Oireachtas Joint and Select Committees
Wednesday, 12 November 2014
Joint Oireachtas Committee on Finance, Public Expenditure and Reform
Overview of Banking Sector: Permanent TSB
2:00 pm
Liam Twomey (Wexford, Fine Gael)
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I welcome Mr. Jeremy Masding, group chief executive officer, Permanent TSB, who is accompanied by Mr. Glen Lucken, chief financial officer; Mr. Shane O'Sullivan, managing director of the group's asset management unit; and Mr. Ger Mitchell, group head of lending. The format of the meeting will be that Mr. Masding will make some opening remarks. In advance of the meeting we collated questions from members of the committee and submitted them to Permanent TSB. I thank Mr. Masding and his staff for responding in writing to them and the responses have been distributed to members. With the help of the input of the delegates, I hope all of the key topics will be covered. Nonetheless, a question and answer session will follow to clarify matters.
By virtue of section 17(2)(i) of the Defamation Act, 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If they are directed by the Chairman to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only tqualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.
I ask Mr. Masding to begin. He should keep his opening presentation to around ten minutes.
2:05 pm
Mr. Jeremy Masding:
I thank the joint committee for the invitation to meet it. As the Chairman said, I am joined by my colleagues, Mr. Glen Lucken, the group's chief financial officer; Mr. Shane O'Sullivan, managing director of the group's asset management unit; and Mr. Ger Mitchell, the group's head of lending. We have responded to the questionnaire the committee submitted to us last week and look forward to taking questions. However, I thought it might be helpful to make a few general comments before the questions began.
This is proving to be a very significant year for the Permanent TSB group. As we have stated to the committee previously, our primary objective is to restore Permanent TSB as a viable, competitive bank focused on the Irish retail banking sector. In doing so, we wish to bring competition and innovation to customers across the country and maximise our ability to return as much as possible of the investment the taxpayer made in the group through the Minister for Finance. This year we have made very significant progress on a number of key fronts.
Financially, we have made huge progress in reducing our losses and moving much closer to a position where the group as a whole will be profitable again. The numbers reflect the enormous strides we have made in delivering the group's key strategic goals of creating a smaller and safer bank, rebuilding the strength of the balance sheet, providing innovative competition in the retail banking marketplace and providing sustainable and affordable arrears treatments. In summary, our goal is to do banking better and operate to the highest standards of professionalism and integrity.
In terms of the focus of the bank, we have targeted the key retail segments that underpin our core competence - current accounts, deposits, mortgages and consumer finance. We have sold those businesses that do not fit with that business model and will continue to do so at prices that optimise the use of taxpayers’ capital. We believe that after the sovereigns crisis, customers will continue to be attracted by a back to basics business model that does not carry the risks of geographical diversification or complexity. That will be the source of our success in the medium term.
In financial terms, we are targeting a return on equity of above 10% for the core bank by 2018. Of course, a smaller, safer bank starts with its balance sheet, where we have reduced significantly the group's dependency on ECB funding and grown the deposit base. In the coming months we will restructure and strengthen the capital base.
On the competition front, we have been very successful in attracting new customers, be they mortgage customers, current account customers or deposit customers. We have grown our market positions in key sectors and are providing real banking competition. In the case of mortgages, for example, we are looking at a market share of over 13% where two years ago it was under 2%. Perhaps most importantly, on the key challenge of dealing with customers in mortgage difficulties, we are making significant progress. At the end of August the number of customers in arrears for more than 90 days was down by over 21% since the start of the year. We are in constructive engagement and have made long-term, realistic and sustainable agreements with thousands of customers which will help to ensure they remain in their homes.
The progress we are making in recovering a business which, after the financial crash, was effectively on life-support is testament to the strength of character of the group's staff, the encouragement of the broader system, the improving Irish macro-economic environment and, most importantly, the financial support of the people. We do not take this support lightly; we endeavour each and every day to serve with a focus that does not hide from our troubled past but is focused on rebuilding an asset of value for the people. Of course, in this context, it would not be appropriate if I did not comment on the recent single supervisory mechanism, SSM, comprehensive assessment. The exercise was conducted through three lenses. The first is the asset quality review, AQR, and this part of the exercise was designed to review the provisions made by the participating banks by testing the models which underpinned these provisions. Of course, weak provisioning was a key factor in the banking crisis; therefore, it is critical that everyone can be confident that the provisioning models are robust and objective. In the case of Permanent TSB, that exercise effectively validated our provisioning policy. The group did not require any capital as a result of the AQR review.
The second part of the exercise reviewed how the group’s capital levels would be affected in what was called a baseline stress test scenario, that is, how the capital levels would be affected by events which might reasonably be expected to occur in the coming three years. In our case, it was found that our capital levels would hold up well and would be in excess of the levels required at all stages through the planning period. Again, this was very encouraging.
The final element of the exercise, the adverse stress test scenario, examined how the group’s capital levels would perform in what the ECB itself referred to as an “extreme” scenario. The ECB called this the adverse stress scenario and described it as “unlikely to occur”. In this scenario, it was found that the balance sheet of the group as at 31 December lastwould see a shortfall of required capital of some €855 million if these events did, in fact, unfold. However, as I said, this adverse scenario was applied to the balance sheet as it stood almost one year ago. Much has changed since and we were able to state on the day of the results that we had already accounted for over 80% of the identified shortfall. The full level of the amount for which we have accounted, which is over the 80% figure, will be confirmed through the capital plan exercise in which we are engaged.
We have also stated we will now engage with the international capital markets. In this regard, we have met in the past week or so the investment communities in London, New York and Boston and I can confirm that there is real interest in the PTSB story and its profitable growth potential. Of course, while good progress has been made, we certainly acknowledge that much remains to be done. We are particularly conscious that the taxpayer has invested a net €2.7 billion in the group. That investment brings significant responsibilities to me and my colleagues, both to protect and, I hope, return as much of that investment as possible and, importantly, to ensure we act fairly and equitably in dealing with customers. Everyone in the bank is fully aware of these responsibilities, which is reflected in how we deal with customers in mortgage difficulties, how we try to create innovative products for our customers in areas like mortgages, current accounts and deposits, and how we try to ensure we will, over time, be as competitive as possible in our lending rates.
Inevitably, we cannot please all of the people all of the time. However, we are working hard to strike the right balance and advance towards the goal of restoring the bank as a profitable, competitive, customer-focused business with which customers are happy to do business and staff are proud to be associated.
2:15 pm
Liam Twomey (Wexford, Fine Gael)
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I thank Mr. Masding for sticking to the time limit. I propose that we adhere to the same ground rules as applied at our meeting last week with Bank of Ireland. This would help to ensure everybody was given an opportunity to ask questions and provide for the best meeting possible. I propose that the lead speaker from each group have ten minutes; they will be followed by other committee members who will have five minutes each. Anyone else who wishes to ask questions, again, will have five minutes. The clerk and I will keep an eye on the clock and I will advise members when they have one minute to go to allow them to wrap up. I hope lead speakers will be able to keep with the time of ten minutes. If members have further questions, I will be happy, time permitting, to allow them back in once I have given others a fair opportunity to put their questions. It does not serve the purpose of the committee if a member uses his or her time to make statements, nor does it give delegates the opportunity to respond properly. Therefore, I ask members to keep their questions short and to the point.
Michael McGrath (Cork South Central, Fianna Fail)
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I welcome Mr. Masding and his colleagues to the joint committee and thank them for the information they sent us in advance and which has been very helpful. It is vital for consumers and the wider economy that the future of Permanent TSB be secured. We do not want to concentrate any further power in the hands of the pillar banks, as that would not be in the interests of the economy. We need a viable and competitive Permanent TSB as a counterweight to the power of the pillar banks. That said, when does Mr. Masding expect the bank to become profitable again?
Michael McGrath (Cork South Central, Fianna Fail)
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Moving to the recent stress tests and the capital requirements of the bank, Mr. Masding has said 80% of the €855 million shortfall in the adverse scenario has been provided for. Will he confirm the size of the shortfall? Is it in the region of €150 million to €200 million?
Mr. Jeremy Masding:
Yes. Perhaps I might give the Deputy the full, transparent details and I will then have answered his question. We started with a figure of €855 million gross and have a contingent, convertible vehicle on our balance sheet worth €400 million, which takes us down to €455 million, of which circa80% has been covered. Directionally, therefore, we expect the net shortfall to be between €100 million and €150 million, depending on the final negotiations with the European Central Bank.
Michael McGrath (Cork South Central, Fianna Fail)
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When does the contingent capital note of €400 fall due for repayment to the State?
Michael McGrath (Cork South Central, Fianna Fail)
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The bank is now counting that figure towards the overall sum.
Michael McGrath (Cork South Central, Fianna Fail)
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Therefore, the bank is looking for €100 million to €150 million, touring the markets and has met potential investors. Mr. Masding has said there is interest in the bank's story. The question is how much of the bank is potentially up for grabs. What percentage stake in the bank is it looking to dispose of to raise the €100 million to €150 million? Is it seeking to raise more than the minimum required?
Mr. Jeremy Masding:
Perhaps if I explain what I think the steps will be, it will help to answer the question. We were in London, New York and Boston on what one calls a "pre-deal rota". In essence, the market is very aware of AIB and Bank of Ireland which engage in a great deal more capital market interaction than us. Our last capital market interaction was under the guise of Irish Life and Permanent. The first stage involved telling our story and introductions. I confirm to the Deputy that deal structures, pricing and shareholdings were not discussed at these meetings. What I am trying to gauge is the level of interest from the capital market community. I do not expect to make a public comment on the shape of the deal until the end of quarter 1 in 2015.
