is €1.921 billion.
Joe Higgins (Dublin West, Socialist Party)
Link to this: Individually | In context | Oireachtas source
Some €1.9 billion.
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I call Deputy Richard Boyd Barrett, who has ten minutes.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I thank the witnesses for appearing before the committee. There are 3,400 repossessions and legal actions of one sort or another in the pipeline. Can the witnesses assure us that Bank of Ireland is actively trying to give people in those cases every option besides having their homes taken off them? Will the witnesses tell us a bit about how Bank of Ireland interacts with the group of people in respect of whom it has gone to the drastic extent of issuing legal proceedings or putting them in the position of supposedly voluntarily surrendering their homes? I suspect it often is not that voluntary and they have little choice. Will the witnesses assure us that Bank of Ireland is making every effort to keep people in their homes?
Mr. Stephen Mason:
It is a thorough process. It starts with our collections activity when someone goes into arrears. We make every attempt to contact customers to figure out what their problems are and to try to get them to meet one of our 100 network account managers around the country. We have 250 branches and 267 mortgage advisers. Customers can meet any of those advisers or network account managers, who will help them to complete a standard financial statement, SFS. If we can get that done, we find that we can offer forbearance in nine out of ten cases. If customers do not respond to our telephone calls, letters or text messages, we will not just stop after a week. We try to do it for a number of months. If customers still do not engage with us, we move into what we call our non-co-operation strategy, in which we write to the customers outlining that, despite our attempts to engage with them, they have not done so and will lose the protections of the code of conduct of mortgage arrears, CCMA, and the mortgage arrears resolution process, MARP, unless they respond to us within 25 days and give us the information we require to be in a position to offer them forbearance treatments and help them with their solutions.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Bank of Ireland re-engages with the customers.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Oddly enough, and perhaps running counter to my instincts and impulses and some of the questioning, I actually believe the banks. It is not in their interests to repossess people and they are under a great deal of pressure. Mr. Mason mentioned that Bank of Ireland reaches some arrangement in nine out of ten cases. What about the one to which it cannot offer a solution, even if that is what the customer is seeking?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
What kind of person is that? These are people who are trying to make an arrangement with Bank of Ireland but for whom it does not believe there is a solution, having examined their situations. Is that what is happening?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
At that point the bank moves to get their houses.
Mr. Stephen Mason:
First, we would try to get a full understanding of their incomes, outgoings and family circumstances to determine whether we could provide them with a forbearance. If we cannot and they move into the unsustainable stage, we consider mortgage-to-rent solutions. This is the answer to the Deputy's question. If mortgage-to-rent is not an option, we consider-----
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Why would mortgage-to-rent not be an option? I presume we are discussing people who are on low incomes or have lost their jobs and are dependent on social welfare. Would Bank of Ireland offer people in such situations a mortgage-to-rent option? Why would they refuse it, why might it not be suitable or what might be the problem?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
That is something we could consider.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
There is much that is thrown at the banks that we should be the ones considering. I do not approve of some of the banks' actions, but they have been given the power to do them and are probably behaving rationally from their own point of view.
The criteria for mortgage-to-rent solutions might rule some people out, at which time Bank of Ireland moves towards repossession.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
From what the witnesses have told me, I am angry about what appears to be their approach to residual debt. Using the previous example of someone who has lost a job or is on a low income, took out a mortgage in good faith, is a victim of the economic collapse, has a family and so on, if that person is forced to give the bank his or her family home, which is an awful thing to have to do for an innocent victim of other people's behaviour, including that of the banks, Bank of Ireland will pursue that person for the residual debt of €100,000 or €150,000. That is cruel.
Mr. Stephen Mason:
We would have had a conversation with the customer beforehand about paying what he or she could. If we subsequently find that the customer can only pay €50 per month, that is what he or she pays. The customer must have a reasonable standard of living and his or her circumstances change after the property has been voluntarily surrendered. We take all of that into account and, in terms of maximising recoveries-----
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I am asking the witnesses in all honesty. I will not give the banks credit, but I acknowledge that, in my experience, they have not been moving for wholesale repossessions. This is not particularly because they are nice, but because it would not be in their interests. Where someone has no option and is forced to give up the family home because there is no sustainable solution available, it has dramatic consequences, yet there is still an outstanding amount and Bank of Ireland will chase that person down for it and take him or her to court, even though it knows the person has no money. Is the bank serious? That is an extraordinarily vindictive and vicious thing to do to people who have already been innocent victims of a mess that was created by the banks.
