Ms Aileen Gleeson:

I thank the committee for the invitation to assist it in carrying out its important work on homeowners affected by defective concrete blocks. I am a principal officer in the shareholding and financial advisory division of the Department of Finance. I am joined by my colleague, Louise Heenan, from the banking division. The Government is deeply concerned with the extremely difficult situation faced by homeowners whose houses are affected by defective concrete blocks. Overall Government action to address this serious problem is led by the Minister for Housing, Local Government and Heritage. On a general level, the Minister for Finance is of the opinion that the existing financial services consumer protection framework is strong and should be fully applied to assist households impacted by defective blocks. This regulatory framework seeks to ensure that mortgage creditors are transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle. Regarding the provision of credit for a housing-related purpose, the consumer protection code requires lenders to gather appropriate information on the consumers' needs and objectives, personal circumstances and financial situation. This information is used to assess the suitability and affordability of credit for the consumer. The European Union (Consumer Mortgage Credit Agreements) Regulations 2016, which transposed the 2014 mortgage credit directive into Irish law, also place an obligation on credit providers to assess the creditworthiness of borrowers. It further provides that regulated lenders should only make credit available where the result of the creditworthiness assessment indicates that the consumer's obligations are like to be met in the manner required under the credit agreement.

The regulatory framework also contains measures on the assessment of properties for mortgage lending purposes by banks and other lenders. The European Union (Consumer Mortgage Credit Agreements) Regulations 2016 provide that lenders are required to use reliable standards when carrying out a property valuation of a residential immovable property for credit purposes. In addition, the Central Bank mortgage lending regulations, namely, the Central Bank (Supervision and Enforcement) Act 2013 (Housing Loan Requirements) Regulations, apply certain loan-to-value and loan-to-income requirements on residential mortgage lending by regulated institutions. Lenders also have a limited flexibility at their own discretion to provide a certain level of mortgage lending in excess of these thresholds.

Within this broad regulatory framework, decisions on credit applications and the type and nature of collateral which lenders accept for residential lending purposes, is a business matter for individual regulated lenders. The Minister for Finance, Deputy Michael McGrath, nevertheless is strongly of the view that banks should positively engage with mortgaged homeowners impacted by defective concrete blocks and assist them as far as possible. As members are aware, some homeowners have identified a challenge whereby they are not in a position to fund the commencement of remediation works before receiving their first grant payment. As one option to address this issue, Banking and Payments Federation Ireland, BPFI, submitted a proposal to the Department of housing setting out a potential approach to resolve this issue. The BPFI in essence proposed that upfront funding could be provided, which would be repaid to the lender once the grant payment was issued. The BPFI advised that a State guarantee would be required to ensure that any affected homeowner could access this funding. Following an examination of the proposal, we informed our colleagues in the Department of housing of important legislative and operational issues that would arise for consideration, such as the need for an appropriate statutory basis. To effect this guarantee, it would be necessary for legislation to be brought forward by the Minister for housing.

Second, on the treatment of such a guarantee for balance sheet purposes, the preliminary view was that this would fall within the definition of a standardised guarantee and would be recorded as Government expenditure upfront. Third, legal advice may be needed to determine if the proposed scheme might constitute state aid. Through our engagement with the BPFI, we also understand that to operate this scheme, it would be necessary to develop new and bespoke IT systems in collaboration with local authorities. This information assisted our colleagues in the Department of housing with their assessment of the options available to them to address the funding issues raised by homeowners.

The Government will continue to work to ensure that the scheme operates effectively and consistently for homeowners who access it and the Department of Finance will continue to work with the Department of housing on this. We look forward to engaging with the committee on this matter and are open to any questions. I thank the committee.