Michael McGrath (Cork South Central, Fianna Fail)
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Until when does the bank have to finalise a deal?
Michael McGrath (Cork South Central, Fianna Fail)
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Clearly, potential investors will try to get the maximum stake in the bank for as little money as possible. That is the nature of what they do. I do not expect Mr. Masding to respond, but I express my concern about seeing the State's shareholding in Permanent TSB diluted significantly as a result of the investment the bank is seeking. I would not like this. The State has invested €2.2 billion in net terms and the final shape of the capital plan for the bank must protect the integrity of the State's investment in Permanent TSB. That is a matter between Mr. Masding and the shareholder, but I express my opinion on it.
I move to the issue of interest rates and, in particular, the standard variable interest rates the bank is charging. Notwithstanding the reduction of a couple of years ago, the bank is still at the high end for an LTV of between 80% and 90% for new mortgages and a gross rate of 4.59%. The bank has 79,000 standard variable rate customers in different LTV brackets. What is Mr. Masding's reaction to the decision of AIB to reduce its rate? AIB's comparable rate for an LTV of over 80% is, 4.25% which is significantly lower than Permanent TSB's rate. Is the bank reviewing its rates in the light of this? Where does the bank stand?
Mr. Jeremy Masding:
It would be inappropriate for me to comment on the pricing decisions of competitors, but we keep our rates under consistent review. As I would not wish to insult the Deputy with a bland answer, I will build on that comment. I note some facts for the Deputy. Our blended cost of funds is 178 basis points. If one looks at Bank of Ireland's which I noted from the transcript of last week's meeting, it is 115 basis points. By definition, we need to work towards a lower cost of funds, but that will take us time. The Deputy will understand we still have to work through legacy issues. At one stage, we had a loan to deposit ratio of 241%. The Deputy will understand it will take us time to bring the cost of funds down. The cost of funds is the first thing to which I point. Of course, the cost of funds does not include the cost of running the bank, the cost of risk or the cost of capital, all of which we must cover to make the bank viable and profitable.
The last thing I would say about a blended rate across the group is that our NIM is 88 basis points. Therefore, we still have a significant mountain to climb. I am absolutely conscious that we must be competitive which I hope has been a hallmark of the team. As the Deputy rightly said, it was reflected in our early decision to reduce our variable rates unilaterally when I first started and we were a significant outlier. We will continue to monitor rates closely and do what we can to reduce our cost of funds, increase our net interest margin and run an efficient business. If am able to do this, we will ultimately be able to reduce our variable rates, where possible. I cannot give the Deputy any guarantee as to when that will happen.
Michael McGrath (Cork South Central, Fianna Fail)
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I hear what Mr. Masding says and accept that his bank is in a different position from some of the others in that it is still losing money and must become profitable. However, it also has to compete, which is the nature of the market. A young person or couple seeking to buy a home by taking out a mortgage will look for the best rate. If the bank wants to increase its share of the mortgage market for new entrants, it will have to move.
2:25 pm
Mr. Jeremy Masding:
I respect the Deputy's perspective on price. We will keep our rates under constant review. I hope that price is not the only factor in determining whom one banks with. I hope we provide a level of banking professionalism and service which is also attractive to customers. Please do not take my comments as disagreement. I agree with the Deputy that we need to keep our rates as competitive as possible, but I hope that Permanent TSB is about more than just pricing.
Michael McGrath (Cork South Central, Fianna Fail)
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My last question concerns mortgage arrears. The last time Permanent TSB was before the committee was in April. On that occasion Mr. O'Sullivan said that the bank expects to repossess between 2,000 and 4,000 homes, which were mainly buy-to-lets but included some family homes as well. Let us look at the numbers in today's presentation. It is stated that there are more than 6,200 principal private residences where loss of the home is a very real prospect, with an assisted voluntary sale, voluntary surrender or legal action under way. Plus, there are 1,800 buy-to-let properties in the same category. That means there are more than 8,000 homes, three quarters of which are family homes, now in a very serious situation whereby either there is agreement for the home to be surrendered or it is essentially before the court. That is a very significant jump in numbers from where the bank expected to be a number of months ago when Permanent TSB was last before this committee.
Mr. Jeremy Masding:
Let me offer some perspective, and then I will hand over to Mr. O'Sullivan so that he can add some operational expertise.
As I have explained to the committee in the past, we have had to build our arrears management function from scratch because the competence in the organisation was at best sub-optimum. I believe we now have a best-in-class retail arrears management function. We have nearly 300 people working with best-in-class technology, which I think is an innovative set of potential treatments. I can assure the Deputy and his colleagues that every customer who engages with us goes through a detailed review of income and expenditure. Our starting position is to try and keep people in their homes, and we have two phrases we use - sustainability and affordability - which are drilled into our staff. Sadly, there are times when we cannot find a solution. We will continue to do everything we can to work with our customers to find the right solution but, sadly, that cannot always the case.
Liam Twomey (Wexford, Fine Gael)
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I ask Mr. O'Sullivan to hold back his response because this time slot is finished.
Liam Twomey (Wexford, Fine Gael)
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I will keep an eye on proceedings and will bring him in later.
Kieran O'Donnell (Limerick City, Fine Gael)
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I welcome Mr. Masding and his colleagues.
When does Permanent TSB expect to be in profit?
Mr. Jeremy Masding:
Probably at the end of 2016. I might get a bit technical, so forgive me. Please stop me if I do and I will explain. What I am really after is sustainable profitability. I do not want lumpy numbers because it is not good for investors or the Irish taxpayer. We have got to generate a sustainable level of grounded profits. In response to the Deputy's question, we will go into sustainable profit at year end 2016 or maybe 2017. In the financial accounts we might be profitable sooner, because there could be some provisional write-back that we could put back into our profit and loss account, but that would only be a one-off entry. Potentially, we could be profitable sooner.
Kieran O'Donnell (Limerick City, Fine Gael)
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Has that to do with write-backs? Obviously Mr. Masding will have seen today that the Central Bank is nervous about the level of write-backs that some of the banks are going to deal with because of the increase in the value of property.
Mr. Jeremy Masding:
The words I have used every time I have been in front of the committee are that I am, by nature, a conservative banker. Any provisional write-back would be very much at the lower end of the curve, so I do not foresee any issues with Permanent TSB and the Central Bank of Ireland. In summary, we may be profitable optically sooner than 2016. Obviously, what I care about - this is also a response to Deputy Michael McGrath's question - is that I want to bring some investors in who believe in the long-term story of this organisation. For me to deliver big profits, low profits, big profits, low profits - that is no way to run a bank, and I am not really interested in that.
Kieran O'Donnell (Limerick City, Fine Gael)
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Did Mr. Masding say earlier that the Permanent TSB's net interest margin is 88 basis points?
Kieran O'Donnell (Limerick City, Fine Gael)
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That is significantly lower than those of Bank of Ireland and the AIB.
Kieran O'Donnell (Limerick City, Fine Gael)
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Bank of Ireland told us its net interest margin was 208 basis points. AIB appears to have indicated that theirs is about 160 basis points. That equates to 2.08 % and 1.6%, respectively.
Kieran O'Donnell (Limerick City, Fine Gael)
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Did Mr. Masding say Permanent TSB's was less than 1%, at 0.88%?
Kieran O'Donnell (Limerick City, Fine Gael)
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That seems very low. Yet Permanent TSB's blended cost of funds is 1.74%. AIB's is about 1.64%, yet it has come up with a net interest margin that is double that of Permanent TSB. AIB's blended cost of funds does not appear to be significantly cheaper. I am wondering why.
Mr. Jeremy Masding:
There are a number of different components to my answer. The Deputy will no doubt have read that we run our business as what we call the core bank, which is the long-term Permanent TSB. We also have some non-core businesses. Those non-core businesses drag down the return. That is my first answer.
Kieran O'Donnell (Limerick City, Fine Gael)
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What are those non-core elements? What is the one that is pulling back?
Mr. Jeremy Masding:
We have a UK business called Capital Home Loans; we also have some non-core Irish businesses. In my opening remarks I mentioned that, over time, it is right for the taxpayer that we look at the way to maximise value from those businesses, and we will do so. So my first answer is that there is a drag from non-core businesses.
Kieran O'Donnell (Limerick City, Fine Gael)
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In the limited time remaining I want to ask about the funding model. Where does Permanent TSB's funding come from at this stage? Is it deposits? Is it ECB funding? Is it inter-bank lending? What is the make-up of Permanent TSB's funding model?
Mr. Glen Lucken:
I can help the Deputy with that. At this moment, €14 billion of our funding is retail-led, a further €3.6 billion is from institutional and corporate clients and the balance is NTMA. Our funding is principally retail-led. In addition, we have wholesale market funding of €7.3 billion, and system funding is now back at a more normalised level of about €6 billion.
Kieran O'Donnell (Limerick City, Fine Gael)
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Where is Mr. Lucken including deposits in that?
Kieran O'Donnell (Limerick City, Fine Gael)
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What are they making up, percentage-wise?
Mr. Jeremy Masding:
It is important to go back in history, I am afraid. At one stage, as I mentioned in my comments, we had a loan-to-deposit ratio of over 200%. I was not in the country at the time, but the Deputy will recall there was a war for deposits. We were particularly hard-hit because of the level of wholesale.
Kieran O'Donnell (Limerick City, Fine Gael)
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What is the loan-to-deposit ratio at the moment?
