Martin Mansergh (Tipperary South, Fianna Fail)

One has to look beyond the confines of this Bill. It raises a general issue about the confidentiality of the tax system except, obviously, where people are gazetted for reasons of tax evasion. I am simply expressing a reservation about that. The Senator can of course put these points to the Minister for Finance when the legislation comes through the House.

If the toxic loan valuation paid on loans after due diligence is different, that will have to be addressed and NAMA can deal with it at that time. The price paid will reflect the actual level of the loan. The price paid for a loan asset will reflect a number of criteria, including current market value and long-term value of the loan as underlying collateral. Clearly, the degree of security is a factor.

The point was raised with regard to social capital. The Minister for Finance has accepted a Labour Party amendment in the Dáil re expertise in social housing and community development when appointing members of the NAMA board.

Several Senators raised the issue of bank lending and asked when it would improve. Without NAMA, bank lending obviously could not improve even when global conditions improve. In the context of recapitalisation, AIB and Bank of Ireland reconfirmed their December commitments to increase lending capacity to SMEs by 10% and to provide an additional 30% capacity for lending to first-time buyers in 2009. If mortgage lending is not taken up, the extra capacity will be available to SMEs. AIB and Bank of Ireland have also committed to public campaigns to promote actively small business lending at competitive rates with increased transparency on the criteria to be met. The Financial Regulator has been monitoring compliance with the above commitments and no issues have arisen requiring attention.

Additionally, Members might like to be aware that the Tánaiste and Minister for Enterprise, Trade and Employment has set up a clearing group chaired by her Department and including representatives from the main banks, business interests and State agencies. The purpose of the group is to identify specific patterns of events or cases where the flow of credit to viable businesses appears to be blocked and to seek to identify credit supply solutions.

There was some controversy about the perception of credit availability in the Irish economy. The Government investigated the issue through a comprehensive independent review of SME lending from both demand and supply perspectives. This was undertaken in the context of recapitalisation and published in July. The review showed that demand had fallen sharply, with the value of new applications for credit down by 42%. Stock of credit remained static, indicating that new credits matched repayments. The review, conducted by Mazars, found that refusal rates vary markedly by sector from 6% to 48%, according to the SMEs surveyed. This finding clearly contradicts the allegation of a blanket refusal to lend. Mazars also examined a sample of files where credit was refused and found that, in general, "refusal seemed reasonable in the context of normal commercial and business criteria". A follow-up review covering the period to September is currently under way and is expected in the coming weeks.

The Government shares the concerns that have been expressed by many Senators and others about mortgage problems and what they may lead to. Obviously, repossession or being forced out of the home is hugely traumatic for anyone. However, fortunately, the rate of repossession in Ireland has so far and, indeed, has always been low, far lower than in the UK or US. For example, the lenders covered by the State guarantee, the so-called covered institutions, reported to the Department of Finance that their total legal repossessions of homeowners this year to the end of September is 20. Media reports of repossession cases taken through the courts show that most involve sub-prime lenders which made mortgages available to borrowers who would not have been customers of the mainstream lenders, often because of perceived higher risks. It is important to be aware that a great many repossession orders granted by the courts are not actually enforced. Through the code of conduct on mortgage arrears and the mortgage subsidy scheme the Government is providing practical help for people in difficulties and the new statutory code of conduct on mortgage arrears, announced in February and which applies to all mortgage lenders, introduced a waiting period of six months to commence legal action on repossession. Around the same time the recapitalised banks agreed to a waiting period of 12 months. These periods run from the date a borrower went into arrears. The mortgage subsidy scheme provides a safety net for those who need financial support in meeting the interest costs on their mortgage. Funding for the scheme has been substantially increased in 2009 and the scheme is currently being reviewed. The number of people benefitting from the scheme has risen to 14,000 as of the end of September.

