Mr. Gary Tobin:

I thank the committee for inviting the Department of Finance to address it on the matter of the detailed scrutiny of the Bill. I am accompanied today by Mr. Des Carville, head of the shareholding and financial advisory division, and Mr. John Palmer and Ms Gráinne Goggin of the banking division.

I welcome this opportunity to highlight briefly the Department's views on the Bill. As requested, the Department submitted a detailed submission, addressing specific issues as outlined in the new memorandum of understanding on Private Members' Bills. As the committee will be aware, the Department has engaged fully with committee members on a significant number of Private Members' Bills. These include Deputy Michael McGrath's Consumer Protection (Regulation of Credit Servicing Firms) Act 2018; Deputy Pearse Doherty's Central Bank and Financial Services Authority of Ireland (Amendment) Act 2017; Deputy Pringle's Fossil Fuel Divestment Act 2018; and Deputy Pearse Doherty’s Central Bank (Amendment) Bill 2018. In each case, we have sought to engage constructively in the pre-legislative scrutiny process. We have sought to give open and honest feedback regarding our views on the proposed legislation and the drafting of each of the Bills. In a number of cases, we have successfully worked with the Deputies to progress the draft legislation into law, following Government approval to do so. In particular, we have worked with Members to progress a number of Bills designed to enhance protection for mortgage holders who are in arrears with their lenders. Specifically, these are Deputy Michael McGrath's Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 and the Land and Conveyancing Law Reform (Amendment) Bill 2019 tabled by the Minister of State, Deputy Kevin Boxer Moran.

On this Bill, we share the grave concerns expressed by the Governor of the Central Bank when he appeared before the committee last week. We have two types of concerns about the Bill. The first relates to the unintended consequences and the second to its timing. To deal with the second concern first, and as highlighted by the Governor last week, we are concerned about the implications of the Bill for the financial stability of the banking sector and wider economy, coming so close as it does to Brexit. As regards the unintended consequences, our assessment is that the Bill will lead to higher mortgage interest rates for consumers, reduced availability of mortgage lending overall, potential severe restriction of the Irish banks' capacity to access eurosystem credit, institutions losing their ability to use securitisation, an increase in repossessions by banks as their ability to reduce NPLs through sales would be severely reduced, a reduction in new entrants and less competition in the mortgage market and a significant reduction in the value of the State’s shareholding in the various banks.

The Government is strongly of the view that a money message is required. There are direct and indirect costs to the Exchequer, which we have outlined in our detailed submission to the committee. The Department also believes that the Bill is unconstitutional as it is currently drafted. The Bill overrides existing contractual rights for persons who issued mortgages to sell them on to third parties and purports to introduce a unilateral alteration of existing contractual terms for mortgages. The mortgage holders concerned would have agreed as a condition to borrow that the mortgage could be sold on. In doing so, the Bill is overriding or abrogating vested private property rights. Constitutionally, this can only be done in a proportionate manner and where justified by the exigencies of the common good. After consulting with the Office of the Attorney General, the Department of Finance is of the view that the interference proposed by the Bill is disproportionate and, therefore, unconstitutional.

I know that the intention behind the Bill is to help those who believe they will be worse off as a result of their loan being sold. However, the Bill will confer no additional protections and will only serve to cause significant harm to the mortgage market for consumers and to the economy more generally. We are happy to answer any questions the committee may have.