Denis O'Donovan (Fianna Fail)
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I welcome the Minister for Finance, Deputy Michael Noonan, to the House. I apologise to the Minister for the fact that he has been waiting for some time. I was not aware of that but some of my colleagues were very engaging on matters but I would have cut them short if I had known the Minister was waiting. Ar aghaidh leat.

Michael Noonan (Limerick City, Fine Gael)
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I thank the Members for giving me the opportunity to update the Seanad on the Government's work in tackling the mortgage arrears problem and on its wider banking and economic policies. The timing is particularly opportune given the significant decisions and announcements made last week.

Senators will be aware of the increase in the number of mortgages in arrears and of the difficulty this is posing for many families. Based on data published recently by the Central Bank, there were 76,600 mortgage accounts that were in arrears of more that 90 days at the end of last March. This amounted to 10.2% of primary residential mortgages. This position has unfortunately deteriorated in recent years. In March 2011, 6.3% of mortgage accounts were in arrears and in March 2010 it was 4.1%.

A number of important measures were developed in recent years to protect the genuine mortgage holders who were experiencing difficulty with their mortgage repayments. These include the Central Bank code of conduct on mortgage arrears which requires, among other things, lenders to put in place a mortgage arrears resolution process, provides that a lender must make every reasonable effort to agree an alternative payment arrangement and places a moratorium on legal action by banks against co-operating borrowers. Forbearance is indeed a very worthwhile and an appropriate response to most people experiencing mortgage difficulties. The approach as set out in the code of conduct on mortgage arrears can provide a household experiencing temporary mortgage difficulty with the necessary and important breathing space to allow that household to get back on its feet and resume meeting full mortgage commitments at a future time.

However, the Government also recognised that these measures are not, in themselves, sufficient to address all cases of genuine mortgage distress and that it will be necessary to develop other more long-term and structural responses for appropriate cases. Therefore, within a few months of taking office, the Government established an interdepartmental group and tasked it to investigate and consider the further measures that could be developed to alleviate this increasing problem of mortgage over indebtedness. This group, which was chaired by Declan Keane, produced its report within a very short timeframe and it was then considered by Government last autumn. This report has served as the blueprint for what the Government, the Central Bank and mortgage lenders are doing to address this significant economic and social problem The Government now has a comprehensive and realistic plan to tackle the mortgage arrears problem which it is implementing across Departments and agencies.

The Government's strategy for assisting those in mortgage arrears includes the following key elements - providing comprehensive advice and assistance to those in mortgage difficulty; providing for an approach to better enable problem mortgage debt to be dealt with on a bilateral basis by way of agreement between borrower and lender; rebalancing personal insolvency legislation to strike a fairer balance between debtor and creditor and to provide for more efficient debt resolution mechanisms, and introducing measures to allow families to stay in the home but transfer its ownership to a local authority or approved housing body.

The Government is fully aware that there are no quick fixes or a one-size-fits-all solution to the mortgage problem. Each family in mortgage arrears faces unique difficulties and we must have a range of solutions which can be adapted to properly address individual circumstances. This is a carefully calibrated approach to ensure that help is targeted at those who need it and cannot pay, as opposed to those who can pay but will not meet their obligations. It would not be a fair or an effective use of public resources to provide assistance to those who can well afford to pay their mortgages or other debt obligations. This importance of protecting taxpayers' scarce resources is reflected in key elements of the strategy. None of the measures being contemplated by the Government represents blanket debt forgiveness. It is clear that the vast majority of mortgage holders can and will continue to meet their mortgage commitments and the Government will support such people. Insolvent people cannot avail of taxpayer assistance in order to live a lifestyle which is well beyond the lifestyle of those taxpayers who are supporting them. The Government is committed to ensuring that, where possible, people can remain in their homes. However, this will not always be possible or appropriate and some borrowers who cannot meet their commitments will need to adjust their circumstances to a reasonable level similar to the majority of taxpayers who are assisting them. Given the case by case nature of the borrower-lender relationship, there is no entitlement to one particular solution; the resolution mechanism will vary and will be dependent on and appropriate to individual circumstances.

Personal insolvency reform was identified in the Keane report as a key element in the resolution of the mortgage arrears problem. The publication of the Personal Insolvency Bill is a fundamental part of this overall reform agenda. It will create a modern and fairer approach to dealing with unsustainable debt and will give genuine insolvent debtors the opportunity of a fresh start. This approach is in the best interests of the person and wider society and the economy. The Bill will change the relationship between the mortgage lender and the distressed mortgage holder. It will give a greater balance to the rights of the borrower and the lender and incentivise both parties to come to an agreed solution.

The clear objective of this Bill is to provide much needed relief to genuine insolvent borrowers who cannot meet their commitments as they currently stand and to restore them to the position where they can meet a reasonable level of their liabilities. For individuals who are insolvent without any reasonable prospect of being able to repay their debts in full, the new legislation will allow them to rehabilitate their financial situation over a defined period.