12:50 pm
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
That is the point.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
That is extraordinary.
Mr. Stephen Mason:
I do not think we said that at any stage. I have been trying to explain the process. In taking people to court we will be seeking that they pay what they can. They have been involved in a process with us and voluntarily decided to surrender their properties. We are asking them to pay what they can of the residual debt.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Let us take a person who has lost a job and as a result does not have the capacity to do a deal with the bank. The bank then moves to repossess the home. It knows that the person has no money and will be struggling to put a roof over his or her head, yet it still proposes to initiate legal proceedings to try to get blood out of a stone.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Does Mr. Boucher not believe that is cruel and vindictive?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
What about the-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
If the Deputy continues, he will be eating into his own speaking time.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I apologise.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I put it to Mr. Boucher that it is unbelievably cruel that the bank chases people who have lost everything for money that it knows they do not have. What is its purpose in doing that when it knows it will be unable to get any money from the people concerned? What is the purpose in taking to court a person whose only income is from social welfare benefits and trying to get from him or her, say, €100,000, which it knows he or she does not have? Leaving aside the cruelty, distress and anxiety for the family involved, I do not see how this makes sense from the bank's point of view. How from its point of view does it make sense?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Mr. Boucher's responsibility is to the bank's shareholders.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Therefore, the bank chooses to torture people from whom it knows it cannot get money?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
What the bank is doing could not be described as anything other than punishment. What it is doing is punishing people because it knows they cannot pay, but it still demands that they do so, including by bringing the legal system down on top of them to force them to pay. There is no word describe it other than "punishment".
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
But the bank is still going to chase them for more money.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
On the buy-to-let sector, I have made the following point to all of the banks. There are many people who are tenants of landlords who owe money to the banks. They are innocent victims in all of this in that they are paying rent to their landlords who have gone bust. The banks have several thousand of these landlords on their books and commenced repossession proceedings in respect of some of the properties concerned. Does Bank of Ireland propose to respect the rights of tenants who faithfully pay their rent and have every right to expect security of tenure and not to be turfed out by receivers appointed by the bank or does it propose to turf out tenants whose contract is not with the bank but with the landlord, which contract they have continued to honour?
Mr. Richie Boucher:
I will try to respond to that question and then ask my colleague, Mr. McLoughlin, to comment further. First, if the tenant has a tenancy agreement, that agreement is not impacted on by whether the property changes ownership. It is also in the bank's interest for the tenants to remain in place. In the cases we appoint a rent receiver, this is done because the tenant is paying rent, but the landlord is not paying it to the bank. The purpose in the bank appointing a rent receiver is to ensure the tenants' money is paid to the bank. Mr. McLoughlin will comment further. The basic principle from our perspective is that our receivers observe tenancy agreements and contracts.
Mr. Liam McLoughlin:
The position is as stated by Mr. Boucher. Some 1,400 fixed charge receivers have been appointed in Bank of Ireland cases. As stated by Mr. Boucher, the receiver steps into the shoes of the landlord in terms of the lease agreement. We respect the terms of lease agreements. We also have-----
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
Often a person could be a party to a one year lease agreement which then expires, but because these things often operate on an informal basis, he or she expects to continue paying rent and remain in the property. The Residential Tenancies Act provides for a four-year cycle in terms of tenancy, which means that a person could expect security of tenure for three or four years. However, the bank can get around this by appointing a receiver who chooses to sell the property. I would like to hear from the delegates that Bank of Ireland's attitude is not a mercenary one of moving in as soon as it can to sell a property, particularly if there is a tenant in it who is faithfully paying rent.
Mr. Liam McLoughlin:
Our attitude is not mercenary. We will respect the lease agreement and the Residential Tenancies Act. In the case of a person who has been in a property for four years, notice periods apply. The bank always abides by these notices, if exercised. We do not tend to act in a mercenary way in that regard. There is in place with our fixed charge receivers a code of governance, the terms of which we ensure are abided by at all times.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source
I appeal to the bank to do so. I hope we do not have cause to meet the delegates again to discuss the eviction of thousands of tenants by the bank.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
What was the weighted average loan-to-deposit ratio for the six Irish banks on a loan book of €400 billion at the end of 2008?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Mr. Boucher should know it.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
The figure was 173% and Mr. Boucher should remember it. What was Bank of Ireland's loan-to-deposit ratio in that year?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
It had been lower at 158% and the difference is important. Mr. Boucher spoke about the bank's policy in certain areas. What was its policy on fraction reserving for the years 2004 onwards?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
It should have been to keep fraction reserving at a minimum of 10%, with the loan-to-deposit ratio being 90%. Why is that?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
As I am running out of time, I will give the answer myself.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Because I voted the wrong way last July my speaking time is only 2% of the overall figure.
Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source
Does the Deputy accept that he voted the wrong way?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
From the Government's point of view but not in accordance with conscience. The difference is 68% which is indicative of the bank's culpability in creating an asset price bubble. When the asset price collapses and the music stops - I will give the delegates a paper on this issue after the meeting - the bank should be accountable for 75% of the collapse in the asset price. The same applies to Allied Irish Banks, for which the figure is 72%. Irish Life & Permanent was at a figure of 300%, but it was an insurance composite and using reserves to lend. The whole thing is a mess. The customers of the banks, collectively, have been literally financially "Nagasakied". They are radioactive and will be exposed to financial radioactivity for the remainder of their lives, which is wrong. This should be taken into account on a case by case basis. There has been much use of terms such as "We have to be consistent" and "We have to be fair." Let us start with the issue of fairness. Who caused the problem? It was caused by the banks' boards, as the balance sheets will show. That is the starting point. What was the secured senior bond level in Bank of Ireland in 2008?
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
It was €61 billion. In the case of the subordinated loans at the bank, the figure is approximately €20 billion, half of Irish national income.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Yes, for Bank of Ireland alone. That is how crazy the whole thing was and there are now 180,000 distressed and depressed families. I am depressed listening to these proceedings and it is not personal. I accept that Mr. Boucher was not on the board at the time. However, he now has a responsibility to face the mess and the financial destruction of the country courageously, fairly and justly. I know that he has the skills to do it and that he understands what I am saying, namely, that it is his duty to bring it to the Government's attention in order that it can go to the European Union and insist on creditor recapitalisation of the bank.
That brings me to Bank of Ireland having 8.8% provisioning of the total loan book of €92 billion. Do the witnesses know what Ulster Bank has in write-offs and provisioning? It is 30% and over. Do the witnesses know what AIB has for write-offs and provisioning? It is 18.5%. These banks operate in the same country, although I know Bank of Ireland also operates in Britain-----
1:00 pm
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I know that. I do not want to get held up with this. There has also been mention of shareholders, so let me give an example. In July 2011, some 35% of the bank was sold to new capital, with an inflow to the bank of €1.1 billion. This came from Mr. Wilbur Ross and Mr. Prem Watsa, a director in the bank. They bought 35% for €1.1 billion, with a cost of 1% of the bank at €31 million. Some 6.4% of the bank, which cost €201 million, was sold for €690 million, with profit of €489 million. They still hold 12.8% of the bank, which cost €402 million, with a market value of €1.38 billion, leaving a valuation uplift of €978 million. The delegation told us a few minutes ago that customers have €2.4 billion of negative equity, with the bank responsible for at least 75% of that.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
The bank has indicated there will be no write-offs or write-downs. The bank created the negative equity, which is what is wrong.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I must allow some space for a response.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I can provide all the figures. It is really ridiculous that we have five minutes to try to cover this ground. I have a few questions to leave the witness. The bank has spoken about sustainability, which takes in term, repayments, costs, residual and collectible factors. We have not spoken about those. How experienced are the staff? It has been indicated there are 1,000 staff dealing with this area, whereas AIB has 2,000 and Ulster Bank has 450, with 200 in Edinburgh. With regard to meaningful engagement, the bank has call centres and I cannot even get through to my Bank of Ireland branch in Stillorgan because my call is sent to a call centre. I cannot speak to people despite the fact that I am very lucky that I have money held in the bank. This is really all wrong.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I must push the Deputy towards a conclusion.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I have some final questions. What is the bank's credit committee structure for deciding policies, and what directors arrive at a policy of having no write-offs or write-downs? It is disgraceful because the banks collectively caused the bubble. We must remember the figures. There was a 173% weighted average loan-to-deposit ratio, which is 83% above the 90% norm over six years. That is 92% of the asset price bubble.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
The witness may answer the credit question before we move on.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
This is important and Mr. Boucher understands these issues. He should be sharing the information in a spontaneous and voluntary fashion with the members of this committee. The balance sheet is the starting point. We must go back to the microcosmic elements of that balance sheet; we have been distracted by other factors. The witness has not even given us a couple of examples as members of the committee were giving them to Mr. Boucher.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
The Deputy must conclude as Mr. Boucher must have time to respond.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
From a free-for-all lending stampede in 2008-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Deputy, we cannot take any more. I call on Mr. Boucher to respond. Deputy Mathews cannot have any more time.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
It is not right.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Prior to the Deputy speaking, I told him I would indulge him.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Sorry, Chairman, but-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
You are not sorry.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I am, but this must be said.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I am on my feet, which means the Deputy should be silent.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Chairman, the last fact is the bank's loan book has come down-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I am on my feet.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
-----by €33 billion or €51 billion, if we include the NAMA loans, since 2008.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Deputy Mathews is making his own contribution farcical.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
This is appalling. I am not.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
You are not the story today. The story is the distressed mortgages.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I do not want to be the story.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
This is about distressed borrowers, and not Deputy Mathews.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
Correct.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I ask Mr. Boucher to respond.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
This is a very sad day. I am depressed by what I have heard.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I have not done it since I arrived to this committee but there is a procedure-----
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
It is good that I have said what I have.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
-----for asking a member to leave. The only factor stopping me using it is that the Deputy would have another story, which is probably what he wants.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I do not want that. I was not seeking the attention and the Chairman is making this a story.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I call Mr. Boucher.