Kieran O'Donnell (Limerick City, Fine Gael)
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I welcome the fact that Permanent TSB is still around. It is extremely important for the Irish banking market to have as many competitors as possible.
Let us compare the interest rates of Permanent TSB with those in the UK. For a loan-to-value ratio of about 70%, the bank is charging about 4.25%. A similar institution in the UK is charging less than half of that, at 2.19%, even though the Bank of England rate is higher than the ECB rate. I believe that is down to a lack of competition in the market. How does Capital Home Loans, Permanent TSB's business in the UK, compare? What does it charge as a standard variable rate for a loan-to-value ratio of 70%?
Kieran O'Donnell (Limerick City, Fine Gael)
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So the situation does not arise. The point I am making is that Ireland has a singular problem at the moment. We have a lack of competition in the market and we have banks that received taxpayers' money not passing on the lower cost of funds to the consumer in the form of lower rates.
In that context, I would welcome Permanent TSB's observations on the Irish market.
Historically, the view would have been that PTSB's tracker loan book comprised a significantly high percentage of the overall loan book, but just 40% of the overall loan book consists of tracker loans. The figure on tracker loans for Bank of Ireland is 58%, yet it has a net interest margin well over double that of PTSB. How many of PTSB's customers have switched from tracker loans to variable-rate loans, on which they pay an additional 1% over the lifetime of the loan? How many people have taken that option and has it been successful? If there was proper competition in the market, would PTSB reduce its mortgage interest rates?
2:35 pm
Kieran O'Donnell (Limerick City, Fine Gael)
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That was down to regulation and was not all necessarily due to competition.
Mr. Jeremy Masding:
I was not here, so mine is just a personal observation. I want to compete with the pillar banks. To echo the points made by Deputy O'Donnell and his colleagues, it is important that we provide innovation, drive and competition, and we will continue to do that. The point I was making was that Permanent TSB is still in turnaround. As a group, we will fix it and will provide real competition to the market. Therefore, I echo the Deputy's points regarding the importance of competition for consumers.
On the issue of our tracker products, I will hand over to my colleague Mr. Mitchell, who has the data on these.
Kieran O'Donnell (Limerick City, Fine Gael)
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Does PTSB have any ECB funding?
Kieran O'Donnell (Limerick City, Fine Gael)
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When does PTSB expect to have that cleared?
Kieran O'Donnell (Limerick City, Fine Gael)
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Let us get back to the tracker issue.
Kieran O'Donnell (Limerick City, Fine Gael)
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Is that 95 customers out of a total of 56,000 or so? That seems relatively low.
Mr. Ger Mitchell:
It is relatively low. A number of points must be borne in mind. Not everybody on a tracker mortgage wants to move. Also, the time involved in buying and selling a property in the Irish market today is approximately 150 days. Therefore, the time lag from getting approval through to payout is a couple of months. Another point is that there is a difference in the timing between those in positive equity and those in negative equity. Naturally, those in positive equity are far more nimble and agile in terms of being able to move. In our view, we are ahead of where we thought we would be when launching the product, because it is a longer run play.
Kieran O'Donnell (Limerick City, Fine Gael)
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It is based on people selling and moving.
Pearse Doherty (Donegal South West, Sinn Fein)
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To pick up on the rate of 1% above the existing interest rate on the tracker mortgage, if that had been applied a number of years ago, would customers be paying higher on the new facility being offered than on the variable interest rate?
Pearse Doherty (Donegal South West, Sinn Fein)
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If 1% was put on top of the tracker rate a number of years ago, would that rate then be higher than the variable interest rate?
Pearse Doherty (Donegal South West, Sinn Fein)
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Did PTSB at all times have a tracker rate that was less than 1% below the variable rate?
Pearse Doherty (Donegal South West, Sinn Fein)
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What was the closest margin?
Mr. Ger Mitchell:
I do not have the figure to hand for when it was closest. It depends on the point in time. As the Deputy knows, the ECB has dropped rates over the past number of years. At the same time, we have dropped interest rates by 119 basis points since 2012. I would need a point in the curve to give the Deputy the accurate margin.
Pearse Doherty (Donegal South West, Sinn Fein)
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Is it correct that at a point before the ECB started to drop tracker rates, PTSB's fixed rate was more lucrative than a tracker rate?
Pearse Doherty (Donegal South West, Sinn Fein)
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Was the variable rate still 1% above that fixed rate?
Pearse Doherty (Donegal South West, Sinn Fein)
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PTSB has mentioned trying to drum up support for investment in the bank. I presume that has been discussed with the Minister for Finance in the context of the activities of the bank in trying to sell off shareholdings.
Mr. Jeremy Masding:
I have experience, at senior principal level, of capital raising. It is important that it is the company and its board that leads the thinking and shaping of the deal and that the Minister be objective in his decision making. I asked the Department of Finance two questions. First, I asked whether I had permission to talk to the capital markets; and second, I asked whether I had permission to appoint an investment bank to support us. Once I go through the process, I will go through the board and we will present the best deal we think we can get to the Minister for Finance. It is important that I keep the Minister, Deputy Noonan, at arm's length, because I do not want to compromise him. I will bring a deal to him and he will be wholly objective.
Pearse Doherty (Donegal South West, Sinn Fein)
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Any deal will result in a reduction in the shareholding of the State within the institution.
Pearse Doherty (Donegal South West, Sinn Fein)
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Of course. What was the most recent valuation by the NTMA of the bank?
Mr. Jeremy Masding:
That is a historic book valuation. My job is to work with a pre-eminent investment bank - we appointed Deutsche Bank. We, the board, myself and Deutsche Bank have some valuation parameters in our heads. I do not under any circumstances want to compromise the Department of Finance. It is my job to shape the situation so the Department stays objective. Therefore, when we have the job done, I will bring the deal to the Department.
Pearse Doherty (Donegal South West, Sinn Fein)
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Is there a possibility of PTSB coming back with a deal - we do not know the level of interest - through which the bank in its entirety will be sold into private hands? Is that a possibility, or is there a restriction placed in terms of PTSB's engagement that it should only be a portion of the capital sum that is required?
Pearse Doherty (Donegal South West, Sinn Fein)
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I understand.
Pearse Doherty (Donegal South West, Sinn Fein)
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I appreciate that. Given that the window is now open to make applications for retrospective recapitalisation - of which the State invested €2.7 billion into PTSB - has this issue been raised at any time? If we sell the shares onto the private market, they cannot be transferred to the ESM.
Mr. Jeremy Masding:
I am the chief executive of a retail bank and play within the boundaries of what I can control. With all due respect, I would define retrospective capitalisation as a political issue between the Minister for Finance and the European Central Bank. I have had no conversations about that.
Pearse Doherty (Donegal South West, Sinn Fein)
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I appreciate that. The question I am asking is whether there was there any comment in regard to selling the shares that they were looking at that option in terms of retrospective recapitalisation, which would mean that the shares would transfer to the ESM.
Pearse Doherty (Donegal South West, Sinn Fein)
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I know it is between Mr. Masding and the board, but we have seen shares in Bank of Ireland being sold, for example, to Wilbur Ross, in what was a bad deal for the State. I believe that was done more to show there was support for an Irish bank rather than for any benefit of the deal. I am concerned, given the position PTSB found itself in over the stress test, which concerns a relatively small amount of money in this context, that we might now enter a type of scenario in which the State would hand over quite a substantial amount of its shares for a relatively small amount of money.
2:45 pm
Mr. Jeremy Masding:
Yes. Perhaps it is the benefit of my being a non-national and being a very focused chief executive. My job is to get the best deal I can in the capital markets. That is what I am focused on. I will do that with the help of Deutsche Bank. I will take it to the board and will bring it to the Minister, and if he chooses to sign it off, he chooses to sign it off.
Pearse Doherty (Donegal South West, Sinn Fein)
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Does Mr. Masding have any timeframe in mind concerning any of this?
Mr. Jeremy Masding:
The stop date is 26 July 2015, which is nine months after the stress test. That is when I have to have the capital in place. My guess is that quarter 1 of 2015 would probably be when I would be ready to make a public pronouncement. I should mention one important factor. Quite rightly, we talk about the Minister as the large majority shareholder, but there is a small minority interest who are also my shareholders. Therefore, we also have to engage with the minority shareholders. That is why I think it will take until quarter 1 of 2015.
Pearse Doherty (Donegal South West, Sinn Fein)
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As regards the European Commission, PTSB's first restructuring plan has just gone off the burner. It is now about to submit a second one. Mr. Masding may be able to enlighten us as to how many years the Commission has had the first restructuring plan. What convinces Mr. Masding that the second one will be approved by the Commission? How does it differ from the first one? How long does he think it will take the Commission to approve that restructuring plan?
Mr. Jeremy Masding:
At the risk of embarrassing myself, I am actually on my third go, just to put the facts on the table. The first restructuring plan was in May 2012. That was a very top-down exercise where I asked the troika for permission to try to build out the bank. The Deputy will understand that I had been in job for five minutes and it felt to me that, top-down, there was a bank to be created. The first one in my head was agreed in principle because it gave us a chance to try to build out the bank.
We submitted the second plan in August 2013. We were making good progress on that but then the comprehensive assessment came in. In a small organisation like ours, there are only so many plates one can spin, so the comprehensive assessment became all encompassing. On the back of the comprehensive assessment and also on the back of the improvement in the Irish macroeconomic fundamentals, I think the third restructuring plan is by far the strongest. I have a higher level of confidence for it being approved than the first and second ones.
Pearse Doherty (Donegal South West, Sinn Fein)
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And the timeframe?
