Arthur Spring (Kerry North-West Limerick, Labour) | Oireachtas source

I understand that but I have a couple of questions. Before I was elected to the House, I was involved in putting together loan portfolios for the purposes of securitising them. My experience is that one would choose loans attracting the very lowest risk and with the cleanest of files attaching because otherwise one could not sell them on the market. The very best loans have to be selected. We are talking here about loans which might not be in the very best state. We also find ourselves in a situation where the providers of the services were the originators of the loans and where a back-office deal was done to sell a securitised block of loans. This provided liquidity for the relevant banks and allowed them to kick on. In my estimation, what is involved here is completely different. As Mr. Crowley intimated, the reputation of the financial institution which originated the loan is not at stake. An SPV or an SSPV might have been set up and the lender in question might have its origins in Malta but it might be regulated here. As we have seen with the insurance corporations, this can prove problematic when it emerges that the parent company has no assets other than its portfolio. In the event that this portfolio has exposure to loans which are not performing fantastically well, can the lender decide - as a result of the fact that it has taken a hit in respect of some loans and that other loans are in arrears and there is non-compliance in respect of them - that the best way to deal with its losses is to increase its variable rates? This would mean that the segment of the portfolio to which I refer would be carrying the remainder of it.

Are lenders of the type to which I refer in a position to make a claim to the Central Bank to the effect that they can justify increasing variable rates on foot of the fact that certain loans are not performing as well as they might? If representatives from one of the main financial institutions were present, they would refer to their mortgage and commercial loan books, the blended rate relating to their cost of funds, interest rates and other specific matters. Where an SPV is involved, it can legitimise the increase in variable rates solely on foot of the fact that some of the loans are not performing. If Mr. Crowley is in a position to allay my concerns in this regard, I would be somewhat more satisfied with what is proposed.