Michael Noonan (Limerick City, Fine Gael)

One of the ironies is that in trying to punish a bank that has been totally recapitalised by the taxpayer, one ends up punishing oneself and all one's tax-paying colleagues. Not everything can be done.

The mortgage interest supplement is a very good scheme that is keeping many people out of major difficulties, but it was designed as temporary assistance for people in temporary difficulty. What we must do is move from a temporary situation to a permanent solution for people who are not in temporary difficulty and where it is clear that they will be in difficulty for years. That is why we have the alternatives as the final back-stop where a person on mortgage interest supplement is getting a lot of money from the State already. In future, an arrangement will be entered into between the local authority and the lender and it will become a social house. The person who is the mortgage holder will have a change of status from owner-occupier to tenant but will remain in the house. That has obvious social benefits. Someone asked who will decide the rent. The rent regime will be the same as that which applies to social housing. It will be no different from how rent is decided for other local authority tenants. In regard to whether an individual will ever get an opportunity to buy back his or her house, a buy-back arrangement from the original lender is not envisaged but he or she will benefit from the normal house purchase schemes applying to local authorities. Those of us who are familiar with such schemes will agree they are more beneficial than any arrangement that might be made with a lender. Many people thought our only aim was to turn owners into tenants. That will only be done in a worst case scenario.

The Deputy is correct about taking into account the entire quantum of debt because, in addition to mortgages, people can also have credit card debts, short-term credit and credit union loans. If the arrangement with the local authority is the end of a long line of options, the first option is solvency legislation. The solvency and bankruptcy legislation will provide for managing the entirety of an individual's debt. Prior to someone becoming bankrupt or insolvent, the entire quantum of debt will have to be taken into account.

Some people dismissed the Keane report without reading it. That is normal among outside commentators, although not among the Members of this House. If we can put in place the various recommendations of the report and add on to them some of the ideas that Deputies and other agencies have suggested, we will go a distance towards a perfect solution.

The prudential capital assessment review, which formed part of the Central Bank's financial measures programme, provides for an annual stress test of the capital resources of the domestic banks under a given stress scenario. The loan loss exercise in the financial measures programme, which includes estimated losses on residential mortgages, assesses the loan losses banks might experience under the base and adverse stress scenario over a three-year period and a loan lifetime horizon. The Central Bank's three-year projected base loss for the Irish residential mortgage loan book is estimated at €5.8 billion, while the adverse scenario is in excess of €9 billion. Under the PCAR requirement, the banks will be capitalised to meet the Central Bank's projected three-year stress losses. In regard to how bank recapitalisation trickles down to dealing with impaired mortgages, the banks will negotiate case by case. As the expected losses under stress are reflected in the overall figures, provision is made for writing down debts but this will be done according to the features of individual cases.

The Deputy asked me another question which I have not yet answered.

See this speech in context