Mr. Richie Boucher:
There was a question regarding the credit policies of the bank. In the interest of saving time, pages 71 to 106 in the annual report cover this. I can send that directly to Deputy Mathews or through the committee. I do not have time to read it out. That deals with the credit decision process in the bank.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
I will not rehash old territory. The position has been made very clear in terms of the bank's attitude towards writing down debt and the priorities for the bank with regard to repaying the taxpayers' loan, along with the interests of shareholders, etc. I will focus on some aspects of the procedures as they relate to customers. I will begin by making a quick comment. In a previous career I was a practising solicitor and involved in drawing down mortgages, as were most solicitors. This involved ordinary people. In every case in which I acted for a client, I never achieved a single change to the standard form deed of mortgage. In every case the valuation on the property being bought was paid for by the purchaser, and the securing the bank's mortgage over the property was paid for by the customer who paid the legal firm to act on the bank's behalf to register the mortgage. I wish to discuss the bank's duty to customers, as the bottom line for many people dealing with the bank who are in distressed positions is that they had no real hand, act or part in establishing the legal relationship they have with the bank.
Another Deputy has put this succinctly in that we seem to be squeezing the pips from the lemon when dealing with customers, so any ounce that can be taken will be taken. Unfortunately, on a daily basis I deal with vulnerable people who find themselves in mortgage distress, and I will focus on some of the issues that have come to my attention and that of other organisations which have come before the committee in the past week. The first relates to the type of assistance that customers get when dealing with Bank of Ireland. The Money Advice & Budgeting Service, MABS, was before the committee and made it clear that it was not in a position to give the high level legal and accounting advice required by people who find themselves in mortgage distress.
The witnesses may answer that the bank has repaid the taxpayer €6 billion and it is therefore down to the State to provide expert advice to people in mortgage distress. Given that these are Bank of Ireland customers and in looking to level the playing field for them in their engagement with the bank, does Mr. Boucher not think it reasonable to do what AIB or EBS have done in appointing the Irish Mortgage Holders Organisation on an independent basis, funding it in assisting the bank's customers in dealing with the bank? Alternatively, how would he feel about a bank levy to set up a national, independent and expert service to act at arm's length between a bank and its customers?
Mr. Stephen Mason:
We have 250 branches around the country and 267 mortgage advisers who can spend time with customers, completing the standard financial statement. There are over 100 people available to meet people in their own homes, at weekends or whenever it may be to complete the SFS. We spend time with people to understand their circumstances and see what we can do.
1:10 pm
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
The bottom line is that they work for the bank; they are not independent. The other point I wish to make-----
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
It is completely arm's length.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
No, the Irish Mortgage Holders Organisation is completely at arm's length. I have had dealings with it, so I can confirm that. Second, with regard to this independent service and why it is necessary, one of the things about engagement with the bank, as the witness knows, is the standard financial statement, which many people find incredibly difficult. MABS, which is an expert body in terms of dealing with debt, reported to us that it assisted 5,481 people in the six months from July to December 3013 to complete an SFS. However, 42% of them were subsequently queried by the lender. The MABS representatives gave us to understand that Bank of Ireland was a significant factor in querying these standard financial statements. They made the point that because these standard financial statements are not stress tested, they have seen fundamental basic expenditure which they regard as necessary being over-ruled by independent financial institutions in order to squeeze the pips out of the lemon.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
Is the witness saying the bank is not one of that 42%?