Mr. Jeremy Masding:
I hope to submit it in the next couple of weeks. I cannot comment on the timeframe of approval. I apologise but I need to be very precise in my English. I do not actually submit it. I will submit it to the Department of Finance as the majority shareholder. I see no reason it will not support it. The Department will submit it to the European Commission and it then goes into the system. I could not comment on when or if it will be approved.
Pearse Doherty (Donegal South West, Sinn Fein)
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It is crucial that we have some sort of restructuring plan approved in order that the bank can move on and there is a bit of certainty.
Pearse Doherty (Donegal South West, Sinn Fein)
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I welcome the fact that mortgage arrears are coming down. I do not have time to go into the details of the solutions that Mr. Masding is offering. I have concerns about the legal area on which there is a heavy focus. I received a letter which contained important comments. Mr. Masding has continually said that he is proud of the bank's mortgage arrears procedures, and he has made similar comments today.
We have discussed letters when Mr. Masding has appeared before this committee. I have received a letter from a couple who are not young. Both of them lost their jobs and went into re-education. One is working and the other hopes to qualify soon. They are in mortgage arrears and have left their house which has been on the market since 2009. Mr. Masding's bank wrote to them in November 2013 offering them an assisted sale despite the fact that the house was on the market since 2009. Mr. Masding's bank has continually engaged with them at the wrong address, despite being notified by them and the Money Advice & Budgeting Service that they had moved to a different part of the country. The bank wrote to them acknowledging that they told the bank a year ago, in August 2013, that they had changed address. Despite this, the bank only put that in its system in September 2014.
These people wrote to me because they are quite frustrated by what happens at these committees, including the suggestion that mortgage arrears are being dealt with appropriately. The letter stated:
The bank has not been engaging with their customers. Our situation was let go until our home went into negative equity. They were alerted of our impending demise at every step of the way. At no point did anyone engage with us or suggest anything other than to send in standard financial statements to our local branch, while never offering a solution - obviously, ticking boxes for them, showing that they are dealing with the situation when they clearly are not. I am attaching the most recent letter from them, along with my response. [The person goes on to say] We are standing at the abyss. It takes everything we have to try to move forward with our lives every day. I am beginning to feel like it is slipping away from me., I fight back for so long and then lose the energy or will, and it takes all I have to respond to their incessant, meaningless letters. This is quite difficult for me to write.I suggest to Mr. Masding that he needs to be more careful in terms of his language and how the bank is dealing with these individuals. These two people are not alone. I know that a lot of progress has been made by Mr. Masding's bank and he has acknowledged that he did not have the right procedures, but there is a long way to go yet. This is not the way to treat people who saved the institution that Mr. Masding is now heading.
Liam Twomey (Wexford, Fine Gael)
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I would prefer if Mr. Masding could hold it, because I am trying to keep to time limits here. I will let him get back in to respond to that.
Pearse Doherty (Donegal South West, Sinn Fein)
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I thank Mr. Masding for that.
Liam Twomey (Wexford, Fine Gael)
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Thank you, Mr. Masding. That is good. I call Deputy Donnelly.
Stephen Donnelly (Wicklow, Independent)
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The delegation is very welcome and I thank them for their time. I thank Mr. Masding also for taking the time to fill out the questionnaire ahead of time, which is very useful.
Can I start on the stress test? The piece that was failed by Permanent TSB suggested for the end of last year's accounts a shortfall of €855 million under the extreme scenario. Mr. Masding has made the point that about 80% of that has been dealt with by now. Am I right in thinking therefore that if the stress test was re-run today - 20% of €855 million is €171 million - the extreme test would find the bank out by about the latter sum? Is that what Mr. Masding means by saying they have dealt with about 80% of what the ECB found?
Stephen Donnelly (Wicklow, Independent)
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If the ECB ran the same test today, we would expect to see under the extreme scenario a capital shortfall of about €170 million, at the highest amount.
Mr. Glen Lucken:
What will certainly always be the case is that the contingent capital, CoCo, will have to be deducted. If we are looking at a gross figure of €855 million today, on an equivalent basis it would be €455 million. We are talking about covering 80% of the total, but that is taking the CoCo into account.
Stephen Donnelly (Wicklow, Independent)
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It looks like things are moving in the right direction financially for the bank. When does Mr. Masding think the bank will be at a stage where if the ECB were to run the tests, the bank would pass that third test as well as the other two?
Mr. Jeremy Masding:
The whole idea of this very professionally run stress test, to be fair - I would not want to be quoted on that - showed that at that point in time we will need some capital. The whole idea of it is that next time they run it we will not need any capital. My expectation is that we will get to a cycle of stress tests on the assumption that we bring in the private capital. If they ran the stress test the day after that private capital, we would pass the stress test.
2:55 pm
Stephen Donnelly (Wicklow, Independent)
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According to Permanent TSB's reply to the committee, its cost of capital is 174 basis points, or 1.74%. Mr. Lucken indicated that the ECB money comprises approximately €6 billion of that. Is that correct?
Stephen Donnelly (Wicklow, Independent)
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Is that through the LTRO programme?
Stephen Donnelly (Wicklow, Independent)
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I understand the ECB is making money available for significantly less than 174 basis points. Is there an opportunity for Permanent TSB to reduce its cost of capital by accessing cheaper ECB money and can the State do anything to help that?
Mr. Jeremy Masding:
I will make a couple of comments on that issue, the first factual and the second a personal opinion. The factual comment is that, broadly speaking, our collateral is not eligible for that new scheme. It would be difficult for us to access it. In terms of my own opinion, I have always felt it was best for the Irish taxpayer and the State to bring Permanent TSB back to a simple, well-governed, well-managed and safe bank. By this I mean that we would have deposits on one side of the balance sheet and good lending on the other. I think the ECB would be extremely supportive of us driving for that business model. We were over-exposed to the ECB in the past. I refer to the loan-to-deposit ratio and filling the funding gap with the ECB when the capital markets closed. I think we would be extremely nervous over the next few years if Permanent TSB gorged itself again on ECB funding. Hypothetically, the Deputy is correct that it is cheaper funding but in terms of the long-term safety of this franchise, I am sorry to be old-fashioned and boring but I want a deposit funded and safe retail bank.
Stephen Donnelly (Wicklow, Independent)
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Mr. Masding is saying that Permanent TSB is sufficiently exposed.
Stephen Donnelly (Wicklow, Independent)
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Mr. Masding referred earlier to a margin of 88 basis points. He said it is higher for the core bank. Is he allowed to state the figure for the core bank?
Stephen Donnelly (Wicklow, Independent)
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How does that compare with the UK? Are we higher or lower?
Stephen Donnelly (Wicklow, Independent)
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Is Permanent TSB trying to move there?
Stephen Donnelly (Wicklow, Independent)
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Is the 121 figure increasing?
Mr. Jeremy Masding:
Yes. To be clear, however, the net interest margin is a function of what we charge for lending and how much we pay for deposits. We still pay a premium over the other banks for our deposits because we do not have a restructuring plan and because of historic issues. Our cost of funds is probably the more important of these considerations.
Stephen Donnelly (Wicklow, Independent)
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I want to move on to the sale of Springboard. Is it fair to say that Springboard is a sub-prime mortgage loan book?
Stephen Donnelly (Wicklow, Independent)
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It was sold this year to Morris Capital for €468 million.
Stephen Donnelly (Wicklow, Independent)
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I apologise, that was the size of the loan book. While the loans were part of Permanent TSB group they were protected because Springboard was part of a regulated entity and, therefore, the code of conduct on mortgage arrears applied. Does the CCMA apply to Morris Capital or is it an unregulated entity operating in the State?
Stephen Donnelly (Wicklow, Independent)
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Is Morris Capital a regulated entity within the State?
Stephen Donnelly (Wicklow, Independent)
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What form does that commitment take? Is it a contractual agreement and does it have legal strength?
Stephen Donnelly (Wicklow, Independent)
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Does Permanent TSB have that in writing?
Stephen Donnelly (Wicklow, Independent)
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In regard to distressed mortgages, I was surprised to see in the numbers supplied that there was no mortgage-to-rent agreement with Permanent TSB. Is that a policy decision on the part of the bank and, if not, why is the number zero?
Mr. Shane O'Sullivan:
There was one case, which is disappointing from our point of view. It is the one customer treatment that we do not entirely control. A number of parties are involved. At our last meeting with the committee we expressed frustration with the way in which the treatment is operating. There has been significant progress since then. A working group has been established, comprising members of the BPFI, the Department of the Environment, Community and Local Government, the Housing Authority and the approved housing bodies. We are collaborating in trying to knock down the obstacles that currently exist. I am hopeful that will improve.
Stephen Donnelly (Wicklow, Independent)
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Is the shelved portion on all splits set at 0%?
Stephen Donnelly (Wicklow, Independent)
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What is the figure?
Stephen Donnelly (Wicklow, Independent)
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Does the bank offer any debt for equity solutions?
Mr. Shane O'Sullivan:
No, we do not. We considered a number of options on foot of our previous meetings with the committee. We took on board a previous suggestion about extending our current treatments into retirement and after investigating it with our credit committees and in other forums, such as with customers, we believe there is merit in the suggestion and we have decided to progress that treatment. We also discussed with the committee the possibility of making commitments upfront to customers who work collaboratively with us to sell their properties in respect of what might happen to any shortfalls, and we decided to implement that as a proposition. We have not pursued debt for equity at this stage. Our sense is that it is a complicated proposition and there may not be as much appetite for it among our customer base as there would be for commitments upfront on shortfalls and lending into retirement.
