Brian Cowen (Laois-Offaly, Fianna Fail)

The Irish Financial Services Regulatory Authority, IFSRA, is currently studying the position on endowment loan shortfalls, having commenced a survey earlier this year to determine whether and to what extent there will be difficulties for customers. It would be inappropriate to reach any conclusions on this issue in advance of IFSRA's consideration of the outcome of the survey.

There are currently no reliable data on the overall numbers of cases where there may be a shortfall. However, endowment loan approvals in the past five years represent just 3% of the overall mortgage market, although it has been considerably higher in the past. Since 1989, a total of 90,000 endowment loans were approved, which is roughly 10% of total loan approvals since 1989.

Recent publicity on endowment mortgages has focused on the possibility that a significant number of holders of such mortgages will have a shortfall of funds when their mortgages reach the end of their normal term. These products inherently require customers to take some risk. They are exposed to market fluctuations, just like any market-based life assurance investment. The fact that an endowment mortgage holder does not gain as much as expected is not in itself an indication of any inappropriate practices on the part of the bank or insurance company concerned.

There is already a substantial volume of legislation in place on these products. For example, the Consumer Credit Act 1995 requires that all endowment loan application forms must contain a prominent notice to the effect that there is no guarantee that the proceeds of the insurance policy will be sufficient to repay the loan in full when it becomes due. The Act also obliges the provision of ongoing information on the performance of the policy, as do the Life Assurance (Provision of Information) Regulations 2001. The Central Bank and Financial Services Authority of Ireland Acts 2003 and 2004 established IFSRA and considerably strengthened the regulatory environment, including through the provision of an enhanced structure for dealing with consumers' complaints about financial institutions.

I will continue to review the adequacy of the legislative framework as the information developed by IFSRA becomes available.

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