Mr. Stephen Mason:
The Senator is talking about something that I have not seen. However, I can say that the SFSs that we receive from MABS are of a very high professional standard. I can also say, and we have proved it in our presentation today, that when we put forbearances in place, 86% of people continue to pay those forbearances. The industry average is 77%. If any bank is trying to get the last pip out of a customer or trying to set their standard of living so low that they cannot sustain it, that is one way of making sure that the forbearance falls over. We are not doing that.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
The evidence of MABS to this committee was that 42% were queried. Its representatives raised a serious concern that they are not sustainable because financial institutions are trying to take too much money out of people's pockets. In the longer term they recommended independent stress testing of standard financial statements.
I will move to the next matter. There are two issues that concern me - when a mortgage is deemed to be sustainable, when it is not, who determines that and the independence of that process, and, second, when somebody is deemed not to be a co-operating borrower. In the first instance, having a solution proposed that is not sustainable-----
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
The Senator has two minutes left.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
My concern is that there is no independence in this process. What is deemed to be sustainable is entirely determined by the bank, and there is no independent review of that. That is the first point. The second point is sustainability. Can the witnesses tell me the number of mortgages that are in arrears of more than 90 days that they have deemed to be unsustainable? The reason I am concerned about this is that the insolvency process, which we all hope will push many of these situations to a conclusion, cannot be accessed by borrowers who are deemed not to co-operate. The bottom line is that Bank of Ireland is not a statutory body, yet its decisions have implications for people's capacity to access a statutory solution. Do the witnesses have a view on that?
Mr. Stephen Mason:
Non-co-operation is defined under the CCMA and we comply with that code. I do not have the definition with me, but largely for us it means where somebody has not provided us with the information that we will require to make an assessment as to whether we could offer them a forbearance.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
I am talking about the independence of the process and the fact that there is no independent appeals process in either situation. When I say "independent", I am not referring to the bank's internal processes, but something independent of the bank and the people who work in that organisation.
Mr. Richie Boucher:
If I can mention the process again, if the customer is not happy with our decision, it must go to a separate process. The bank must get all the documents, look at it again and there is a separate process in the bank. I accept it is the bank. However, we must retain all the files, all the decision-making process and the Central Bank from time to time audits that decision-making process. We have a documentary trail which shows the original SFS, the original process and the original decision as to whether it was deemed sustainable or not. If the customer is not happy, it goes to a separate committee of the bank which is completely separate from the original decision makers. We must also retain all of the files for an audit on behalf of the Central Bank by third parties to examine whether we have been consistently applying that process.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
I understand the process.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
The Senator has 30 seconds.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
An important point must be made about this. I know that under section 3.40 of the CCMA the bank must document the process and everything else. However, there is no obligation on the bank to inform the borrower about why decisions are reached. Under the basic principles of natural justice, does the witness think that is an equitable position?
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
I have not seen that in my experience. That is all I can say on that point.
I wish to make a final point about receivers. I can forward a submission to the witnesses about the point I wish to make. I understand that approximately 1,250 receivers have been appointed to buy-to-let properties under deeds of mortgage, with at least 800 of them appointed by Bank of Ireland. There is deep unhappiness about the actions of receivers in the buy-to-let market. From personal experience I know that tenants have been evicted, repairs have not been done and tenants have been left in total uncertainty. There was an attempt by the Irish Banking Federation to produce a document setting out the duties of receivers and the duties of tenants but the situation is hopelessly inadequate. It must be remembered that 20% of the Irish population, which is one in five people in this country, live in rented properties. Will the witnesses accept that something must be done to set up an equivalent to the code of conduct on mortgage arrears for buy-to-let properties that takes into account that tenants are a fundamental and important part of this process and that receivers must step into the shoes of landlords in every sense? That includes repairs. One cannot take the money without doing the job.
Aideen Hayden (Labour)
Link to this: Individually | In context | Oireachtas source
There is a proposal to amend the Residential Tenancies Act 2004 to put receivers firmly in the shoes of landlords. I hope Bank of Ireland would not object to that proposed amendment.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
While Deputy O'Donnell is turning off his telephone, I call Senator Coghlan.
