Bernard Durkan (Kildare North, Fine Gael)
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I thank our guests for appearing before the committee and giving us the benefit of their knowledge. I, like others in this room, have been critical of the Central Bank over a long period in the past. This is not personal and I do not want any of the witnesses to take it as personal, but there are issues which public representatives have had to face which were unusual, to say the least. They still continue. To put it in the vernacular, the banking system in this country still punishes borrowers above and beyond other borrowers across Europe for something they did wrong during the crash, and I will come to that momentarily, or for something they are about to do wrong on the basis that they are a higher risk than those elsewhere.

There is no such thing as risk-free lending anywhere in the world. It does not exist. However, we were led to believe during and immediately after the financial crash that it should have been risk free. It is not, never can be and never will be, nor should it be. That is why there is speculation in markets and so forth. I also realise, like everybody here, that we must have a stable banking system. That is fundamental to an open economy, and we must be sure there are good practices that protect the economy and protect the consumer. Reference has been made to this at length.

One of the problems I and all of us have faced is sitting down across a table from the representatives of banks which had lent money to borrowers, knowing they should not have done so. They knew it was impossible to meet the demand at a later stage but, clearly, they were of the mind that it would be all right because there was an inflationary situation and property prices would exceed all expectations. What in God's name was going on at that stage? Nobody would think like that and presume that it was going to continue. It could not happen. I am sure you, Chairman, other members of the committee and I advised countless people that under no circumstances should they borrow in the way that was being suggested to them. Obviously, people did not always take that advice. It was harsh advice at the time, and they saw people like us as impeding them and their progress. In the long run, we were speaking for their well-being. To outline what happened, no worthwhile regulations were applied at that time. Hence, the full extent of the problem.

What happened next was worse. The banks retrospectively applied good conduct on borrowing after the event. It was the most amazing performance. When the horse was well and truly bolted and galloping down the far end of the track, suddenly the banks said they were going to apply good banking practice and good regulations on the borrower, who had already borrowed far in excess of what his or her capability of repayment could and should be. On the one hand, there must be good confidence in the banking system, but on the other we must restore public confidence where the consumer is concerned.

There has been reference to the code of conduct on mortgage arrears. That has been quoted to me several times. The code of conduct benefits the bank over the borrower to a great extent. The bank tells the borrower his or her borrowings are unsustainable and, as a result, this is how we must proceed. The limit is that it repossesses the property. It might take a while, but the bank will repossess it. It will pile on interest and so forth, in many cases piling on the interest with no regard to what it is doing to people, to such an extent that there is no other way out except to liquidate the debt and repossess the property. I will not go into the emotional situation of the thousands of people who found themselves in the extraordinarily sad position of having lost or losing their homes. That was on the cards for perhaps six months or a year or whatever the case may be. It is still happening.

Does the Central Bank have the power to impose on what are now regarded as vulture funds some type of recognition for the fact that they acquired the loan books at a knock-down rate in many situations, with a discount of 30%, 40%, 50%, 60% and up to 80% in some cases? Of course, the borrower never knows what the full discount was, but the borrower must pay for it. The borrowers are now falling into what is known as distressed debt, because they have not been able to repay or discharge the loan. That is because they were never going to be able to repay it. It was not possible from the outset. The unfortunate borrowers include business borrowers and the businesses involved, who gave personal guarantees in respect of their households and so forth. They ended up in tragedy. I and everybody else in the committee have sat in front of vulture fund representatives while men and women cried openly, sought mercy and got none. That is a very sad thing with which to conclude. However, that is the way it happened.

All the time, members of the committee were tabling parliamentary questions. We could not ask too many questions in case we would cause a flight of funds, and we could not ask too many pointed questions. We asked questions as to whether the banking system and the economy were based on sound economic fundamentals. As to the number of times we tabled those questions, I sometimes dream about them. The reply was "Yes", they were. In fact, it was "No", they were not. However, nobody recognised what we were trying to say at the time. Nobody cared. There were financial regulators, ombudsmen and the Central Bank. That was presided over by all these agencies, without demur, and we know what the consequences were.

The Chairman will be glad to know I have come to this conclusion. We need some hope for those who are in what are called distressed loan scenarios. We need some recognition that the banking system, whether a vulture or original lender, is going to take into account the circumstances. They say to us "that was then and this is now". In other words, it was fine then but the banks are not part and parcel of the previous regime and the new rules will be applied now, whether people like it or not, and nothing can be done about it.

We may not be able to do anything about it now but we might have to. Instead of a continuing reference to the code of conduct and the last review of the code of conduct in 2018, I ask that the code be urgently reviewed again with greater recognition of the hardship caused to many borrowers.

Incidentally, we all know these borrowers as people who ran their businesses and homes very effectively for many years, borrowing money and paying it back, never leaving money owing to anybody. They were always able to pay it back, except when there was a convergence of a massive amount of overhang of borrowing at the same time and place, which rendered the State and the banks insolvent. It was an incredible performance but nobody accepted responsibility. Nobody came with us to the table to speak on behalf of the people who find themselves with distressed mortgages. It is within the capacity of the banks and the Central Bank to oversee a system that is fair to these people. It is a matter for the Central Bank at this stage.

A final point relates to banking competition. A number of raiders introduced themselves to this jurisdiction before the banking crash, undermining the banking system in the country by undercutting others, offering mortgages and borrowings at a rate never known before. Loans were granted on interest-only terms, so what sort of system were we in? This was meant to be the system for the foreseeable future, and it was seen as good banking according to the system that applied at the time.

I am not asking the witnesses to comment on an individual bank but if a bank moves from our system now, it will not be in the interest of the consumer or the business people served by that bank, particularly if that bank's loan book is to be transferred to a vulture fund. There is now a conundrum that the Central Bank must resolve. We cannot do it. These controls are in the hands of the Central Bank.

I would like to see us retain the level of competition within the banking system in this country and on a sound footing. Everything must be done to ensure it continues without interruption, and that in the event of vulture funds deciding they can seize an opportunity to take over a major chunk of the banking system in the country, we must remind them that they are only here in sufferance and they are only partially accountable to the Central Bank. We have asked all these questions before and there are unregulated third parties involved with borrowing in this country and taking over loan books. We asked the questions many times and were told they would be subject to usual rules and regulations but these bodies are not subject to such rules.

It is all fine to complain about this but somebody must do something about it fairly soon. I have gone long over my time, for which I apologise, but at any time in future if the Chairman wishes members to attend a meeting with the Central Bank or representatives of banks or vulture funds, we will be more than happy to attend and support.