Joan Burton (Dublin West, Labour)
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Question 89: To ask the Minister for Finance his views on whether serious challenges will remain for the banking sector here after completion of the transfer of toxic loans to the National Asset Management Agency; if, post-NAMA, he foresees significant future losses on the banks' remaining loan books including mortgages, consumer credit and commercial lending; his views on whether credit flows to businesses and households are likely to remain constrained for some time; if a continued credit famine is likely to constrain economic growth; when he expects the normal flow of credit to be restored; and if he will make a statement on the matter. [5459/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I accept that serious challenges remain for the banking sector. I have said that following the transfer of assets to NAMA it is likely some institutions will require additional capital to absorb the losses on these loans. To the extent that sufficient capital cannot be raised independently or generated internally, the Government remains committed to providing such banks and building societies with an appropriate level of capital to continue to meet their requirements. This will have to be done in a manner consistent with EU state aid rules. The level of capital that may be required has yet to be determined, though the Financial Regulator and my officials continue to monitor the position. Capital needs will only be identified once there is an indication of the haircut levels being applied to individual banks.

The banks have made, and will no doubt continue to make as necessary, provisions in respect of their mortgage books, consumer lending and commercial lending. It is a matter for each institution to decide within the appropriate regulations the level of provisions to set down for future write-downs. It would therefore be inappropriate for me to comment or speculate on the loan books of individual institutions.

The second Mazars report on credit availability, published in December, confirmed that while some SMEs are facing significant challenges accessing credit, and the sector in general is more conservative in its borrowing, nevertheless new lending is still taking place. However, the proportion refused credit, especially in certain sectors, remains a concern for Government.

Under NAMA legislation I will shortly issue guidelines to all banks participating in NAMA who lend to SMEs, to ensure that SMEs, sole traders and farm enterprises will have recourse to an independent, external review of decisions of credit refusal by the banks. I hope that banks not participating in NAMA or covered by the Government guarantee will also decide to participate. My aim is to have a simple, effective review process, run by people with experience and credibility. The banks must comply with the recommendations of the review process or explain why they cannot do so.

In addition to dealing with individual cases, the credit review system will examine the credit policies and practices of the banks in respect of SMEs. This will help me to decide what further action might be necessary to secure the flow of credit. I intend to publish the analysis from the review process so that the performance of the banks participating in NAMA will be clear to all. Work has been ongoing since December on the logistical aspects of the review system and it is envisaged that this will be completed shortly.

With regard to mortgages, the latest Central Bank statistics report, for December 2009, shows that residential mortgages outstanding were 0.3% below the figure for December 2008. However, the rate of reduction in activity in the third and fourth quarters of 2009 moderated. Many lenders are conducting extensive advertising campaigns, showing that competition is a real factor on the mortgage scene. The existence of that level of competition in the mortgage lending market is sufficient to ensure that credit institutions will lend to suitable qualified customers to remain competitive and retain their share of the market.

Joan Burton (Dublin West, Labour)
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Does the Minister agree the NAMA process is going far more slowly than predicted during the discussion on the Bill in this House? Most of us have heard the horror stories emerging from all sides in banking. A great number of distressed loans were undertaken with almost no collateral. There is great confusion about who has title to loans. Many loans were on foot of solicitors' undertakings that have not been properly completed. Professional advisers, at €240 million per year thanks to the generosity of the Minister, are crawling all over the loans. Professional advisers such as accountants, lawyers, estate agents, valuers, quantity surveyors and chartered surveyors cannot sign off these loans as high-quality loans when there is no proper title. Therefore, the NAMA process is effectively moving at a snail's pace. Does the Minister have a date for when he expects the NAMA process of transferring loans to commence?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The NAMA process of valuation and transfer of loans is well under way. Work in several major institutions will be finalised in respect of major lenders at the end of this month. Work is proceeding with considerable expedition. It is essential that the work continues with expedition.

Professional fees are being set at the lowest possible level on foot of the tenders issued by NAMA. I am satisfied these precautions are essential to protect the taxpayer in respect of the acquisition of these loans, something that was very much to the fore in parliamentary debate on this subject.

