Pearse Doherty (Donegal South West, Sinn Fein)
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7. To ask the Minister for Finance the numbers of times State-backed banks have vetoed proposals in the personal insolvency process in cases in which they were the majority creditor. [45944/14]

Pearse Doherty (Donegal South West, Sinn Fein)
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In recent exchanges with the banks at the Joint Committee on Finance, Public Expenditure and Reform a very stubborn approach to struggling families has been taken, particularly by Bank of Ireland. Its approach has become clear once more. Mr. Boucher of Bank of Ireland has claimed he is not aware of a single case in which his bank wrote down mortgage debt. He has suggested the bank has voted in favour of personal insolvency arrangements in 45 cases. The committee asked him to supply information on whether any of these cases involved the write-down of mortgage debt. Two weeks later we are still awaiting the information. It is clear that Bank of Ireland has a policy of not supporting any personal insolvency arrangement that involves a write-down of mortgage debt. The Taoiseach said in the House two weeks ago that "there is, as yet, no definitive evidence of banks vetoing proposals." To what degree are the banks playing ball with the legislation introduced by these Houses?

Michael Noonan (Limerick City, Fine Gael)
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The information I am giving the House has been provided by the particular institutions. So far this year, AIB has been the controlling voter in 78 cases of personal insolvency process proposals. It voted in favour of the proposal in 51 of the 62 personal insolvency arrangement cases and against it in the other 11. AIB voted in favour of the proposal in all 16 debt settlement arrangement cases. When representatives of AIB appeared before the Joint Committee on Finance, Public Expenditure and Reform in October, they noted that the bank exercised its veto only if too much of a dividend was going out to unsecured debt.

When representatives of Bank of Ireland appeared before the Joint Committee on Finance, Public Expenditure and Reform in October, they confirmed that the bank had voted in favour of personal insolvency arrangements in 45 cases, or 76% of all such cases, in which it was a participant in the 12 months since the launch of the insolvency service. When representatives of the bank appeared before the joint committee in April, they confirmed that the bank's policy was to veto proposals where secured debt was to be written down.

Permanent tsb has informed me that since inception of the insolvency service, seven personal insolvency proposals have been vetoed in cases in which it was the majority creditor. It has voted in favour of the proposal in 13 instances in which it was the majority creditor.  With regards to debt settlement arrangements in which permanent tsb held the majority vote, it voted in favour of three and against one.  Permanent tsb has noted that each case is assessed on the basis of its individual merit. I have been informed that the bank generally decides to use its veto because it can offer the customer a long-term sustainable and affordable treatment without the need for a personal insolvency arrangement, or because of financial reasons such as proposed fees or dividends.

Pearse Doherty (Donegal South West, Sinn Fein)
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I thank the Minister for giving that information. It is probably an understatement to say the personal insolvency system is clearly not functioning as it was intended to do. Representatives of the Insolvency Service of Ireland are travelling around the State to inform people and try to raise awareness, which is to be welcomed. I am aware that the Personal Insolvency Act 2012 is to be revised soon. I have not seen any indication from the Government that the major flaw in the system which was identified by Sinn Féin and those who work at the coalface with people who are struggling to pay their mortgages when the personal insolvency legislation was debated here will be addressed. I refer to the section of the 2012 Act which allows a bank that is a major creditor to veto any proposal made by a personal insolvency practitioner. The problem is that the Minister can bring the banks to water, but he cannot make them drink it. It is clear that Bank of Ireland, in particular, has set its face against the spirit of the legislation. The Minister who owns 15% of Bank of Ireland has confirmed in his reply that it is the policy of the bank to veto personal insolvency arrangements proposed by personal insolvency practitioners "where secured debt is to be written down." As a 15% shareholder in Bank of Ireland, can he say this policy is simply not acceptable and should be reconsidered by the bank? Will he emphasise that the personal insolvency system is intended to deal with both secured and unsecured debt? Will he make it clear that Bank of Ireland should co-operate fully with it?

Michael Noonan (Limerick City, Fine Gael)
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While the initial take-up of insolvency solutions has been low, it should be noted that the number of cases in the system has increased to over 850. These cases will be worked through in the coming weeks and months. The fact that the Insolvency Service of Ireland is now in place has acted as a catalyst in encouraging debtors and creditors to reach bilateral deals to address insolvencies. In the absence of bilateral agreements, the new statutory framework mechanism will require all relevant creditors to engage with and respond to insolvency arrangements proposed by debtors. One of the features of the relationship between the Department of Finance and the banks in which we hold shares is that we do not interfere in commercial decisions. As the banks operate in accordance with law, they are entitled to do what they do. I will not interfere with their commercial decisions. There is some tweaking required in the legislation. The regulatory regime has already been changed somewhat in respect of fees, etc. and a review is being conducted. As the Deputy knows, the legislation was principally driven by the Department of Justice and Equality and the Minister for Justice and Equality will introduce proposals in this regard.

Pearse Doherty (Donegal South West, Sinn Fein)
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The take-up of the personal insolvency arrangements has been pathetic when measured against the expectations this Government had to deal with the mortgage crisis. The former Minister for Justice and Equality, Deputy Shatter, said that approximately 15,000 applications for debt settlement arrangements and personal insolvency arrangements would be applied for each year plus a further 3,000 to 4,000 applications for debt relief notices. As the Minister mentioned, there are 850 in the system and at the end of quarter three of this year there were only 1,200 applications in total since the very start. It is not working.

If other banks took the same approach as Bank of Ireland to veto every proposal that requires a debt write-down of secured mortgage debt it would be dead in the water. Some banks are engaging with the spirit of it but no personal insolvency practitioner, PIP, should put forward a proposal to write down debt with the Bank of Ireland because the bank will veto it.

The Minister mentioned the need for tweaking but is this core area of the legislation up for tweaking or will he allow the Bank of Ireland and other banks deal with it at their leisure?

Michael Noonan (Limerick City, Fine Gael)
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The take-up was slow initially but there was an expectation that there would be a slow start to this new legislation in this jurisdiction. The recent Insolvency Service of Ireland, ISI, quarterly statistics were published in October and in summary, during quarter three, 61 debt relief notices, 22 debt settlement arrangements and 48 personal insolvency arrangements were approved. In addition, there were 137 bankruptcy adjudications in the third quarter of 2014 following the reduction in the duration of bankruptcy to three years. In the year to the end of the second quarter there were 301 bankruptcy adjudications compared to 58 in the whole of 2003. Steady progress is being made. As the new staff settle in the new legal framework is proving to be quite effective and helpful. Its very existence is giving an impetus to bilateral arrangements between banks and persons in mortgage difficulty. The Department of Justice and Equality is carrying out the review, which will consult with the Department of Finance but as yet I have no clear indication of that.