Stephen Donnelly (Wicklow, Independent) | Oireachtas source

I take the Minister's points on board but I support Deputy Collins' amendment. I would disagree with the Minister's economic analysis. He may be right but I do not think he is for two reasons. Last year, the IMF conducted a 100 year review of the way countries have successfully got out of mortgage crises and it concluded that the only two countries where it ever worked were Iceland and Norway. In Iceland and Norway they did something similar to what Deputy Collins spoke about, which is a very broad write-down of mortgage debt. I met two Icelandic Members of Parliament yesterday to ask them how they managed to do that without destroying their banking system.

They informed me that they had split their banks in two, namely, into good banks and bad banks and that the former retained the functioning assets. I am currently involved in drawing up a paper on a debt-for-equity product which would allow something similar to happen here but without the banks being obliged to take a write-down. I disagree with the Minister's economic analysis. I believe the opposite is the case, namely, that job creation and economic growth will only occur and that emigration will only be stemmed when the quantum of household debt is brought back down to a sustainable level. The latter will require the banks to play ball in a way in which I have no faith in them doing.

In the context of the mechanism under discussion, I would like to consider the case of a couple who engage with a personal insolvency practitioner who then engages with their bank on their behalf in circumstances where a reasonable personal insolvency arrangement can be arrived at. Some banks are already engaging in this fashion. To its credit, AIB has made some very positive noises in this regard. Let us imagine that there is equity in the house owned by the couple to whom I refer but they cannot pay off their mortgage. With some restructuring, they could retain their house but their bank indicates that it has no interest in retaining them as borrowers for the next ten, 15 or 20 years. It then states that it is taking in the house and calls in the full mortgage. The bank proceeds to seek repossession and, as a result of the provisions in section 2, the judge states that there is a deal to be done and that the parties should try to arrive at a personal insolvency arrangement.

The bank then states that while other financial institutions are restructuring in circumstances such as those I have outlined, it is not doing so. It further indicates that it is not interested in such arrangements, that it no longer wants the debt on its books and that it is taking the house and is going to sell it on. The personal insolvency practitioner informs the judge at the next court hearing that it is his or her opinion that there is a personal insolvency arrangement to be arrived at, that such arrangements are being arrived at by other banks and that the bank in question is refusing to play ball. The bank then states that the latter is the case and insists on taking possession of its asset. Can anything else be done at that stage or is this how the Minister sees matters playing out in the context of the powers the banks retain to ignore reasonable personal insolvency arrangements and repossess properties? I am of the view that banks will repossess in circumstances where the house on which a mortgage is held is not in negative equity. Will the Minister outline whether that is his understanding of how the banks might enforce their rights?

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