It should be strongly borne in mind that the losses the banks and other creditors have or will incur do not arise from this new legislation. Instead such losses are a consequence of prior lending to an individual that is now insolvent. The reality is that these losses already existed and the legislation only allows for unsustainable debt positions to be resolved in the best interests of the insolvent debtor and also in a way that is fair, in the circumstances, to all creditors. The Bill will give creditors a better opportunity of recovering losses in terms of incentivising individuals to earn in the future from which they can pay a proportion of their income to creditors. While the provisions of the Bill will not come into force until its is enacted by the Oireachtas, the detail of the policy framework for bankruptcy and personal insolvency reform now proposed by the Government will provide a clearer picture for borrowers and lenders alike about the consequences of non-payment and failure to reach agreement.

As Senators are aware, the Minister for Justice and Equality has introduced this important Bill to the Oireachtas. It is hoped to complete Second Stage in the Dail prior to the summer recess and to complete Oireachtas consideration in the autumn session. Steps are already under way to put in place the insolvency service and other systems to deliver this new debt resolution framework. The post of director designate for the insolvency service was advertised in May and the new director, when appointed, will have responsibility to get the new agency up and running without delay.

Personal insolvency reform is only one of the planks of the Government's overall response to the mortgage problem. The Central Bank, as supervisor of credit institutions and having regard to its very important consumer protection responsibilities, also plays a significant role. In particular, its engagement with regulated mortgage lenders, to require these lenders to produce mortgage arrears resolution strategies and implementation plans, is also key. The Keane report placed a strong onus on mortgage lenders to develop a range of innovative but practical solutions and to make them available to their customers who are experiencing mortgage difficulties. The Keane report even outlined a "decision tree" framework approach that could be adopted to indicate the type of solution that may be appropriate and possible having regard to particular customer circumstances. It placed a strong onus on mortgage lenders to develop these solutions and to present them to the Central Bank.

The indicative options suggested by Keane are now well known, namely, split mortgages, trade down mortgages, restructuring of mortgage payments, and forbearance or sale. The report also made it clear that this was not an exhaustive list and that other options could be developed by banks. The process has been a bit slower that had been hoped. It must be recognised that banks have also had to come to terms with the significantly new demands and pressures that arise from the more in-depth engagement that is now required with a much greater number of their customers. It is hoped that, following intensive engagement with the Central Bank, lenders will be in a position to move to providing suitable long-term forbearance options to their customers in genuine distress from a personal debt perspective. The recently published Bill should act as a stimulus for banks to develop and bring forward realistic and sustainable options. It is hoped that the majority of agreements can be done on a bilateral basis and will not require use of the formal provisions of the Personal Insolvency Bill.

The Central Bank has indicated that lenders have now completed, or are completing, the segmentation of their loan portfolio to assess the projected level of different forbearance or modification techniques for the bank. Lenders have also provided details to the Central Bank of their proposed menu of forbearance and loan modification techniques which, it is understood, are broadly in line with the recommendations of the Keane report. I am informed that individual lenders are expected to move to the measured roll-out stage shortly and that they will be required to start fully implementing their complete menu of approaches later this year. It is essential, in the real interests of homeowners that are experiencing genuine mortgage distress, that momentum is maintained and even increased on this work and that banks allocate sufficient operational capacity to effectively implement the process.

Strong progress has also been made on the other elements of the Government's mortgage arrears strategy. The Minister for housing and planning has now formally launched the mortgage to rent scheme on a nationwide basis. Much focus has been rightly placed on enabling people to continue to live in their home, and this is a very important backstop scheme for those with the most distressed mortgages and who would otherwise be eligible for social housing support. The scheme is specifically targeted at those low-income families whose mortgage situation is unsustainable and where there is little or no prospect of a significant change in circumstances in the foreseeable future. The scheme can ensure that the family remains in the home, paying rent, while ownership is transferred to an approved housing body. It is accepted that this is not an easy option for families as it involves the surrender of home ownership. However, it does provide security and continuity to families and in many cases a more affordable way for low-income families to meet their accommodation needs. More than 60 cases are now going through this process and it is expected that up to 100 families will avail of this important scheme this year.

The provision of clear information and advice to mortgage holders is also an important requirement as identified in the Keane report. While the overall objective of the recommendation was immediately accepted by the Government, the details of the way to achieve this did require further thought. In particular, the roles of existing agencies in the area of the provision of public service and financial information and advice, other ongoing developments, not least the advisory role now envisaged for personal insolvency practitioners in the personal insolvency area, had to be considered further to ensure there would be no duplication or confusion of service or responsibility. The Government has broadly agreed a three-pronged framework to better inform and advise at-risk mortgage holders. These initiatives include: an enhanced website under the aegis of the statutory Citizens Information Board - keepingyourhome.ie/ - is in place and provides important information to distressed mortgage holders; a borrower telephone helpline is also provided under the aegis of the board and this will be enhanced next month; and new initiatives to provide one-to-one advice to mortgage holders to specifically provide professional financial advice on long-term forbearance or restructuring proposals that may be offered to them by their mortgage lender - it is intended that this will be in place to tie in with the roll out of solutions by banks under the MABS process.

