Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

7. To ask the Minister for Finance when he, in his capacity as Minister for Finance or as a member of the Economic Management Council, last met the State supported banks for an exchange of views on issues affecting the economy, including mortgage arrears, variable interest rates and lending to small and medium enterprises; and if he will make a statement on the matter. [13054/15]

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

The purpose of this question is to ascertain the level of engagement of the Minister for Finance with the banks, in particular with the banks in which the State is a shareholder. We own a number of the banks. We have a minority shareholding in Bank of Ireland. The Minister is a member of the Economic Management Council and it is appropriate that he would engage with the banks regularly on key issues of concern in the economy such as interest rates, mortgage arrears and lending to the SME sector.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I can confirm that I last met the CEOs and senior management of the each of the banks last July when we discussed, among other matters, the issues included in the Deputy's question. I also met the CEO of Permanent TSB in the past month. In addition to my own meetings with the banks, officials in my Department meet senior management of each of the banks each month at least. The agendas for these meetings are wide-ranging and typically include updates on mortgage arrears, lending volumes across all portfolios, product pricing and profitability. My officials keep me briefed on these developments.

On the specific question of mortgage arrears, the banks' arrears management teams provide updates on current trends and initiatives being taken by the banks to assist customers in financial difficulty and the distressed credit environment in general. In the case of SMEs, AIB and Bank of Ireland submit their lending plans to the Department and the Credit Review Office at the beginning of each year. The banks also meet the Department and the Credit Review Office every quarter to discuss progress. The Credit Review Office is also available to review cases where credit facilities up to €3 million are refused, withdrawn or offered on unreasonable conditions. There are more than €2 billion of State supports available in the SME and farming sector, including large supports from Enterprise Ireland and the Irish Strategic Investment Fund.

On the topic of variable interest rates, the Deputy may be aware that this was subject to lengthy discussions with the banks' CEOs at the most recent meetings of the Joint Committee on Finance, Public Expenditure and Reform. At those meetings the banks pointed out that in comparing the standard variable rate mortgage margin of Irish banks with other jurisdictions, it is important to understand that the difference reflects many factors and loss experience, in particular, which determines the capital that must be held against these loans. In recent years this has obviously been very different for Irish banks compared with their counterparts in other European countries. Funding models also differ between Ireland and other countries. They pointed out the shortcomings of comparing mortgage rates against short-term ECB funding rates, given the significant liquidity risk which is a feature of mortgages that typically have a 20-year term.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I respect the fact the Minister does not run the day-to-day business of the banks and that there is a relationship framework in place to provide for that separation. I would expect, however, the Minister and other members of the Government to have regular and ongoing engagement with the banks, in particular the State-supported banks, on the key issues of concern to the people and the economy, such as interest rates, the handling of mortgage arrears and the issue of lending to the SME sector.

The Economic Management Council last met the banks in June 2012, almost three years ago at this stage. At that time there was a detailed discussion on mortgage arrears. The Minister has stated he met the CEOs of the banks in July last year. This level of engagement is not sufficient. It is helpful and to be welcomed that the Minister's officials regularly meet the senior management of the banks. When the CEOs of the banks are contacted, however, and a meeting is requested by the Minister or with the Economic Management Council - we have many issues with that council but it exists and it might as well use its powers and influence - there has not been any meeting with the banks since June 2012, and I find that extraordinary. There is a need to step up engagement with the banks on those key issues, while respecting that a relationship framework is in place which separates the Minister from the day-to-day management of those banks.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

There is a relationship framework in place, the details of which the Deputy is fully aware of. My officials meet the banks every month. They are sometimes in daily contact with them on specific issues. Otherwise it is weekly contact. I work with my officials who brief me and I give them my view. I transmit views to the banks through my officials. There is merit in doing it on a hands-off basis because it would not be appropriate for very frequent meetings between the political side and the commercial side. It gives rise to the suspicion that there is political interference in commercial decisions. I favour a hands-off approach but I favour a full flow of information. That is the way it is organised in my Department.

The banks do not report to the Economic Management Council. That was one specific occasion when one specific set of issues needed to be discussed at a very high level in Government. The Department of Finance is the interface with the banks because we are the shareholders. I am the shareholder in the banks. There is constant and regular contact with officials who report to me in detail, both verbally and in writing.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

To an extent there is also merit in a hands-on approach. If there is a lack of direct engagement by senior people in the Government, this sends a signal to the banks that the Government endorses their approach and is satisfied with what they are doing in respect of mortgage arrears, interest rates and their role in lending to the economy.

The Minister was far from hands-off when it came to meeting people from private equity funds or so-called vulture funds. He met them eight times in 2013 and 2014; personnel from the Department met them 65 times. In contrast, there were five meetings with advocacy groups for those in mortgage arrears and the Minister attended none of them. The Minister can be quite hands-on when he wants to be in dealing with vulture funds but he certainly has not been hands-on in using his very significant influence with the banks on the issues of concern to the Irish people.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Those are just accusations of a personal nature. When the Deputy cannot make any ground in a logical argument, it is an attempt to introduce some kind of smear.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

It is not. Those are facts.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I meet the appropriate people. There is nobody at any senior level in any of the banks who does not know that what is being done is being monitored very closely by the Department of Finance and me.