Stephen Donnelly (Wicklow, Independent)
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I am delighted to hear that some of those things are happening. I ask the witnesses to investigate the way in which AIB uses the debt for equity solution. I think it is more applicable in other areas but the first area in which it was used was in respect of retirement and it is working. A couple aged 60 years who are six years away from retirement would get a split which allows them to live with dignity in their house until they reach the age of 66 or 67 years and AIB would then offer a debt-for-equity swap on the amount required to bring the total borrowings down to a level that allows them to remain in the house. Without that debt for equity portion coming into play on retirement, it is difficult to restructure mortgages for the lifetime of the borrower. I ask the witnesses to examine how AIB has been successful in managing this arrangement.
Thomas Byrne (Fianna Fail)
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What is Permanent TSB's percentage share of standing mortgages in the market?
Thomas Byrne (Fianna Fail)
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What is the figure for outstanding loans?
3:05 pm
Thomas Byrne (Fianna Fail)
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I had a look at the County Meath record for repossessions in the county registrar’s listings and it is fair to say Permanent TSB is active when it comes to repossessions. Since 13 October, there have been four sittings of the county registrar’s civil list. Permanent TSB accounts for 92 out of the 395 cases listed in which a financial institution is cited as applicant or plaintiff. That comes to approximately 24% of all sittings, which seems very high. I did not raise this with Bank of Ireland when it attended the committee because there seem to be very few cases in Meath in which it is involved. Is there any reason Permanent TSB is outperforming its market share in the repossession courts? Does it have a worse book than its competitors? Is it treating people more harshly? Is this typical in other counties?
Thomas Byrne (Fianna Fail)
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I accept that. Bank of Ireland is not there but I am sure it will be in time.
Mr. Shane O'Sullivan:
I have spent quite an amount of time in the courts over the past year. I have seen how it tends to come in waves. There is no bank involved that does not have significant numbers of cases. It tends to be spread across the banks nationally.
For every 100 of our customers who are deep in our arrears process, 22% end up with a letter or in the legal process. Compared with other banks, on occasion that is the lesser figure. If one bears in mind that at a point in time we were the country’s largest mortgage provider and if one looks at the figures nationally, one will have a broader perspective as to those numbers.
Thomas Byrne (Fianna Fail)
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Is that in executed repossession or in order obtained?
Thomas Byrne (Fianna Fail)
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These are cases where the bank has actually gone into the house.
Thomas Byrne (Fianna Fail)
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Did this involve people being put on the street or were these easy pickings such as vacant properties that have been hanging around on the books for a long time?
Thomas Byrne (Fianna Fail)
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What does the bank do when faced with putting people on the street? What does it do when it is told a husband, wife and children are in a house to be repossessed?
Mr. Shane O'Sullivan:
It is still within the court process. The court will appoint a bailiff to effect the execution. The bailiff will act as the agent of the court, given that it was the court that granted the repossession order after listening to both sides of the case. The bailiff will act on the court’s behalf in those situations. This is the case in the 23 repossessions so far this year, which is out of a stock of 162,000 mortgages, which is 0.01%, which is unnaturally low.
Thomas Byrne (Fianna Fail)
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Are there other cases where the people leave after a repossession order has been granted?
Thomas Byrne (Fianna Fail)
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Has the bank a policy in dealing with unrepresented defendants in courts? Does it tell its lawyers to go the heavy in such cases? I have seen all the banks, not just Permanent TSB, go hell for leather against people without legal representation. One might say it is their fault because they do not have lawyers but they may not be able to afford one.
In cases where houses are being sold on behalf of the bank, are there procedures in place to check for propriety that cash is not paid under the counter to professionals involved in the sale or vendors who may be in situ? I have received allegations in this regard but I do not have the full details and therefore cannot back them up. I will pass on the details about one sale to the bank for it to investigate.
Thomas Byrne (Fianna Fail)
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They should be treated differently because they are in a much weaker position. They are on their own.
Liam Twomey (Wexford, Fine Gael)
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That is a question that the Senator might want to keep for another session.
Thomas Byrne (Fianna Fail)
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I just wanted to raise the issue.
Mr. Shane O'Sullivan:
The bank will always advise people to take legal advice. That is really a question for the Judiciary rather than for the banks.
On the second point concerning houses sales, we have a panel of professional agents appointed. They go through a competitive process before they are appointed and then work to a contract and service level agreement. When they are selling properties on our behalf, they must achieve the open market value or we will not sell the property. There are documented guidelines and audit trails for any agent who works on our behalf to sell properties.
Thomas Byrne (Fianna Fail)
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Is Mr. O'Sullivan satisfied that this system is working?
Thomas Byrne (Fianna Fail)
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Is it not possible to take cash under the counter in such sales?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I thank the representatives of Permanent TSB for attending. From its figures presented to us, 179 people have had properties repossessed. In 195 more cases, the bank has got a judgment for repossession. There is then a whopping 3,945 cases in which court proceedings have been initiated. Notwithstanding that the number of people in arrears over 90 days is falling, the bank still has large numbers of mortgage arrears, essentially 16,000 principal private dwellings and more than 3,000 buy-to-lets. Are we moving towards a significant escalation in repossessions? Is it a case that some of the easier lifting has been done with those who can afford deals but now we are facing into those in extreme difficulty who will have their homes repossessed? Is that the likely scenario as we move deeper into the cases of householders with greater difficulties?
Mr. Shane O'Sullivan:
It is correct to say the number of repossessions will increase. However, they will increase from a very low base. So far this year, we have had 23 repossessions, 0.01% of our total mortgage stock. Each day, my team and I look to see if we can find solutions for customers.
In the slide pack we provided slide No. 4 shows that in 12,351 cases we have found solutions. However, the Deputy is correct in saying that in a significant number of cases we have commenced legal proceedings. I will say a couple of things about this. Such cases are difficult for us and our customers. We only arrive in the legal process after we have exhausted every other avenue. At times we find ourselves having no other option available to us and to do nothing would actually make matters worse. That is the important context in which we understand this figure.
The legal process is lengthy. Therefore, these accounts are at the start of what is typically a four year process. The commitment of the bank is that we will work with these customers continually to see if we can end the legal process sooner rather than later. That happens on both sides. Sometimes we find from a customer's perspective, unfortunately, that it takes the commencement of the legal process to secure proper engagement. Therefore, in these legal numbers we have a very significant number of people who are not paying anything towards their mortgage - not one cent. We have a significant number of people who are not willing to complete an SFS form and come in to meet us to talk through the issue.
3:15 pm
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Time is running out. I appreciate the points Mr. O'Sullivan is making, but I strongly suspect that people who are in extreme financial difficulty - those who have been worst hit by the economic crisis, unemployment and very low incomes - are probably burying their heads in the sand because they know that the bank has nothing to offer them and that they are facing the prospect of their homes being taken away from them.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Earlier this week New Beginning made a proposal outlining that it had investors behind it where they would buy up many of the really troubled mortgages in arrears and they would be able to offer solutions such as mortgage to rent to keep people in their homes by hook or by crook in a way that the banks seemed to be unable to do. How can it do this? While what it is doing would not be my ideal solution, it is interesting that it has big investors who are willing to put money into this option and saying they will keep people in their homes. Why can they do it and the banks cannot?
Mr. Shane O'Sullivan:
We have received the detail of that proposal in the past 24 or 48 hours. We will evaluate it and if it makes sense, we will be the first to go forward with it. My point is that the legal process which takes four years to complete is the worst outcome for our customers. It is also the worst outcome for us as a bank - on both a social and financial level. To the extent that we can come up with solutions or third parties such as New Beginning can do so, we are more than willing to consider them. The Deputy has my commitment - we received the proposal 24 or 48 hours ago - that we will give it due consideration.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I have one last one-line question.
Liam Twomey (Wexford, Fine Gael)
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The Deputy will have to come back to it.
Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Chairman for allowing me back in and I will try to keep this brief.
I like Permanent TSB's current account initiative which I know has been very successful and has attracted more than 80,000 customers - about 80,000 accounts are stretched. What commitment is the bank making to new customers regarding the period of time for which it will honour that deal? I know that the bank has put money behind the initiative and that it is advertising that people can save typically between €100 and €200 a year if they transfer their main account into which their salary is paid if they are working. For what period will the bank commit that there will be no fees for the people concerned.
Michael McGrath (Cork South Central, Fianna Fail)
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I presume the logic of the bank is that it is winning new customers. It is not making money from them in terms of their current account, but it is hoping to get other business, mortgages, personal loans, etc.
Mr. Jeremy Masding:
I start from the premise that I outlined in my opening remarks. Members of the general public to whom I speak do not want to get caught up in the pre-2008 financial services complexity that was thrown at them. Therefore, if they wish to avoid complexity, Permanent TSB is really simple. We have a current account and savings accounts. We lend money to people who can pay it back. That is the model.
Michael McGrath (Cork South Central, Fianna Fail)
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For those who start with a high LTV, if over time they are paying their mortgage or the value of their house increases and they can move to a lower LTV band, are they locked into the interest rate for the band in which their mortgage was drawn down or can they submit a revaluation and reduce the interest rate?
Michael McGrath (Cork South Central, Fianna Fail)
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The mortgage holder is locked in to it.
Michael McGrath (Cork South Central, Fianna Fail)
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Mr. Mitchell answered a question earlier about the tracker portability product. He indicated that only 97 customers had moved to it. I know that it is a relatively new product and it is the most attractive product, of which I am aware in the market. I think Permanent TSB should put some money behind marketing it. It has 57,000 customers with tracker mortgages, many of whom are living in unsuitable homes - they might have young families who are still living in apartments. Permanent TSB is willing to offer the product to people in negative equity in certain circumstances.