Paul Coghlan (Fine Gael)
Link to this: Individually | In context | Oireachtas source
I was interrupted a great deal this morning by the other House. I thank the gentlemen for their attendance, presentation and answers. I will be brief. How many voluntary surrenders of a dwelling have there been in the past 12 months and where there were such surrenders, does the bank pursue the borrower for the balance of the debt? With regard to small and medium enterprise, SME, owners in financial distress, does the bank write off a commercial mortgage or a personal residential mortgage? Finally, with regard to the remaining State stake of 14%, I appreciate that the bank has paid off €6 billion to the State already but when does it intend to dispose of that stake or what is the procedure for removing that 14%?
Paul Coghlan (Fine Gael)
Link to this: Individually | In context | Oireachtas source
Is the timing up to the Minister?
1:20 pm
Paul Coghlan (Fine Gael)
Link to this: Individually | In context | Oireachtas source
I am sure we would like whatever the bank might be able to part with.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Obviously that would not be the first time.
Paul Coghlan (Fine Gael)
Link to this: Individually | In context | Oireachtas source
Perhaps we will have to go to the other door.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
So people are going to have knock on another door.
Paul Coghlan (Fine Gael)
Link to this: Individually | In context | Oireachtas source
How many voluntary surrenders have there been? What does the bank do with the balance of the debt in voluntary cases?
Mr. Stephen Mason:
The customer remains liable for the balance of the debt. However, I do not have the breakdown. There was 119 private dwelling home properties that came into possession in the year and that was made up of voluntary surrenders, abandoned properties and legal repossessions. I just do not have the breakdown. I am sorry.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I welcome this second attempt. I want to be consistent with all of the banks and ask each one the same questions. People watching will realise that is what I am doing even though I have asked the questions in a different order.
How many of the bank's staff deal with the legacy of arrears mortgages?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
What about home loans and buy-to-lets?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
That means there are 500 people who deal with the hardcore cases.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
A section in the code for mortgage arrears mentions the payment of incentives - possibly paid bonuses - to staff involved. Are any of the bank's staff paid bonuses?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Are bonuses paid across the sector?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
What about within the bank?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Has that always been the way?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
But have bonuses been paid in recent times?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
In the last three years?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
No bonuses have been paid in the past three years.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Does that apply across the entire organisation?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Bank of Ireland is the last institution to attend here. We have not seen some of the others. Perhaps the Chairman will decide whether we need to examine this.
A common feature among the institutions is that a large number of the solutions to mortgage arrears are legally based. I took a quick look through the bank's figures because I wanted to be certain that I am operating on the correct basis. For home loans, out of 11,054 cases that are in arrears for more than 90 days, there were 3,942 non-legal solutions and 3,478 legal solutions, which represents 47% of the entire 7,420 so-called solutions provided. For buy-to-lets the bank has 5,638 mortgages that are in arrears for more than 90 days, with 907 of them, or 27%, receiving non-legal solutions, and 2,368, or 72%, on the legal side. For combined measures, 4,849 cases had a non-legal solution and 5,846 had a legal solution, which equates to 45% non-legal and 55% legal solutions. Can Mr. Boucher tell me if that is a sustainable model for dealing with the mortgage arrears crisis?
I read down through the figures and the most obvious item was the fact that there are only 81 split mortgages in the home loan sector and 17 in the buy-to-let sector. Permanent TSB has a large share of split mortgages. I ask Mr. Boucher to address my point. Did he understand the point I made?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The figure is very high.
Mr. Richie Boucher:
First, regarding our forbearance solutions, it is important to bear in mind that one of our key desires is to ensure that if a customer needs forbearance, it is before they go into arrears. It needs to be taken into consideration that forbearance costs the bank money. We reach out to customers, saying to them "If you feel you have a financial problem that could negatively impact on your ability to pay the mortgage then we encourage you to come to us before you go into arrears." Our forbearance policy is very much aimed at that, so I do not think we can dismiss them. I just wanted to make that point.
I will ask my colleague Mr. Mason-----
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I noticed that the bank called in receivers for some home loans, which is unusual. I have not seen that happen with the other institutions. I have seen receivers called in for buy-to-lets. How many civil proceedings does the bank have under way, outside of what is measured here in terms of the courts?
There is an issue at the moment with regard to positive equity. I call it the paradox of positive equity. It means that people perceive that they are more vulnerable to the financial institutions and banks if they are in arrears but in positive equity. Is the bank pursuing customers who are in arrears for fewer than 90 days via court proceedings?
Mr. Stephen Mason:
The Deputy asked a number of questions. I apologise if I miss anything, but I do not intend to do so.
First, I wish to mention one slight thing which will not change the Deputy's figures too much. September is the base, rather than December, in terms of percentages. That detail will change the figures slightly, but not by much. That is the way the market works.
