Peter Mathews (Dublin South, Independent) | Oireachtas source

I welcome the Minister for Finance, Deputy Michael Noonan, to the House and thank the Ceann Comhairle's office for selecting this Topical Issue for debate. It concerns a hugely pressing issue for hundreds of thousands of households in this country. As public representatives, we must always seek to convert statistics and figures to give us a sense of how they impact on people. The Minister understands that better than anyone. It is what politics and fairness are all about.

Deputy Michael McGrath introduced a Bill in this House on 31 March concerning the standard variable rate being applied by the banks to residential mortgage accounts. That debate was very important. Deputy McGrath highlighted that Allied Irish Banks which, together with Bank of Ireland, is one half of the duopoly of pillar banks, has 130,000 variable-rate mortgages, Permanent TSB has some 80,000 such customers, and Bank of Ireland has approximately 70,000. AIB is charging, on average, a variable rate of 4.15% on its mortgages, while Bank of Ireland and PTSB are charging, on average, 4.5%. However, the current eurozone average for variable standard-rate mortgages is 2.5%. In other words, these banks are charging a shocking and extortionate rate of almost 70% more than the eurozone average. That is not right.

The two main banks should not be allowed to retain a duopoly hold over the nation in respect of loans they advanced into the credit pyramid and bubble they created. I have in front of me figures which illustrate the calculable culpability of all the banks by reference to their funding models, as they call them. In fact, there is no such thing as a funding model. Rather, there are funding principles, because the principles of banks funding their assets are determined by bank boards. Unfortunately, that issue is not even being addressed in the banking inquiry, which is a shocking indictment of the approach being employed. By referring to the banks' balance sheets, which are the financial evidence of what the bank boards decided as policy, over the seven years from 2001 to 2008, we see there was a reckless departure from 90% loan-to-deposits ratios to a 173% weighted average. That was wrong. It is wrong that people who have the legacy loans from that era are being forced to pay an extortionate super-profit margin above the normal new loans margin.

Today I took a walk to visit some the nearby branches of the main banks. AIB on Lower Grafton Street has a sign emblazoned above its door advertising a mortgage awareness day which took place on Saturday, 21 March 2015 from 10 a.m. to 3 p.m. There is a great deal of irony to contemplate there. By God, that bank's variable standard-rate mortgage holders are very much mortgage aware. In the case of Bank of Ireland, there was an advertisement showing a house and the text: "Need to move? We pay your stamp duty to the value of 1% of your mortgage." Of course, there is no mention that this 1% will only apply, at most, to 80% of the cost of the property. That is another illusion, a lie to tempt people innocently into tying themselves to Bank of Ireland, as the bank describes it, "for small steps, for big steps, for life". The bank's 80,000 standard variable-rate mortgage holders certainly are in it for life, paying a 2% super-profit over eurozone rates for a euro loan. That is simply wrong.

The Minister must bring the banks to heel on this issue. Bank of Ireland, in particular, is out of control. Until nine months ago, its board of directors included an individual who made a profit of €500 million from his small investment of €350 million, which was a one-way bet into profit. He has since gone back to America. It is instructive to consider the backgrounds of the 12 remaining directors. The governor is British and has mainly been involved in the Lloyds Banking Group. Kent Atkinson is also British and previously with Lloyds TSB. Next we have Richie Boucher, who spent a lot of time at the Royal Bank of Scotland. Pat Butler was in the resolution group in McKinsey & Company. We have Tom Considine, a former Secretary General of the Department of Finance, former member of the advisory committee of the National Asset Management Agency and a former board member of the Central Bank of Ireland. James Herron is British and formerly of Invest Northern Ireland. Andrew Keating is only a young man but formerly worked with Ulster Bank. Patrick Kennedy, like Pat Butler, was formerly with McKinsey & Company. John Moran, like Tom Considine, is a former Secretary General of the Department of Finance. Davida Marston is another director who is British. My point is that most of these people have no empathy for or understanding of their Irish customers, yet they are the men and women who decide the policy of the bank and decide what the variable rates will be and if and when they are changed.

Bank of Ireland reported a profit of €1.1 billion in 2014, which followed a loss of €1.7 billion the previous year.

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