Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I thank Deputy McGrath for the work he has put into preparing the Bill. Before I get into the details of the Bill I wish to give what is a hugely important issue some further context if time allows me to do so. I wish to do so by acknowledging why people have fears about this matter. I recognise their concerns and I am acting in the best way possible that I can to respond to the concerns people may have about changes that could take place in our banking system in the future. I reiterate that one of my key priorities as Minister for Finance is to normalise our banking system over time, to ensure that our banks are able to invest in households and businesses and to provide the credit and lending that is needed while at the same time putting in place the most appropriate and effective framework of consumer protection. This includes ensuring there is an appropriate framework in place for the resolution of complaints. What I want to do, and it is one of the reasons I have asked the Central Bank to conduct a review of the code of conduct on mortgage arrears, is to ensure we have the fairest and most effective support for any borrower who faces great difficulty. Alongside this, we must be careful that actions we take to offer further protection as and when loans are sold or changed do not have unintended and very negative consequences for either the banks themselves, in which we have a stake, their relationship with the regulator or, crucially for me, all the citizens who depend on a functioning banking system in their day-to-day lives.

I fully recognise the position in which families find themselves when they have arrears, facing firms with which they are not familiar, firms about which they may have concerns. All of this will make people even more concerned about what the future will hold, and I want to put these fears in context. The most recent Central Bank figures show that the number of mortgage accounts for principal dwelling homes, PDHs, in arrears fell further in the third quarter of 2017. This is the 17th consecutive quarter of decline. The number of PDH mortgages that were classified as restructured at the end of September was 119,070. Of these restructured accounts, 87% were deemed to be meeting the terms of their current arrangement, up slightly from the previous quarter. Thankfully, repossession numbers in Ireland remain low in comparison with other countries and repossessions in Ireland take longer. It is important to drill down into the repossession figures in the context of this debate and to refer to the Central Bank's figures which again emphasise the difficulty people experience when facing this final phase of dealing with debt. In 2016, the number of PDH properties repossessed was 1,693. This was made up of 1,452 repossessions by banks and 241 by non-banks. In 2017 up to the end of September, the total number of PDH properties repossessed was 1,106,982 by banks and 124 by non-banks. Much of this is due to the fact that the Government has reformed personal insolvency legislation, changed the relationships in respect of insolvency arrangements and put in place the Abhaile service to help borrowers in arrears, putting a particular focus on those who are in long-term arrears to ensure there is dedicated support for them as they work through these very difficult issues in court. More than 10,000 vouchers have now been issued for the Abhaile scheme since it began in July 2016.

To put this in further context, there have been broader changes in our banking system. Non-performing loans in the banks are now down by 60% to €22 billion from a peak of €54 billion. They are considerably higher than is acceptable in the long run, and this is the view of the single supervisory mechanism. However, even leaving this aside, to have a banking system with this level of non-performing loans causes challenges for those banks and in turn for our own economy.

We have legislation in place to protect mortgage-holders, which I have detailed. We put in place the 2015 Act. We have the code of conduct on mortgage arrears, to which I have referred, and which has played a valuable role in alleviating the acute difficulty that so many faced during the crisis. As I have indicated publicly already, I have asked the Central Bank to review this existing code and to report back as soon as is practically possible with its assessment of the implementation of the code.

We have already touched on the status of Permanent TSB. The bank is required to put in place a significant reduction in its non-performing loan ratio, which as it stands is over five times the eurozone average. The relationship that exists between me and the bank is not, as Deputy Fleming has stated, one of control. The loan sales that have taken place in the past and that are under debate this evening do not require my consent as Minister for Finance. The framework in place is a legally binding contract which cannot be changed unilaterally and it was required to be put in place during the depth of our crisis. It is true that I will be consulted on that loanbook sale when it reaches a certain point in the process, and that has not yet occurred.

As I have indicated, the Government has agreed to support the Bill. There are drafting issues on which we will work with Deputy McGrath. We have already begun a period of consultation with the Central Bank which is at an initial stage. It has raised a number of impacts and issues within the Bill that we will have to consider at drafting stage. A further matter that will require consideration by a committee of the House is whether the Bill will require consultation with the European Central Bank. Some of the matters on which I will work with the House refer to what is the definition of a "credit agreement owner" and the potential consequence of this for excluding any form of securitisation. We may need to work on this matter as the Bill is formulated to permit such vehicles as they are currently formulated but to avoid creating an opportunity for more active loan-owner purchasers to structure themselves in a way that would fall outside the scope of the Bill.

This is not just a theoretical matter, it is a very important one.

I also have some concerns about how we will square the practicalities of regulating loan owners with commitments on the free movement of capital in the EU and EU competition law, and these are matters that will require further exploration.

There are other technical matters in the Bill that will require drafting and work and I hope many of these can be resolved quickly and without any difficulty. I take this opportunity to make my Department and officials available to provide any drafting support we can in advance of the consideration of the Bill at pre-legislative committee. We may be able to progress the Bill quicker this way than by the line-by-line amendment process which takes place later on Committee Stage. I will work with the Dáil and committee on this matter.

I have already made clear that I have met a number of the main banks as part of my normal engagement process. I made clear to them that they need to be very cognisant of customers' concerns in relation to their actions.

The framework the previous Government put in place played a very valuable role in alleviating many of the darkest difficulties that many feared would develop then. The framework in place is one that has played an effective role. I recognise strongly the concerns and fears that have been ignited by a decision taken by a bank that is independently regulated, with which I have a very strictly governed legal relationship. Given that I recognise the issues at stake I will accept the Bill on behalf of the Government, work on it through pre-legislative scrutiny and on Committee Stage to deal with the technical issues which I think we can deal with quickly and the more substantial issues that will require work. In parallel with this, we will ask the Central Bank to continue its work in reviewing the code of conduct on mortgage arrears to ensure that if the overall framework can be strengthened in a way to maintain the balance we find a way to do so.

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