Receivers for rent in the PDH book are for buy-to-lets. They are properties that were originally owner-occupied properties but then they became buy-to-lets.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
That is fine. It just looks unusual.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
What is the number of civil proceedings instigated by the bank in the courts outside of what is outlined here?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Less than 90 days.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
So it is not bank policy.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Why would the bank do so?
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
What about my question on positive equity?
Mr. Stephen Mason:
Positive equity does not enter our thinking. For us it is all about affordability and what the customer can afford. If the customer can afford one of our forbearance arrangements, we offer the same forbearance whether one is in positive or negative equity. It is all down to how much a customer owes and what is his or her affordability. We do it that way and I think I gave an example earlier when somebody raised the matter.
Our split mortgages are split fairly - 50:50 - between those in positive equity and those in negative equity.
Kieran O'Donnell (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Does the bank know how much its positive loan book is in arrears?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
The Deputy has run over time.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Senator Sean Barrett will be the bank's last questioner today. First, I want to clarify something that arose this morning, because it is in the best interest of the bank and the committee to get this matter nailed down.
Earlier today, Mr. Boucher, we discussed unsecured and secured debt. The question is really whether the bank has written down secured debt in personal insolvency arrangements or bankruptcies to date. Also, we want to establish whether the bank provides write-downs and whether unsecured debt or secured debt was used for PIA and bankruptcy processes.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
It is when the debt has been in an unsecured position that the movement has taken place.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
When it has reached the status of being unsecured, in both the PIA and bankruptcy situations.
Sean Barrett (Independent)
Link to this: Individually | In context | Oireachtas source
I welcome the visitors this afternoon. I have a few questions, particularly with regard to measures to prevent a recurrence of what has happened since 2008, and indeed the period before. What is the bank's current loan-to-value ratio?
What is the current multiple for loans in terms of the income of the borrower? What percentage of the loan book is in property, compared to what it was at the peak? Does the bank have any policy to orient itself away from property? How does the Central Bank work with the bank in regulating the sector?
1:30 pm
Mr. Richie Boucher:
Our primary focus for mortgage lending is the income capacity of the customer. The multiple will depend on different circumstances but it is between 4.25 and 4.75. We will provide a mortgage for up to 90% of the purchase price or a formal valuation, whichever is lower. The average loan to value of mortgages we wrote in 2013 was 70%. I do not have the quantum of property or the percentage of property we had in 2008, but if the Senator had the advantage of seeing our pack, we break down the profile of our loan book on one of the slides. We break down the portfolio and show the gross amount before the provisions of €8.8 billion. For property and construction, prior to the provisions, it amounts to 18% of the loan book, with roughly half in the Republic of Ireland and half in the rest of the world. Some €8.8 billion is in the Republic of Ireland and €8 billion in the rest of the world.
Sean Barrett (Independent)
Link to this: Individually | In context | Oireachtas source
For clarification, what does the figure of €92.8 billion refer to?
Sean Barrett (Independent)
Link to this: Individually | In context | Oireachtas source
Is that 92.8% in property?
Mr. Richie Boucher:
No, €92.8 billion is the total book, of which 18% is property and construction. Of that 18%, half is in the Republic of Ireland and the balance is in the UK and the rest of the world.
With regard to regulation, it is an extremely challenging and intrusive process and we have engagement every day at various levels in the company. In the primary process, at the top, the Central Bank operates PRISM - that is, the probability risk and impact system - and looks at the risk factors of the bank, the capital of the bank and various other factors. It makes an assessment of the bank and, based on its observations, requirements and requests, we get a risk mitigation programme. We have certain timescales in which to deliver certain outcomes that are satisfactory to the Central Bank. The Prudential Regulatory Authority, PRA, in the UK follows the same process under a different name. There is a myriad of interactions, but the risk mitigation programme, RMP, and the PRISM are the primary areas of focus.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
I will allow a matter of clarification from Deputy Pearse Doherty.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Mr. Boucher said that no non-executive director had received an increase in salary last year. Yet there was no reduction, and the gross figure increased. The annual report, which runs up to December 2013, shows that Mr. Butler received €80,000 in fees this year, and the figures for last year, on page 159, show him receiving €79,000. Is it correct that he has received an increase?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The other references are for different dates. Some people joined on 20 January, but Mr. Butler shows a 12-month period and an overall increase.
