Michael Noonan (Limerick City, Fine Gael)

I move amendment No. 2:

To delete all words after "Dáil Éireann" and substitute the following:

"— recognises that the recapitalisation and deleveraging of the banking system will facilitate increased lending into the Irish economy and help underpin economic recovery;

— endorses recent reforms in the Central Bank to strengthen the regulatory framework and also the Government's plans to introduce legislation to enhance the legislative framework governing financial regulation and supervision in Ireland, consistent with best practice international standards;

— notes that the Chairman of NAMA, Mr. Frank Daly, has recently stated that the Agency is exploring ways by which it can provide finance for commercial and residential property deals in line with its objective of reinvigorating the Irish property market and that he envisages that NAMA will work with the two pillar banks to identify solutions which will increase access to residential mortgages for its Irish residential portfolio;

— notes that there are significant Government supports available to assist mortgage holders who are in arrears and are experiencing difficulties with repayments in respect of their principal private residence, including:

— the Mortgage Interest Supplement Scheme (MIS) which provides an important safety net for mortgage borrowers who get into difficulties and that more than 18,500 families are now benefiting from this support;

— advice available through the Money Advice and Budgeting Service (a significant portion of the MABS client base are mortgage holders);

— protection to mortgage holders provided by the Central Bank's statutory Code of Conduct on Mortgage Arrears (including a moratorium on legal actions by the lender provided the borrower is co-operating and the mortgage is sustainable) which applies to all regulated lenders; and

— lender forbearance (at end of the last quarter of 2010 there were circa 60,000 rescheduled residential mortgage accounts while lenders representing the majority of the market are set to introduce a deferred interest scheme in 2011, which will extend present levels of forbearance);

— welcomes the fact that the existing supports are working and the level of repossessions of family homes remains low;

— affirms its support for the Programme for Government under which a number of proposals aimed at helping mortgage holders in difficulty will be examined;

— commends the Government for its actions to stabilise the financial system and to restore the public finances thereby protecting jobs and home ownership; and

— expresses its confidence in the success of the Government's efforts to deal with the impact on Ireland of the worldwide financial crisis."

We are all very much aware of the challenges facing our citizens since the onset of the banking crisis and downturn in the economy. The challenge for Government is to manage constrained resources to ensure that those who are less well off in our society continue to have access to an acceptable level of public services including health and education, as well as opportunities for employment to enable them to support themselves and their families.

For many individuals the main challenge is retaining the family home at a time when unemployment and reductions in salaries are placing increased pressure on homeowners in making their repayments. For many with mortgages these problems are compounded by falling property prices, with the issue of negative equity restrictions it imposes on options for addressing rising debt, whether by trading down or moving to a new location where employment opportunities are better. Increases in mortgage interest rates will exacerbate these difficulties. As several Deputies drew the attention of the House to these difficulties, there is little need for me to rehearse them. They are common to constituents in every part of the country.

Before I address what the Government is doing or planning to do to assist those facing these challenges, I would, first, like to address the wider issues of economic policy raised in this Private Members' motion, including the impact of bank recapitalisation, meeting credit needs in the economy and the impact of NAMA.

As I have stated previously in the House, a key objective of the Government is to strengthen overall fiscal sustainability by separating bank risk from the sovereign. Clearly, this can be achieved only by returning the banking system to health. Shortly after we presented our radical plans to resize and reorganise the banks the ECB issued a number of very important announcements related to the continued availability of euro system funding for our banks. First and most important, it confirmed that, against the background of our decision to recapitalise the banks in line with the Central Bank's rigorous assessment of their capital needs, the ECB would continue to provide liquidity for banks in Ireland and, according to the Central Bank's statement on the night of the announcements I made on bank restructuring, "supports the Irish banks plans to deleverage and downsize their balance sheets". Second, it confirmed that all marketable debt instruments issued or guaranteed by the Government would be deemed as fulfilling the credit standards required for collateral in eurozone credit operations, irrespective of rating. In the absence of such a statement, the risk was that the banks' access to ECB funding would have been restricted had there been downgrades of the sovereign. These commitments are very important in underpinning the capacity of the banking system to meet sustainable credit need because it is impossible for a bank to prioritise new lending when it is experiencing capital or funding problems. The fact that the ECB will continue to fund Irish banks puts them in a position where they can give credit. Economies cannot function without access to credit. Certainly, they cannot grow without access to the credit required to permit such growth.

We know that the Irish banks have lent excessively and imprudently during much of the last decade. As discussed in the recent Nyberg report, credit allocation became heavily skewed towards real estate and development lending and genuine borrowers, for example, in manufacturing and agriculture have seen their percentage share of overall lending reduce annually over time since the end of the 1990s. My Department has recently published some statistics which show how real estate lending became disproportionately large. Other more productive sectors such as agriculture and manufacturing were starved of credit in the rush to lend to real estate developers and even to farmers, shopkeepers and solicitors who wanted to become real estate developers. It is essential to reverse this trend. I am sure many of my colleagues share my experience of being told by small business owners that they cannot get credit from the banks, only to find after examining their balance sheets that, even though they may be operating in a sector of the economy, their difficulties arise because they invested their profits in four apartments and two houses. The mortgages on these properties rather than difficulties in their core businesses are pulling them.

The difficulties that brought us to the position in which we find ourselves arose not only from development-----

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