Pearse Doherty (Donegal, Sinn Fein)
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I have been raising an issue with the Minister for Finance, Deputy Michael Noonan, for quite some time now, seeking to get accurate information on the macro-prudential limits on mortgage lending that were introduced by the Central Bank on 9 February 2015. Obviously, the Minister of State, Deputy Eoghan Murphy, is aware that the Central Bank called for submissions last week with regard to the review it is carrying out on these limits, as well as submissions on the loan-to-value and loan-to-income limits that it introduced. I ask the Minister to facilitate the publication of the most important evidence there is of the working of these rules, which is the amount of leeway on loan-to-income and loan-to-value that the rules allow for that the banks are actually using. That is critical. Under the existing rules, 15% of qualifying loans can be dealt with as exemptions from the loan-to-value limit and 20% as exemptions from loan-to-income limit. What does this mean? It means, if one looks at AIB as an example, that AIB could have issued €400 million worth of mortgages in 2015 that did not comply with the loan-to-income rules. That is what 20% of their mortgage lending would have been. It would have been about €300 million if it was solely on loan-to-value.

What we need to know is whether this flexibility that is built into the rules is being used by the financial institutions and whether it is being completely used. They are sensible rules in my view and should be used to the maximum of their ability in terms of the exceptions that are there. In my view, it is those on lower incomes whom the rules narrowly disqualify, rather than a large number of bigger loans, who should be availing of these exceptions. Thanks to my persistence in seeking replies to parliamentary questions, we see that 11% of the qualifying loans issued by Permanent TSB in 2015 were under the loan-to-value exception, while the Central Bank rules allow for 15%. The Minister has refused to direct AIB to publish its figures. I cannot see why that is the case, because we need all of the information available. Both Permanent TSB and AIB should be publishing these figures in a way that is very easily digestible to the public and that can feed into the review by the wider public and by Members of this House in terms of the evidence-based review that the Central Bank has called for. As long as these figures are unpublished, there must be questions about whether the banks are simply using the rules or whether they are hiding behind the rules and the real problem is that they are simply not lending. We will not know that until we know that they are using the 20% exception on loan-to-income ratios and the 15% exception on loan-to-value ratios to the maximum ability and that they are using them for a large number of people on low incomes instead of for the bigger loans, which would use up a lot of the percentage base.

There can be no evidence-based submission without evidence. That is what goes to the core of this issue. We need to be empowered with regard to making an accurate submission. I do not see how I could make a submission not knowing if this exemption is being used or not. If the Central Bank does not want to be accused of running a sham exercise, it must work with the Department of Finance to release these figures. Following the Minister's refusal when I asked again that he direct AIB to release these figures, I wrote directly to the Central Bank and it provided an ambiguous reply saying that it had obligations under section 33AK and EU law, but it went on to suggest that it would publish the figures that I am calling for now so that we can feed into an evidence-based review. The Central Bank says it will publish the figures after the review and the submissions are concluded. I ask the Minister of State if he will facilitate me and anybody else who wishes to have an input into this important review by supplying a crucial part of the evidence, which is whether the banks are using the exceptions that are available to them.

Eoghan Murphy (Dublin Bay South, Fine Gael)
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I thank the Deputy for raising the issue and I am aware of his interest and persistence on this matter. I am glad that he acknowledges that the rules are sensible.

The Central Bank's macro-prudential limits on mortgage lending came into effect on 9 February 2015. The policy sets restrictions on the loan-to-value, LTV, and the loan-to-income, LTI, ratios on products that can be offered by mortgage providers. The Central Bank has an independent mandate to promote and protect financial stability and these residential mortgage lending macro-prudential measures were put in place by the Central Bank with the objective of increasing the financial resilience of the banking and household sectors and reducing the risk of bank credit and house price spirals in the future.

There are a number of exemptions allowed for within the Central Bank guidelines - for example, for mortgage switchers or forbearance cases. The banks are at liberty to use these exceptions to the extent they see fit and will likely do so with consideration to their risk appetite, lending policies and overall strategy. The measures provide that residential mortgage loan approvals issued after 9 February 2015 will be subject to specified LTV and LTI restrictions. Any mortgage loans sanctioned prior to that date are not affected by the new rules even where the mortgage is drawn down after 9 February.

Subject to certain exceptions, the restrictions that apply to mortgage lending are: a maximum LTV mortgage of 80% of the value of a principal dwelling house for non-first-time buyers; a maximum mortgage LTV of 90% for a property valued up to €220,000 for first-time buyers, subject to an 80% LTV on any excess value above that amount; a limit of 70% LTV on buy-to-let mortgages; and an LTI limitation of three and a half times a gross annual income for loans only.

Certain other types of primary home residential lending fall outside the scope of the new rules. The LTV and LTI limits do not apply to the refinancing of housing loans, switcher mortgages or housing loans entered into in order to address arrears or pre-arrears. Housing loans for borrowers in negative equity who wish to obtain a mortgage for a new property are not in the scope of the LTV limits. However, lenders can exceed the above LTV and LTI thresholds in respect of a certain limited proportion of the overall amount of residential lending, as the Deputy has pointed out. For primary home mortgage lending, up to 15% of new lending as drawn down can exceed the LTV threshold limits in an annual period and up to 20% of new lending can exceed the LTI threshold.

