Kieran O'Donnell (Limerick City, Fine Gael)
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In respect of mortgage arrears, various financial institutions have appeared before us recently. Deputy McGrath made reference to the total number. A total of 50% of the so-called resolutions being provided for mortgage arrears by the institutions involve legal proceedings and legal letters. Is Professor Honohan satisfied that this is a basis for a sustainable mortgage arrears resolution mechanism?

Light touch regulation was what got us into trouble with regard to the banking sector. Professor Honohan said the Central Bank would keep an eye on it but figures never lie. Professor Honohan is looking at banks meeting their targets. They have met their targets because they have issued legal letters. With all due respect, they are not sustainable solutions. Could Professor Honohan feed into that mix the upcoming European stress tests for the banks? Are they impinging in any way on the type of approach the banks are taking to mortgage arrears resolution?

One feature that appears to be coming up is the paradox of positive equity whereby people in positive equity who are in arrears appear to be in a more vulnerable position than those in negative equity who are in arrears. Is it not fair to say that if a bank proceeds to sell an asset that is in positive equity with a loan that is in arrears, that could improve its balance sheet so one might just do it in terms of its capital ratio. We are getting down to the nuts and bolts here. We need to look at it in this context. The banks came before us. A total of 50% of their proposals involved legal letters and two of the major institutions told us that they did not do mortgage debt write-off in respect of personal insolvency arrangements. We are trying to find something that is sustainable, particularly in terms of keeping people in the family home. Could Professor Honohan deal with that?

I spoke about light touch regulation because there are times where one must get down into the nitty gritty. Could Professor Honohan give me his overall view of that area, feed it into the stress tests for the banks and give us his view of the banks in terms of the pending stress tests? Is their caution on their capital ratio feeding into their approach to mortgage resolution and sustainable solutions?