Michael McGrath (Cork South Central, Fianna Fail)
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I recently attended the opening of a revamped PTSB branch in Douglas in Cork. I was told me it was hoped to start a new SME lending initiative. When will it get under way? What is the bank's focus in that area?
Michael McGrath (Cork South Central, Fianna Fail)
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Will it provide working capital?
Mr. Jeremy Masding:
Yes. We will offer a business current account, a business savings account, business electronic banking, working capital and a degree of term finance. We need to be clear on where the boundary stops. If it moves to import-export finance or factory leasing - I am very clear as a CEO that ours is a focused business model - there will be times when we will have to say to customers that we do not do this.
Michael McGrath (Cork South Central, Fianna Fail)
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Does the bank have an envelope of money in mind - a potential fund of a certain amount?
Michael McGrath (Cork South Central, Fianna Fail)
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The bank is not limiting or putting a line under it.
Michael McGrath (Cork South Central, Fianna Fail)
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Has the writing-off of mortgage debt happened? Is this a solution for customers who remain in their homes or is it only considered where the home is lost and there is a residue of debt still owing?
Mr. Jeremy Masding:
I have said this at every Oireachtas committee hearing so far. I will not countenance debt forgiveness, the upfront use of taxpayers' money. However, I will countenance what I think is good banking practice - a debt write-off. They are two very different things. I ask Mr. O'Sullivan to explain our debt write-off policy.
Mr. Shane O'Sullivan:
We believe there is credibility in a debt write-off at the end of the process. In our accounts for the first half of the year we charged off at a group level of €121 million. For 2013, the equivalent charge-off figure at group level was €175 million. This write-off at the end of a process is increasing from a low base. I have mentioned that when we appeared before the committee in April, we discussed the concept of providing comfort for people up-front about the shortfall after the sale of a property. We are increasingly rolling this out. We are speaking to 500 customers and giving them a commitment up-front that if they work collaboratively with us to sell the property, we will write off up to 80% of the shortfall once they meet 20% or more of the shortfall.
The numbers involved in personal insolvency cases are also small, but we believe they will grow.
Again, we are open to a debt write-off in the insolvency space because we believe it is a systematic and controlled process and, to date, we have committed to writing off €1.5 million.
3:25 pm
Michael McGrath (Cork South Central, Fianna Fail)
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Has the bank agreed to any write-off where the customer remains in the home? I refer to a current mortgage holder where at the end of the process an amount has been written off, or is it only in cases in which the home is forfeited?
Lucinda Creighton (Dublin South East, Independent)
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I apologise for coming to the meeting late. I have a couple of questions to ask in the light of recent court cases on variable mortgage rates. Was it commonplace between 2002 and 2003, for example, and in 2008 to include a mortgage clause linking a rise in interest rates and market conditions? Was this standard practice in the bank?
Lucinda Creighton (Dublin South East, Independent)
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Essentially, the question is whether it was commonplace to include a clause in variable mortgages linking changes in interest rates with market conditions.
Lucinda Creighton (Dublin South East, Independent)
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Would anything in the clause have suggested any logical reason for an increase in the mortgage interest rate?
Lucinda Creighton (Dublin South East, Independent)
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It could happen without a reference point and at the whim of the bank.
Lucinda Creighton (Dublin South East, Independent)
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I am well aware of that.
Lucinda Creighton (Dublin South East, Independent)
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Many other banks include a link with market conditions. My point is that given the huge influence of the Central Bank and the European Central Bank in recent years, the increase seems extraordinary. I wonder how the bank can justify the increase in the interest rate for variable rate mortgage holders at a time when the Central Bank’s rate was and is running at almost zero. It is a major issue. I am trying to get to the bottom of the matter in terms of the bank’s logic as to why no account is taken of Central Bank rates.
Mr. Ger Mitchell:
It is important for people to understand that there is no direct binary link between the European Central Bank's lending rate and the cost of funds which is attributable to each bank. The source of funding for any retail bank will be a mixture of retail depositor funds, commercial and wholesale deposits, treasury instruments and system funding. The blended cost of these funds to Permanent TSB is just north of 1.7% or 170 basis points, while the ECB rate is at 15 basis points. It is important to bear this in mind. The second point to make is that over the course of the past two years we have reduced our standard variable rate by 119 basis points at a time when others have increased. The third point is that our net interest margin for the group is at 88 basis points, which does not leave an awful lot of headroom in the relationship. It is important to bear these three things in mind.
Lucinda Creighton (Dublin South East, Independent)
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In that context, I am curious to hear some detail, as I have not been able to find the information in the presentation. I have noted in the presentation that the variable rate mortgages are worth €7 billion, but I cannot find the equivalent figure for tracker mortgages. I am curious to hear what the balance is.
Lucinda Creighton (Dublin South East, Independent)
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I am curious to learn what percentage of overall income in the past five years has been generated from variable rate mortgages for owner-occupiers.
Mr. Ger Mitchell:
I do not have a breakdown of the exact income. The final point I wish to make is that there is more involved than just the cost of funds. For example, there are five main pieces that go into our model to deliver a mortgage rate. There is the cost of the raw material, namely, the funds. There are also the credit inputs and the risk of default. One then has to deal with the liquidity of the capital inputs. All of these together conspire to create the price. There is also the cost of doing business - the operating expenses in supporting the network and the bank.
Lucinda Creighton (Dublin South East, Independent)
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I appreciate all of these variables, but my concern is not just for PTSB, it extends to banks right across the board. Ultimately what has happened in recent years is that variable rate mortgage holders are paying the price for the favourable rates given to tracker mortgages. That is beyond dispute as one can see in every single bank. Is the Central Bank involving itself in trying to identify a fairer and more equitable approach for mortgage holders? Is PTSB under pressure from the bank to do so or is there any engagement with it?
Mr. Ger Mitchell:
There is engagement with the Central Bank on an ongoing basis on a wide number of issues. For sure, we have had discussions with it on our pricing. It is important to identify the distinction. There are two portfolios of variable rate mortgages. There is the standard variable rate, the historical legacy variable rate, which effectively was a blended rate from 0% finance up to 100% and beyond. In recent years it has moved to a managed variable rate and a loan to value variable rate. We led the market in that regard in May 2013. We introduced a variable mortgage rate at 3.95%. We have tried to break the link with the standard variable rate and try to reward customers who bring a greater and more sizeable deposit to the transaction.
Paul Murphy (Dublin South West, Socialist Party)
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I will begin with some questions about staff and their conditions in PTSB. Is it fair to say staff took a major hit following the liquidation of the defined benefit pension scheme in the past year or so in terms of the value of their pensions being slashed by perhaps one third?
Mr. Jeremy Masding:
I will not make a subjective response to that question. The facts are that the capital shortfall in the defined benefit pension scheme was €350 million, money we did not have. When preparing for this meeting I asked the team to quickly value the scheme if it were in place today and the capital shortfall would be €500 million. When one looked at the comprehensive assessment which still left us with a capital shortfall, the test for me was how I could keep the bank open and keep 2,300 people in work. Unfortunately, as a chief executive, sometimes one has to make choices and keeping the bank open and maintaining 2,300 jobs was of importance to me.
Paul Murphy (Dublin South West, Socialist Party)
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Yes. I am just establishing, as a background to the current situation, that workers have taken a significant hit in recent years. In that context, for example, will Mr. Masding give a commitment that there will not be pay cuts or compulsory redundancies in the foreseeable future?
Paul Murphy (Dublin South West, Socialist Party)
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In terms of how they are kept in work, there is a minor discrepancy in the reply to question No. 13 concerning the details of functions outsourced in the past 12 months. The response is that none was outsourced, but a small number of staff, approximately 70, were defined as being outsourced. I accept that that is a smaller number than in most banks. What is the explanation for it?
3:35 pm
Paul Murphy (Dublin South West, Socialist Party)
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What is outsourced now?
Mr. Shane O'Sullivan:
There are a couple of businesses outsourced. They are in this non-core space. When a business is determined to be non-core, it does not make a huge amount of sense to build the capability in-house in terms of staff numbers and expertise. For example, our commercial mortgage book was deemed to be non-core in 2011 and, as a consequence, we are not investing money and time in building capability to manage that in-house because it is non-core and it will be sold. We have engaged a third-party outsource provider, Certus, to help service that book.
Paul Murphy (Dublin South West, Socialist Party)
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Would the bank have the intention to go further in terms of outsourcing? Mr. O'Sullivan will have noted the fine that Ulster Bank got today and its IT was all outsourced. Certainly, it is arguable today that IT is core.
Mr. Jeremy Masding:
I want to go back to Deputy Paul Murphy's first question as well. I did not finish. The facts are the facts but in answer to his question as to whether my staff contributed to the success of this organisation by making real personal sacrifices, the answer is absolutely, yes. As to whether I respect them for doing that, the answer is yes. As to whether I think the performance we are now beginning to see is due to the efforts of 2,300 staff who, as the Deputy stated correctly, have taken some real personal pain, the answer is yes. Therefore, while I am sure they do not get a mention publicly very often, as their CEO, I should do that. We as a management team are very lucky to have them because of the trade-offs they have made and the performance they continue to deliver.
In terms of outsourcing, one needs to be a fairly big organisation to make outsourcing economical. All things being equal, we are not big enough to make outsourcing economical.
Paul Murphy (Dublin South West, Socialist Party)
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I have two final questions. The first relates to the number of branches. There has been a significant reduction of 25%, in line with the number of employees. Would Mr. Masding have plans to close further branches? I refer to the impact that has on communities and staff.