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
A document relating to Bank of Ireland has gone missing in the Department of Finance. It was from a tax advisor who deals with high net worth individuals. It made a proposal to the governor of the bank, before it was recapitalised by the State, to buy it out and take it over. This was rejected by Bank of Ireland and the Department but the correspondence has gone missing in the Department of Finance. Has the Department requested the original copy from the bank?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Has the documentation that is missing in the Department of Finance also gone missing in Bank of Ireland?
Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The letter was cc'd to Brian Lenihan. It is highly suspicious. That was the only item of correspondence between the bank and the Department of Finance during this period. There are major questions about the tax adviser, who I do not claim did anything wrong. He was a tax adviser to the former Taoiseach, Bertie Ahern, in respect of the whiparound in Manchester. This is a sensitive letter about the taking over of the bank by a global outside agency, yet no correspondence exists in the Bank of Ireland or the Department of Finance. Is it not suspicious that the correspondence has disappeared from both the Department and the bank?
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
Mr. Boucher can respond.
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Is Mr. Boucher saying the mortgage book in the Republic of Ireland and the mortgage book in the UK are somewhat similar?
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I presume also in value and in mortgage terms.
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The repossession rate in the UK is quite high.
Mr. Richie Boucher:
The point I was trying to make, by drawing an analogy, was with the aim of ensuring that people did not compare apples to oranges. If we are to describe the orange, for want of a better term, repossessions are part of a normalised market. In the UK, if we have a loan book of €27 billion and roughly 180,000 mortgage accounts, 600 repossessions a year would be a relatively normalised market. Members should not quote me on these figures as I am just throwing them out.
Liam Twomey (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source
How does that compare if Bank of Ireland has a similar rate of repossession in this country?
Mr. Richie Boucher:
It depends. There are two factors, one of which is that a much bigger proportion of our mortgage book in the UK is buy-to-let. I wanted to point out that in a normal market, based on our experience, repossessions happen, and in our case, with a normalised book in the UK, there are about 600 a year.
Peter Mathews (Dublin South, Independent)
Link to this: Individually | In context | Oireachtas source
I have one question.
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
No; I am bringing matters to a conclusion. I thank Mr. Boucher, Mr. McLoughlin, Mr. Mason and Mr. Farrell for coming before the committee. This has been an ongoing process and every time we have requested the bank to come before us since the target measures were put in place, it has done so. We appreciate the documentation provided to the committee, which arrived early so that we could assimilate it and compare it to information received from other banks. This is an evolving process and, as with some of the other banks, the prescriptions laid out in the Keane report were not seen by the Central Bank, the Department of Finance and the banks as the definitive means of unravelling or dealing with this difficulty. Other resolution processes have come to the fore as we examined the issue.
Difficulties with some of the resolution processes seem to be apparent, such as the mortgage-to-rent issue, and these have been repeated in recent days.
It is worthy of acknowledgement that in the case of each of the institutions which have come before the committee, while there may have been robust challenges, differences of opinion and perhaps some strong questions with regard to how individual banks are approaching individual things, it is testament to the work of the committee members that there has also been a response by the banks to issues that have been raised by us. In the case of Bank of Ireland and the issue of the split mortgages, in particular the variable-rate case, while members may have different views about it, the bank representatives have responded to the issues.
One thing noted in today's engagement was that the initial letters of correspondence to customers are not being counted as part of the resolution processes. That was a major bone of contention at the committee the last time around and I welcome the fact that the Bank of Ireland figures presented today did not include these as a means of stepping up the figures.
I will be advising the institutions that have come before us - I imagine it is being done anyway because they have been watching proceedings - to examine the transcripts and see what is being debated back and forth among everyone. While we are looking for consistency, I recognise that we cannot have the same approach throughout all the banks and that it is not necessarily going to be the case. We are looking for solutions on a case-by-case basis and the last thing we need on a case-by-case basis is a set prescription as a panacea to all the difficulties that exist.
I strongly call on the representatives of Bank of Ireland as the resolution practices evolve and as there is a tweaking and a tinkering of approaches, to let this committee know about the developments, because if there are improvements to the system we would like to hear about them and we may well be in a position to welcome such measures at times.
1:40 pm
Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source
With that said I will bring proceedings to an end. I thank Mr. Boucher, Mr. Mason, Mr. McLoughlin and Mr. Farrell for coming before the committee today. The discussion has been purposeful. We will be meeting with the Insolvency Service of Ireland and the Governor of the Central Bank later this month, at which time we will be drawing our recommendations, which we will be furnishing to the relevant agencies.