Áine Collins (Cork North West, Fine Gael) | Oireachtas source

Every member of this House recognises that the mortgage crisis and the huge level of indebtedness is the next big problem that must be solved. Fianna Fáil now seems to have all the solutions but it must never be forgotten that it was Fianna Fáil that caused this problem in the first place by its inability and unwillingness to rein in the housing and building boom because of its close association with developers. It must also be remembered that this is not the first time a Fianna Fáil Government has brought this country to the verge of bankruptcy because of its close association with questionable business interests. Initially this was done through the establishment of Taca, a secret society of friends of Fianna Fáil which continued for many years and in many forms such as the infamous Galway Races tent. From 2000 to 2006 Fianna Fáil put the interests of these friends ahead of the interests of the country creating unaffordable budget deficits and robbing this country of its sovereignty, resulting in Ireland's entering a bailout programme. It also pushed up the cost of development land and houses to an unsustainable and unaffordable level which has created massive negative equity.

Having clearly stated the origins of the problems we must move on to solving the problems. There is no easy or quick fix solution. Every action taken is a double-edged sword. Every mortgage written down reduces the capital ratio of the bank. Many people say the banks have already been capitalised by the taxpayer to achieve this, but if this is not done in a careful way the banks will require extra taxpayers money to maintain their capital ratios. The banks will, rightly, face another stress test next spring. The European stability fund is not operational yet but we hope it will be sometime early next year after the German elections. Until this is achieved there will have to be a balancing act between the amount of mortgages and debts the banks can write off and their requirements to maintain proper capital to stay within European guidelines. Otherwise the taxpayer will have to step in again to bridge the gap.

To clearly understand the extent of this problem it should be noted that the outstanding balance on residential mortgage accounts in arrears over 360 days was over €11.4 billion at the end of June 2013. In the buy-to-let sector the number of accounts in arrears of more than 90 days was 29,369 and the outstanding balance on these accounts was €8.6 billion at the end of March 2013. There is no magic bullet and each case would have to be looked at on a case-by-case basis.

As a nation we intend exiting bailout programme this year. We are on course to achieve this, however to be successful the market assessment of creditworthiness is crucial. We must be very diligent to ensure our level of personal debt does not interfere with this process and work with our European partners to establish the ESF, which will complete the separation between sovereign debt and banking debt. This Government, during the first half of its term, has concentrated on dealing with our huge sovereign debt, which we inherited from Fianna Fáil. We renegotiated the troika deal, ended the bank guarantee and rebuilt Ireland's reputation in Europe and globally. During our very successful Presidency of the EU we advanced the policy of separating bank and sovereign debt which will, hopefully, be quickly finalised after the German elections. Meanwhile this Government has begun the process of dealing with the crisis and key policy issues such as the Personal Insolvency Act, the Insolvency Service of Ireland, a set of Central Blank targets, the review of the code of conduct published by the Central Bank, the mortgage-to-rent scheme, split mortgages, sale by agreement and trade-down mortgages have all been implemented.

We are very disappointed with reports from the banks to the finance committee. It is obvious from their response that many banks relied on letters threatening repossessions in the solutions offered to customers to meet their targets. This is not good enough and I am glad to see the Central Bank is working with the banks to ensure 15% of their customers in arrears must be dealt with by the end of this year and 25% by the end of March. There are inherent dangers to this approach. We can already see how the buy-to-let business sectors the banks are going after low-hanging fruit and calling in loans where assets exceed the borrowings, not allowing the insolvency solutions time to work through. I am confident this Government and the Minister for Finance, Deputy Noonan will get this balance right.

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