Joan Burton (Dublin West, Labour)
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The Minister made an announcement about the delegation of a significant range of banking functions to the NTMA. It seems the agency is taking over a significant quantum of functions in respect of banking that the Department of Finance used to provide. The NTMA is now to deal with the capital needs of institutions, realignment and restructuring within the institutions and the general advice on banking matters. The original date for a significant tranche of NAMA loans to be completed was pre-Christmas. In his reply the Minister has now moved that date back by about two and a half months. Countries in banking crisis, such as Sweden, acted swiftly and rapidly. It is now more than a year since Anglo Irish Bank was nationalised and more than a year since the layout of NAMA was discussed. The Minister is now saying there will be a two-month delay, at a minimum, on the start of transfer of loans. Will the Minister tell the House why he has decided to decant a significant range of functions with regard to banking, from the Department to the NTMA, given that the NTMA is also looking after NAMA? Is it that the Minister has lost confidence in the Department of Finance because of the way it has performed in the financial collapse? Has the Minister been advised by the European Central Bank what view it will take? What is the status of NAMA bonds on their six-month maturity? Can they be cashed?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy has asked a very wide range of questions. I should make it clear that as Minister I will continue to be fully responsible and accountable to the Oireachtas and that these arrangements relating to the NTMA will not result in any change in that regard. As the banking crisis has evolved, officials of my Department and the NTMA have worked together very closely. The demands of the crisis have required significant adjustments in the deployment of resources in both organisations. The recent passage of the NAMA legislation, together with the appointment of a new Secretary General at my Department, who took up work on Monday last, provided me with an appropriate opportunity to consider further the division of work between my Department and the National Treasury Management Agency. The Department will remain necessarily very closely involved with banking and financial services issues. However, the NTMA will be involved in discussions with the covered institutions on their capital needs and it will lead those discussions — although officials from my Department will be present because that is an area in which they have considerable expertise. They will be involved in discussions with financial institutions on realignment or restructuring within the banking sector. They will be responsible for managing the Minister's shareholding in the credit institutions and they will have some residual functions under the guarantee schemes.

It is important it is understood that the NTMA and the Department are working very closely together. A draft delegation order is currently being discussed with the Office of the Attorney General and I intend to remain fully accountable to the House for all these matters.

Joan Burton (Dublin West, Labour)
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I wish to ask a very brief supplementary question.

Brendan Howlin (Wexford, Labour)
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We are three minutes over time. The last supplementary question was a very long series of supplementary questions.

Joan Burton (Dublin West, Labour)
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The Minister read out a very long answer and my question is very brief.

Brendan Howlin (Wexford, Labour)
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I am afraid we need to move on.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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If I could have a question from the Deputy.

Joan Burton (Dublin West, Labour)
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The NTMA is not directly answerable to the Dáil so we are now——

Brendan Howlin (Wexford, Labour)
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Deputy Burton, please.

Joan Burton (Dublin West, Labour)
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Sorry, this is a very real point. The Minister read out very long answers——

Brendan Howlin (Wexford, Labour)
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Deputy, please, you are four minutes over time on this one question.

Joan Burton (Dublin West, Labour)
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Sorry, the Minister read out very long answers——

Brendan Howlin (Wexford, Labour)
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Other Deputies have to be accommodated.

Joan Burton (Dublin West, Labour)
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This is very brief. Where is the NTMA if it is not answerable to the Dáil?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am accountable to this House and I can give directions to the NTMA.

Richard Bruton (Dublin North Central, Fine Gael)
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On a point of order, there is an important issue here as to whether the Minister has just promised a piece of secondary legislation that will come into the House for debate. Could I clarify, with the assistance of the Leas-Cheann Comhairle, whether the Minister just announced that there will be secondary legislation that will come to the House for debate?

Brendan Howlin (Wexford, Labour)
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That is a matter on which we can check the record of the House and see exactly what the Minister said, unless the Minister wishes to clarify now.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Secondary legislation will be required to implement the announcement I made yesterday.

Joan Burton (Dublin West, Labour)
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On a point of order, this was already requested of the Taoiseach who did not seem to know what we were talking about this morning.

Brendan Howlin (Wexford, Labour)
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That is not a point of order.

Joan Burton (Dublin West, Labour)
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Will the Government provide time in the House for a full debate on this new division of functions——

Brendan Howlin (Wexford, Labour)
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That is something that is appropriate——

Joan Burton (Dublin West, Labour)
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——and arrangements with the NTMA?

Brendan Howlin (Wexford, Labour)
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——to the Order of Business or another matter. We are in the middle of Priority Questions and I call Priority Question No. 90.

Joan Burton (Dublin West, Labour)
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The Taoiseach and the Government did not give us the answer. Can the Minister give us the answer?