The decision of a bank to utilise some or all of these exemption thresholds or not is a commercial matter for individual banks, subject to compliance with consumer protection rules and having assessed loan applications on a case-by-case basis. The banks, therefore, are at liberty to use these exemption discretions as they see fit and will likely do so with consideration to their risk appetite, lending policies and overall strategy. The macro-prudential limits on mortgage lending are designed, implemented and monitored by the Central Bank in its role as regulator of the Irish banking sector, and therefore fall outside the remit of the Minister for Finance. Lenders are required to make regulatory returns to the Central Bank on the lending they make which falls within the scope of the macro prudential regulations. These returns are provided on a six-monthly basis.

The Central Bank has not provided information on such regulatory returns on an individual institution basis; neither has it provided, at least so far, aggregated data on this matter for public information and there is no regulatory requirement for any bank to publicly disclose the value of approved mortgages that are exceptions to the macro-prudential limits. However, in the context of the upcoming review of the macro-prudential rules, officials in the Department will write to the Central Bank to suggest that it would be helpful if the Central Bank could make available aggregated data on mortgage lending since the macro-prudential rules came into operation. This data, if available, would assist respondents in making evidence-based submissions to the Central Bank's consultation process.

The Minister for Finance's role, as set out in the relationship framework agreements with the banks in which the State is a shareholder, does not involve him in the relationship between the banks and their regulator. It would therefore be inappropriate, and beyond his remit, for him to direct an individual credit institution to disclose the information sought by the Deputy. The Central Bank has indicated that, while the general framework of mortgage rules is intended to be a permanent feature, arising from this forthcoming review the calibration of these rules can be tightened, loosened or left unchanged in response to its analysis of the operation of these rules from inception through summer 2016. However, it has cautioned that, given the value of a stable rules-based system, any changes to the existing measures will require a high evidence threshold.

As laid out in the programme for Government, the Department of Finance will work with the Central Bank in the context of the review of the mortgage lending limits and, as indicated, officials will also engage with the Central Bank on the availability of data to assist the public consultation process. On a more general point, despite concerns that the macro-prudential measures would impact on the level of lending in 2015, data indicate that new residential mortgage lending amounted to almost €4.9 billion in 2015. This represented an increase of 26% on the 2014 new residential mortgage lending figure of €3.9 billion.

Pearse Doherty (Donegal, Sinn Fein)
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I welcome that the Minister will write a letter to the Central Bank asking it to do exactly as I asked it to do in a previous letter. The Minister mentioned the "data, if available"; he knows the data is available. These are the rules the banks must abide by, and every quarter they cannot exceed 15% or 20% of the exceptions. The data is available. They must have it, record it and report it to the Central Bank.

Permanent tsb included the data in its financial returns. Permanent tsb gave the data to the Minister for Finance and he put it on the record of the Dáil. The Minister for Finance is the major, and almost only, shareholder in AIB. While one can look for aggregated data relating to other financial institutions, where we have a 99% shareholding in an institution we should be at least saying, if not directing, that it would be helpful if the bank we own tells us whether it is using the 15% exceptions under loan-to-value and the 20% exceptions under loan-to-income to the full of its ability. This could potentially be €400 million of mortgage lending that could be provided if it is not using it. However, we do not know; we are in the dark. Then we have political parties scurrying about and suggesting that we might introduce measures whereby the Exchequer would pay €1 for every €2 that individuals save, because they are finding it difficult to meet the loan-to-value targets, when we do not know whether the banks are using the exceptions that are allowed for under the rules.

We must have some straight talking. Before taking office the Minister was known as a person who talks straight so I hope he will say that it would be helpful if AIB would give the information to the House, as Permanent tsb has, as to whether it is using the leeway provided under the rules. We can deduce from the information Permanent tsb has provided that it is not using the leeway. It is only using 11%. Therefore, what are we doing about the major problem here? People are being frustrated as a result of these rules. They cannot get mortgages because the rules are putting such a constriction on them and we are thinking about coming up with policies that would help them fulfil the rules. I ask the Minister to go beyond writing a letter to the Central Bank. We have already asked for that, and I welcome that a letter is being sent. However, I ask the Minister at least to make a statement saying that AIB should provide the same type of information that Permanent tsb has provided.

Eoghan Murphy (Dublin Bay South, Fine Gael)
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I appreciate the Deputy's interest and persistence in this matter. Both of us were members of the banking inquiry and we both have a strong interest in this area.

I would be interested to see the correspondence the Deputy received from the Central Bank, if he would not mind sharing it with me and my officials. Permanent tsb can disclose information if it chooses to do so. That is its choice. However, there is no regulatory requirement on other banks to disclose this publicly. There is a requirement on them to make such returns to the Central Bank. Under the relationship framework agreements with the banks in which we are shareholders, we cannot interfere. We cannot get involved in the relationship between the banks and the Central Bank as regulator, so it would be inappropriate for us to get involved as the Deputy is requesting and to direct them in this manner.

However, the forthcoming review is very important. To ensure we can have an evidence-based approach for this House and the public feeding into what the Central Bank is doing as part of that review, it is important that the Department writes to see if it can get the aggregated data from the Central Bank and to suggest that it might be published, because it would be helpful for making submissions to that review and playing a part in it. Of course, it is within the remit of this Chamber through the Oireachtas committees to engage with the Central Bank on this issue, not only under section 33AK but also section 33AM of the relevant Acts, and to have that debate with it directly.

It is also important to note, as I mentioned earlier, that mortgage lending has increased since these rules came into effect. Furthermore, these exceptions are not targets. It is for the banks, according to their risk appetite and what they think is prudent in terms of managing their loan books, to allow exceptions under the two criteria where they think it is appropriate and where it makes sense in the overall managing of their loan books. What we do not want is for a bank, where it was imprudent or improper to go to these full exceptions, to do so and put other lending and other customers at risk. We have seen that previously and we have seen its negative consequences.