Mortgage arrears continue to be closely watched. According to the Financial Regulator's retail credit report on the covered institutions, the percentage of homeowners in arrears is notably lower than that of investors. While the number in arrears is still rising, figures for the second quarter to June show a marked slowdown from the first quarter. Some commentators have raised fears about the impact of negative equity. Since activity in the property market has remained low it is very difficult to assess realistic price levels. Many who bought at high loan-to-value rates close to the peak of the market are in negative equity now and a member of my family is in that situation. Any estimate, however, of how many there are or how long the position is likely to last is largely speculative. In any event, being in negative equity does not change the level of mortgage payments so the problems it may cause are more long term.

Senator MacSharry correctly pointed out that the draft business plan provides a cost-benefit analysis of the NAMA project. I welcome the broad support of Senator O'Toole for NAMA. He made the very good point that the publication of the Bill and the business plan helped a debate to take place well before the legislation was debated in either House.

On the special purpose vehicle, the off-balance sheet approach is not a dodge. The Minister was up front about the fact that liabilities have increased while we receive countervailing assets in return. We need equal treatment with EU member states such as France and Germany and we must ensure we are treated in the same way as other countries from the point of view of EUROSTAT.

Senator O'Toole also raised the question of additional oversight of NAMA, suggesting a committee be established for that purpose. The Bill already provides for significant accountability to the Dáil through the Committee of Public Accounts. The Minister for Finance has indicated he is open in principle to a special committee on NAMA but has a difficulty with the idea that another Oireachtas committee should be legislated into existence or that an Oireachtas committee should have some form of executive oversight role regarding the agency.

Senator O'Toole also made a point about developers changing ownership into the names of family members, creating the danger that a developer whose loans were in default could walk back into the market at some time in the future without any penalty. There is a section in the Bill that deals with this issue. Committee Stage of the Bill is still being discussed in the Select Committee on Finance and the Public Service so I do not want to say too much. However, the Minister is concerned to ensure that developers who have lost a lot of money on development schemes cannot walk away from their responsibilities. This can be debated in further detail when the Bill is presented to the Seanad in a couple of weeks.

I take the point made by Senator Alex White to the effect that we need public confidence now, rather than at some time in the future, although none of us can be against confidence growing in the future either. He also asked about Anglo Irish Bank. Some €4 billion was provided to Anglo Irish Bank to protect the economy from the wider losses that would have occurred in the event of the failure of the bank to protect its €64 billion of deposits and the consequent threat to the financial system. The board of Anglo Irish Bank is currently finalising a restructuring plan which will give consideration to all options for the future of the bank and will set out its future strategy. The restructuring plan will also address the issue of compensatory measures for the capital provision and will have to be approved by the Minister for Finance. It will be submitted to the European Commission for approval under EU state aid rules by the end of November.

One Senator raised the issue of EU state aid. The Government has worked very closely with the EU at every stage of the legislation to ensure there is no contravention of the rules. Senator O'Toole suggested appointees to the board should come before an Oireachtas committee to explain their credentials, more as a confidence-building measure than a public grilling. He may raise the matter with the Minister in due course but I will pass on his suggestion.

Senator Boyle pointed out that there had been and perhaps still are some organised campaigns against NAMA, mainly from outside this House. He made the valid point that while alternatives have been put forward the Government does not consider that they have as much coherence or depth as the present scheme.

I compliment Senator Callely on his contribution. There is a school of thought that the less Members of the Oireachtas have in the way of outside interests the better and the more disinterested they will be. Senator Callely referred to his full declaration of interests in this regard but there is an alternative point of view that sees having various interests as giving a legislator knowledge and expertise he or she would not otherwise have. Members of this House come from many different backgrounds, occupations and interests, the last of which have to be declared. Provided they are open and transparent those interests enrich rather than diminish a debate.

I do not accept Senator Regan's complaint that the Oireachtas is being rushed, cajoled or denigrated. No guillotine will be applied to the Bill in either House. Many hours have been put in this week on Committee Stage which is due to finish tonight. There is a public interest in having reasonable expedition consistent with close scrutiny and debate. I do not think the Government can be criticised on its handling of the matter in that respect. As regards why it has been put forward now rather than six months ago, the obvious answer is the importance of getting these things right.

I agreed with Senator Butler's contribution. He said the banks need to lend and will not be able to give the same kind of credit as they did in the recent past.