Mr. Jeremy Masding:
The Deputy makes a good point. Interestingly, on the roadshows, when we are talking about Permanent TSB, 76 branches seems to be very attractive to investors in a world that is becoming more digital. I inherited 92. I had to close 16 using an economic threshold. All things being equal, 76 is right-sized and will be a source of advantage over time.
Paul Murphy (Dublin South West, Socialist Party)
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Can I ask one last question?
Liam Twomey (Wexford, Fine Gael)
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The time is up, I am sorry. I let it run a little.
Gerard Craughwell (Independent)
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I will go back to the issue of tracker versus variable mortgage rates. Mr. Masding should correct me if I am wrong. One could have two next door neighbours working at exactly the same job, in exactly the same value home, with exactly the same mortgage, with one on a variable rate and the other on a tracker rate, and the difference in repayment could range to several hundred euro per month, which suggests to me that over the past six or seven years the banking sector, Mr. Masding's bank being part of it, has chosen to lean its recovery on its most loyal customers, the ones who were there with them before the boom. They have continued to increase the rates, although I accept that Mr. Masding's bank has reduced its slightly in recent times. Where does equity fit in this? Where is the customer in the middle of all of this? Is it something Mr. Masding has considered or does he not care? Is it the case that we are digging him out of a hole and the banks have decided to keep their heads down, keep the hatches battened down, say nothing and hope nobody notices?
Mr. Jeremy Masding:
I will repeat what I stated to one of Senator Craughwell's colleagues. We are conscious that we must be competitive and that has been a hallmark of this management team, which came together in 2012. That was reflected in our early decision to reduce variable rates, unilaterally and considerably.
We will continue to monitor rates closely and do all we can to reduce our cost of funds because, at the end of the day, what we are trying to build is a sustainable competitive bank for Ireland. Ultimately, we will reduce our variable rates where possible, but it would be inappropriate for me to guarantee when that would happen. I have to pull some other levers first.
Gerard Craughwell (Independent)
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I will make one last point. Mr. Masding spoke about the bank's loan-to-value rates and where the value is higher than the loan, there is a reduced rate available. He has worked on that. Is that something the bank will offer to its traditional variable rate mortgage holders? Will the bank now review those who are on variable rate mortgages and accept that it needs to help them by cutting their repayments? Is that something Mr. Masding would consider?
Mr. Ger Mitchell:
We have existing customers who have moved across to some of our managed variable rates. It comes at a cost because the charge would have to be re-registered and there are conveyancing fees and so on involved. As I stated earlier, we have increased our lending to the market by 13% and a significant portion of that has been in terms of additional advances to existing standard variable rate mortgage customers. For those customers where the value of their property comfortably exceeds the size of the mortgage, they have moved across onto the managed variable rates and benefited from a lower rate.
Gerard Craughwell (Independent)
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Has Mr. Mitchell any opinion with respect to the suggested 20% deposit when it comes to purchasing a new property?
Mr. Ger Mitchell:
There are probably two or three points I want to make on it. First, we understand what the Central Bank is trying to do. It is trying to increase the resilience of the banking and household sectors to the property market. It is trying to reinforce the credit risk mitigations tools that banks currently have. At the heart of what we have started to do in recent years is to put affordability and repayment capacity, not the value of the asset, at the heart of underwriting. The value of the asset is a secondary or tertiary issue that one looks at. We are working with Banking and Payments Federation Ireland, BPFI, in terms of the consultation period, which does not close until 8 December. As to our view on it, we advocate a more moderate approach towards the proposals and even to consider a more graduated approach. The situation is dynamic. No later than the weekend, the Governor has come out and introduced the prospect of having an indemnity guarantee. Recently, the Government has spoken about an indemnity guarantee as well. There is a lot of stuff in the air at present. We have provided our feedback constructively through the BPFI and that is the way in which we will continue in the weeks ahead.
Aideen Hayden (Labour)
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I apologise for arriving late. One of my colleagues was sick in the Seanad and I had to sit in on a fisheries debate. We are flexible in the Seanad. We are masters of everything or none, depending on one's view on fisheries policy.
I will start where Senator Craughwell left off. It relates to the Governor's statements in relation to mortgages and the consultation process. There are two issues I want to raise. First, it was mentioned that the Governor is engaging in this consultation process because these new measures will improve the resilience of the banking sector generally. The witnesses mention in their submission that they believe these new measures will have a significant impact on the availability of mortgage finance to key customer segments. They give the impression, which they have also done at this meeting, that it might be a severe measure given the market at present. As somebody who has studied housing historically, it strikes me, and Mr. Mitchell alludes to it, that the focus on customer affordability and repayment capacity is a more important matter than loan-to-value ratios for the sake of argument. This three times income is harking back to the 1970s, 1980s and earlier when we were dealing with a completely different mortgage market and a different interest rate regime than at present. The Governor has indicated that part of the reason he is doing this is to avoid another bubble in the housing market. Does Mr. Masding believe we are either in or approaching a property bubble?
3:45 pm
Aideen Hayden (Labour)
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I am sorry, but I do not know how much time I have.
Liam Twomey (Wexford, Fine Gael)
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Five minutes.
Aideen Hayden (Labour)
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I have approximately four questions.
Mr. Jeremy Masding:
That is my invite to the Ministry of fisheries Christmas party. As an outsider, I respect what the Governor is trying to do. We all know that macroprudential intervention is important for our banking system. He is trying to force people to think, the best way of doing so is by going to an extreme. My team and I have engaged in dialogue in which we have expressed two thoughts, the first of which is on having a more graduated process over time. Second, we are less obsessed with loan-to-income, LTI, ratios. I am more interested in how much people earn every month, where they spend it and whether they can afford to repay me. Working with the Governor, I want to reach that sweet spot.
Aideen Hayden (Labour)
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That is in Permanent TSB's submission.
Aideen Hayden (Labour)
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The question was on whether Mr. Masding believed we were in or approaching a property bubble.
Mr. Ger Mitchell:
The answer is "No". From peak to trough, the graph fell by 55%. On a blended average, it has recovered 40% or so. The issue is the supply of housing where demand is greatest. In July 2013, 46,000 properties were for sale. This July, there were 37,000 for sale. The level is down approximately a quarter. The lack of supply is fuelling the increase, not cavalier or liberal underwriting practices.
Aideen Hayden (Labour)
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My second question relates to a matter to which our committee will return, as we will engage in consultation with the Governor on these measures. Given the fact that they are predicated in part on a so-called property bubble that Permanent TSB does not accept exists, a position with which I agree, does Mr. Mitchell believe the proposal could damage a fragile recovery in the property sector?
Mr. Ger Mitchell:
I am not qualified enough to say whether it could, but it will obviously dampen demand and may reduce the amount of mortgage lending, certainly in the near term, as people will probably need the better part of 12 to 24 months to save an additional 10% if the full 20% deposit measure comes into play.
Aideen Hayden (Labour)
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My next question relates to receiverships on Permanent TSB's buy-to-let mortgage loan book. The number of receivers is quite low at 454. However, the bank has more than 17,000 buy-to-let mortgages that are in arrears of more than 90 days. Given the number of those on which the bank is taking legal action, the level of receiverships will increase. The committee and the Private Residential Tenancies Board, PRTB, in its most recent report recommended that tenants' rights be respected under the Residential Tenancies Act and that the Act be changed to put receivers into the shoes of landlords. Would Permanent TSB be prepared to accept this proposal?
I am running out of time. The committee has heard evidence to the effect that AIB's policy of using independent advisers to advise its customers in arrears when engaging with it has been successful. We have noted that success in our recommendations. Would Permanent TSB be willing to engage in a national scheme of this type, one funded by the banking system, to assist distressed borrowers?
Aideen Hayden (Labour)
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With a levy on the banking sector.
Mr. Shane O'Sullivan:
The devil is in the detail. Unlike some of the other banks, we have significant levels of engagement across our customer base. We have not found ourselves needing to reach out to third parties in a significant way to date. That said, we engage with some third parties that approach us proactively on behalf of customers. This has worked well with the likes of New Beginning, the Irish Mortgage Holders Organisation, IMHO, and the Money Advice & Budgeting Service, MABS. We have a good relationship with them, but we have not found it necessary to formalise commercial arrangements with brokers.
Aideen Hayden (Labour)
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The advice is more about levelling the playing field.
Aideen Hayden (Labour)
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What of the issue of receiverships?
Aideen Hayden (Labour)
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The bank would not be against supporting such a legislative change.
Arthur Spring (Kerry North-West Limerick, Labour)
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I welcome the news that the bank is lending more money, but I will get straight into the detail because of the time restrictions. What level of tier 1 capital does Permanent TSB have?
Arthur Spring (Kerry North-West Limerick, Labour)
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Where does the bank hope to get its capital to in order to reduce the cost of its funds?
Arthur Spring (Kerry North-West Limerick, Labour)
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AIB told us that its capital was at 14.8%.
Arthur Spring (Kerry North-West Limerick, Labour)
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The bank is predicting it but has not yet forecast it. To what level must the bank get in order to make a substantial decrease in the variable rate of its cost of funds - 15% or 20%? Are external banks, for example, RaboDirect, that promote themselves not as vanilla-style banking facilities, but solely as savings facilities, a threat? Three years ago, An Post was in a position to provide deposit accounts at a rate above every other financial institution and, therefore, tier 1 capital was reduced significantly.
