Stephen Donnelly (Wicklow, Independent) | Oireachtas source

I thank the Governor. Before making my next point, I emphasise that I have the height of respect both for the position the Governor holds and for him as an individual holding that position. However, in light of the testimony we have heard from the banks and from organisations which are trying to help borrowers in distress, and from everything I have seen come through my own door and through various discussions we have had, I was very disappointed with Professor Honohan's opening statement. Were I a banker, on the other hand, I would be reasonably happy with it. The message is that things are more or less going according to plan, that the Central Bank has identified four areas in which change is required and is working with the banks to ensure it happens. That certainly does not represent any type of call to arms.

It does not indicate that any alarms went off in the Central Bank to warn that something was going quite seriously wrong and that the approach needed to be changed. If I were some of the banks who came before the committee two weeks ago, I would be pretty happy. My interpretation would be that the Central Bank is more or less okay with the way the banks are proceeding to deal with this matter. If I were a borrower whose mortgage is in distress or an individual who was trying to assist such borrowers - not to mention the fact that I am a Deputy - I would be extremely disappointed with what I have heard today.

I am of the view that the Central Bank is taking a hands-off approach to this matter. Let me explain why I believe this to be the case. We know the banks are allowed to define what constitutes a sustainable offer and that they do so within parameters set by the Central Bank. However, the banks have quite a broad remit in the context of what they view to be sustainable. The banks now have more or less unlimited contact with their customers as a result of the changes to the code of conduct on mortgage arrears. We are aware that not only can the banks veto any insolvency proposal, but two of them have stated that they will - as a matter of policy - veto any such proposal which includes a write-down of secured debt. We know that the banks are allowed to categorise customers - Irish citizens - as being uncooperative. This is not Professor Honohan's fault; it is as a result of the changes introduced in the legislation. It is outrageous that Irish banks are allowed to deny Irish citizens access to the legislative process of insolvency by stating that they believe them to be not co-operating. If a borrower wants to make an appeal against the actions of a bank, it must go to the bank itself.

I believe everything I have just said to be true. We are also aware that there is absolutely no consistency. Representatives from the four main lenders came before the committee last week. A previous speaker already outlined the interactions that took place with Mr. Richie Boucher, and Bank of Ireland has stated that it will veto any PIA which includes a proposed write-down of unsecured debt. We know that Bank of Ireland's split-mortgage concept is a farce. This is because it charges the same interest on the shelved portion as it does in respect of the non-shelved portion. The figures presented by all of the banks show that Bank of Ireland's rate of legal proceedings initiated is two to four times higher than the other three institutions. We all know that the difference between financial recovery and financial ruin for those in Ireland who are dealing with unsustainable debt largely comes down to the bank one is dealing with. A person can be really unlucky and have his or her loan sold to LoanStar, Oaktree Capital or any of the other unregulated entities. He or she can also be unlucky in that he or she might be obliged to deal with Bank of Ireland as opposed to one of the other three banks, from which he or she might obtain a deal. We are aware that there is very little quality on offer and that thousands of legal letters have been sent out. The vast majority of the so-called sustainable proposals take the form of either legal letters or extend-and-pretend measures such as interest-only arrangements, recapitalisation of arrears and so forth. I do not believe that the approach to take in dealing with an unsustainable debt crisis is to increase the total payments due during the course of the type of arrangements to which I refer. Essentially, the latter is actually what is happening.

I hope Professor Honohan's sense of urgency and that of the Central Bank are greater than what has been outlined here. Does Professor Honohan find it acceptable that there is so much inconsistency across the banks in the context of how they are dealing with people? Does he find it acceptable that several of them are publicly stating they are going to go against the spirit of the insolvency process? Does he find it acceptable that so few insolvency agreements have been concluded to date? Does he find it acceptable that the vast majority of so-called solutions involve either legal threats or an increase in the total amount that borrowers will be obliged to repay?