Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I thank Deputy Phelan for raising this very important issue. As the Deputy will be aware the relationship framework with the bank provides the State cannot intervene in the day-to-day operations of the bank or its management decisions. These frameworks are published on the Department of Finance's website. The Minister for Finance must ensure AIB is run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State.

I understand AIB is acutely aware of its fiduciary duty to protect taxpayers' money and can only write down residual debt if there is no prospect of that debt being paid back or no affordability to pay it back. From the bank's perspective, it is not possible or practical to set out absolutely strict guidelines on applicable levels of write-down as each case is different and circumstances vary from customer to customer. However, once it has been determined a customer's level of net disposable income does not allow for a standard forbearance solution, it is sometimes necessary and economically sensible to involve debt compromise as part of the overall resolution. This debt flexibility usually arises in the application of a split mortgage or a voluntary sale for loss arrangement. All resolutions offered to customers in difficulty are assessed on the basis of the borrower's maximum affordability in respect of his or her mortgage.

The approach of the Government on this issue has been clear, and it is that mortgage holders and other borrowers who can meet their loan obligations should continue to do so and that appropriate assistance should only be afforded to those mortgage holders, or other borrowers, who experience real and genuine difficulty in meeting their commitments. This approach was recommended by the Keane report, which recommended against blanket debt write-off on affordability and distributional grounds. It is clear the vast majority of mortgage holders can and will continue to meet their mortgage commitments.

The Government's strategy to assist those in genuine and significant mortgage difficulty is built around measures in four distinct areas. These are personal insolvency, which the Deputy mentioned, a mortgage advisory service, the mortgage to rent scheme, and engagement with the banks. Considerable progress has been achieved across this strategy. This strategy is being managed across several Departments and reflects the fact there is no single solution to the mortgage arrears problem.

The Central Bank's code of conduct on mortgage arrears, the CCMA, also provides a strong consumer protection framework to ensure borrowers struggling to keep up their mortgage repayments are treated in a fair and transparent manner by their lender, and that long-term solutions are sought by lenders with each of their borrowers. The CCMA provides an integrated package of consumer protection measures for borrowers facing or in mortgage arrears. It seeks to deliver on the following principles: to ensure appropriate resolution of each borrower's arrears situation, to ensure lenders deal with borrowers in a fair way, to support and facilitate meaningful engagement between lenders and borrowers and to ensure borrower awareness of the benefits of co-operating with the lender and the consequences of not co-operating.

In its mortgage arrears resolution targets, or MART process, the Central Bank has set clear targets to require the main mortgage lenders to propose and conclude sustainable solutions to mortgages which are more than 90 days in arrears. However, the appropriate solution in each individual case is one for the bank and lender to conclude having regard to the particular circumstances involved. So far, lenders have reported to the Central Bank they have met the quarter two and quarter three targets for 2013.

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