Mr. Jeremy Masding:
There are several answers to that question. In spite of our turnaround journey, we have been able to increase our market share in retail deposits. This is a testament to the quality of my staff and the strength of the brand. As we gradually tick off the turnaround items, we will become more attractive to retail depositors. Therefore, I expect we will be able to compete.
Regarding the price we pay for those deposits, the Deputy will understand that we pay a premium over and above the pillar banks. As we tick off the restructuring plan and capital rates, the Irish public will see us as a genuine, stable competitor and, therefore, we will be able to price versus AIB and Bank of Ireland in a competitive way.
Arthur Spring (Kerry North-West Limerick, Labour)
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Mr. Masding is optimistic.
Arthur Spring (Kerry North-West Limerick, Labour)
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I will address the net interest margin of approximately 88 basis points. I presume this is the blended for all amending-----
Arthur Spring (Kerry North-West Limerick, Labour)
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What would it be for mortgages alone?
Arthur Spring (Kerry North-West Limerick, Labour)
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Surely the bank examines its different sectors and knows how profitable each is.
3:55 pm
Arthur Spring (Kerry North-West Limerick, Labour)
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Is this where mortgages fit?
Arthur Spring (Kerry North-West Limerick, Labour)
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Does Mr. Mitchell think they are above 1.21%?
Arthur Spring (Kerry North-West Limerick, Labour)
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That is the net margin. I would have presumed Permanent TSB would have had this information available.
Arthur Spring (Kerry North-West Limerick, Labour)
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I apologise but something significant was happening in the Chamber and I got dragged away.
Mr. Ger Mitchell:
We run economic models on all of our existing and new products. At present, our blended rate across our variable rate book for new business this year is 4.3%. Five costs go into this, which are the costs of the raw material, capital, liquidity, operating expenses and risk. All of these together come in at approximately 3.7%.
Arthur Spring (Kerry North-West Limerick, Labour)
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This has increased from 1.78% to 3.7%.
Arthur Spring (Kerry North-West Limerick, Labour)
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I am trying to get my head around this. What risk is attributable to new business in a market which, according to us, is in an ascendancy position at present? Is it relative to the risk attributable to previous mortgages or is it on a new basis? Is it isolated within the bank when it is being funded or is thrown in with the funding of all existing mortgages? Is this why it can be reduced to 4.3%?
Mr. Ger Mitchell:
With regard to risk models, our actuary team prepares a model which forecasts the probability of default and the loss on default, which varies depending on the loan to value of each product. This is why we are able to optimise the price for those with 50% or 60% loan to value compared to those with 90%. The costs change depending on the loan to value.
Arthur Spring (Kerry North-West Limerick, Labour)
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I would like to get into this in detail, but the Chairman is indicating that I must move along. A huge number of people are still in mortgage arrears. Last week we established how AIB is conducting itself. What is Permanent TSB's policy on people who unfortunately have had to sell their homes and are no longer in a position to sustain their loans? Anyone in this position is having a very difficult time. On Monday and Tuesday I was with people who deal with people with disabilities trying to get back into the workforce. They said the largest difference they have seen over the past ten years is that in the past five years a significant number of people, predominantly self-employed, have had mental trauma to the point where they have lost their confidence. Some people have had breakdowns and some people have needed assistance. Some people have lost their homes. It is something Irish society has never before seen. How does Permanent TSB treat these people after the sale of the house?
Mr. Shane O'Sullivan:
There is a financial answer and an empathetic answer. Our unit takes and receives 2,000 phone calls every day of the week. From our branch network we receive 300 standard financial statements every week and the subject matter is always difficult. Our staff are trained to fully understand the difficult situations in which people find themselves. We work hard to try to find solutions and I am happy to say that in the great majority of cases we can do so. Unfortunately in other cases we cannot. From our efforts to date we have learned that selling one's underlying property, be it a family home or an investment property, is difficult. We did not get it right at the start. Where a shortfall existed we sought repayment in its entirety. We have moved our position in recent times. We are willing to work collaboratively with customers to agree upfront, before the sale of the property, the outcome with regard to the shortfall if one arises.
Arthur Spring (Kerry North-West Limerick, Labour)
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Are write-down and write-off options?
Arthur Spring (Kerry North-West Limerick, Labour)
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I am glad to hear it.
Mr. Shane O'Sullivan:
If we work together to sell the property for the best price possible and there is a shortfall, if someone is prepared to commit to repaying at least 20% of the shortfall we will commit to writing off up to 80% of the remainder. We will do so over time. For some people this could be months and for others it could be years. This is the process we follow at present. For people with particular difficulties, such as disabilities, we have a trained workforce which works with them and we will push to the boundaries of what we can do to accommodate people.
Arthur Spring (Kerry North-West Limerick, Labour)
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If I could impress one idea on the bank it is that in the event people are pushed to sell their home the bank should write off all of the debt. I know it is a financial institution with fiduciary duties to its shareholders, but in no other part of the world is somebody who loses his or her home, given that it is not a trophy home but a moderate home, on the line for something as basic as putting a roof over his or her head for years to come. I was shocked to hear AIB does not write off any debt but keeps people on the line long term. I can see Permanent TSB is taking a more compassionate and realistic approach. I impress upon the witnesses the idea people should be given as much of a break as possible when they are down and out; let us get them back into the workforce. I thank the witnesses for their time.
Liam Twomey (Wexford, Fine Gael)
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I wish to follow up on the final point made by Deputy Spring. No other bank which has come before us in recent months has been writing off debt. The witnesses say at the end of the process after the house is sold and everything is closed it writes off the residual debt which is left over. Other banks are probably doing this, but none of them is stating it publicly as a policy. What is the thinking behind it? Permanent TSB is a conservative bank which exists to make money and loan appropriately. When did the bank decide that on coming to the end of the road with a person, when unfortunately the house must be taken from him or her, the loan could be written off completely? Who decided this?
Mr. Shane O'Sullivan:
We have given it a lot of thought over the past year. I go back to the point we made earlier, namely, we see a significant distinction between debt forgiveness and debt write-off. Debt forgiveness is the unilateral forgiveness of debt upfront. We do not think there is necessarily a balance of fairness in the proposition. Earlier a Senator spoke about two people living next door to each other, both of whom have the same jobs and income, and asked whether it is right that one party has debt forgiven while the other works tirelessly to repay the debt. We do not believe there is equality in this example. This is debt forgiveness, and we avoid it at all costs. However, debt write-off is a different proposition. Where people work with us as hard as they can in difficult circumstances we believe a different balance of fairness can be struck. If our borrowers are willing to sell their underlying property to repay the maximum amount of debt they and we can get from the sale of the property, we believe it is right to go a step further with them. We feel the balance we have struck, which is up to 80%, is right. With regard to other propositions, earlier we spoke about personal insolvency. We see this as having real validity in terms of resolving the debt issues our customers face. We would apply decision rules and criteria to this. We are not open to considering-----
Liam Twomey (Wexford, Fine Gael)
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I apologise for interrupting but I am quite curious about how the debt is written off. How long has the bank been doing this?
Liam Twomey (Wexford, Fine Gael)
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Did the bank have discussions with the Central Bank on this issue? Is it purely an initiative of the bank?
Liam Twomey (Wexford, Fine Gael)
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Including this issue?
Mr. Shane O'Sullivan:
We did discuss this as part of the mortgage arrears resolution strategy and targets process. The Central Bank has its own views on writing off debt at the end of the process. It is encouraged by our approach and is supportive. This is a decision we made ourselves and we are happy with how it is progressing.
Mr. Jeremy Masding:
To put this in context, we had a real issue with arrears management so we had to sit down over many hours to try to get the right menu of treatments to help as many customers as we could. It is one of a number of what we believe are quite responsible treatments for as broad a population as we can possibly help.
4:05 pm
Liam Twomey (Wexford, Fine Gael)
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This debate has been going on for years. People talk about moral hazard and about equity and fairness, but what Permanent TSB seems to be doing should become the standard norm, so the committee will definitely push that.
Liam Twomey (Wexford, Fine Gael)
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Does Permanent TSB have to take all of this into consideration?
Liam Twomey (Wexford, Fine Gael)
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It is easy for the committee to tell the witnesses to write off loans. It is not our responsibility. That is important.
Permanent TSB has written to the Governor of the Central Bank about the new guidelines for mortgages.
Liam Twomey (Wexford, Fine Gael)
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There are also issues around taking income into account. Is that right?
Liam Twomey (Wexford, Fine Gael)
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Could the witnesses give us Permanent TSB's submission?
Liam Twomey (Wexford, Fine Gael)
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I am only asking. The witnesses do not have to do that.
Mr. Ger Mitchell:
We have not written formally to the Governor or the Central Bank. We have made our submission through the Banking and Payments Federation Ireland, BPFI. It is an extensive submission, but it grounds itself on three main pillars: the focus on affordability; a moderation of some of the recommendations; and a graduation in the timing of the introduction of the measures. That is the essence of our submission to the BPFI.
Liam Twomey (Wexford, Fine Gael)
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We are going to do a report on it ourselves. Permanent TSB is clearly a significant stakeholder and we are asking all significant stakeholders for their opinions.
It is interesting that, as was mentioned, if people want to trade up that they can hold on to their tracker mortgage plus 1%. I presume that is only for Permanent TSB customers.
Liam Twomey (Wexford, Fine Gael)
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Permanent TSB does not plan on offering that to other banks' customers.
Liam Twomey (Wexford, Fine Gael)
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On behalf of the joint committee, I thank all the witnesses for participating in this meeting and for the material they have supplied to the committee. I thank them for two intense hours. I know it is intense, but I felt the witnesses were up to it, so we kept going rather than taking a break.