The measures to address the mortgage crisis are of course part of the wider Government work to repair the banking system and to refocus it on meeting its primary objective which is to fulfil the credit needs of sound businesses and personal borrowers and to provide a secure place for savers to deposit their money.

Within the context of the EU-IMF programme, we have embarked on a major repair programme for our banks. This work is being carried out led by the shareholding management unit of my Department.

The main element of this has been the recapitalisation of the key banks last year to an amount of €24 billion, inclusive of a buffer amount of over €5 billion, as determined through the financial measures programme. This capital need, however, has not been exclusively provided by the State. Other sources, such as internal capital generation, private investment and burden sharing with subordinated bondholders, are also making a contribution. There have been comments recently about the Irish banks possibly needing more capital in the future. These have been made in the context of changing regulatory capital requirements but also in the context of the rising mortgage arrears. Fixing the mortgage arrears problem, therefore, is not only important from a social perspective but also from a banking stability perspective. In this context, it should be recognised that arrears are generally tracking between the base and stress case assumptions in the 2011 financial measures programme and that no additional capital requirement is expected to arise at this time from the mortgage arrears problem. In addition, at a general level, it should be recognised that Irish banks are among the best capitalised in Europe.

A further challenge being addressed is the need to rebuild a stable funding framework for the banking system. We have seen the stabilisation of the deposit base of the Irish banks, and indeed some growth. Most deposits are still covered by a Government guarantee, but the banks recently started recruiting deposits without this guarantee as a first step towards eventually exiting the guarantee scheme.

In parallel with rebuilding funding capability there is the continuing deleveraging of the excess assets of the banks' balance sheets. The extent of deleveraging to date is also a big step towards the fixing of a banking system to meet the needs of the economy.

Turning now to economic prospects, my Department recently published updated economic and budgetary projections. We see GDP growth of 0.7% this year. The indications are that domestic demand remains fairly weak. In particular, consumers continue to save a relatively high portion of their incomes, partly reflecting uncertainty regarding what the future will bring. This is where Government comes in. What we are trying to do is create certainty and boost confidence to reduce the need for excessive precautionary savings, but the recent savings trend also reflects the desire of many households to reduce the burden of debt accumulated during the bubble years. That is entirely natural, and I expect this phenomenon of balance sheet repair to continue for some time.

The external sector is leading the recovery, with exports of goods and services now well in excess of pre-crisis levels. This shows that the improvement in competitiveness, which has been evident in recent years, is standing to us. I believe this demonstrates the inherent flexibility of the Irish economy. Prices and costs in Ireland have fallen significantly, and further improvements are in the pipeline. The strong export performance also means that our balance of payments with the rest of the world moved into surplus in 2010 for the first time in over a decade. A small balance of payments surplus was also recorded last year.

As a small open economy whose recovery is being driven by exports, Ireland will be affected by the soft patch that the global economy is currently going through. However, the composition of our exports and the aforementioned competitiveness improvements will help to offset the potential negative impact of this slowdown. I would emphasise that nearly all forecasters expect that Ireland will record positive GDP growth again in 2012.

On the budgetary front, I am happy to say that based on data for the year to date we remain on track to achieve our budgetary targets. In fact, tax revenue is slightly ahead of our expectations so far this year, with the early indications suggesting that we are within our target commitments.

The outcome of the European Council meeting last week is also a significant and very positive development for our future prospects and the statement that it is, using the words of the Council, "imperative to break the vicious circle between banks and sovereigns" is most welcome. While much work will now need to be done, starting with a eurogroup meeting next week, to build on that and to work out the details, this European Council decision represents a significant policy breakthrough along the lines of what Ireland was seeking, to appropriately address the burden we assumed for dealing with the Irish and wider banking problem. The eurogroup will now commence an examination of the Irish financial sector, with a view to further improving the sustainability of this well-performing adjustment programme.

The decisions and developments of last week, domestically on personal insolvency and at EU level on the wider Irish debt burden, have been of great significance and they suggest that there is now a real opportunity to seize the opportunity to rebuild our economy and put it on a more sustainable footing. Today's announcement that the National Treasury Management Agency is resuming its treasury bill programme shows the significant improvement in market sentiment towards Ireland since this Government came into office.

Looking beyond this year, there are grounds for optimism regarding the medium term prospects for the Irish economy. Our underlying strengths have not disappeared with the crisis. We retain many of the core qualities that underpinned the sustainable, export-led growth that prevailed during the 1990s, and it is now important to use them while this time maintaining a stable banking and fiscal environment.

Darragh O'Brien (Fianna Fail)
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I welcome the Minister back to the Chamber and thank him for his contribution. I will begin on a positive note. The Personal Insolvency Bill, which I have read, is complex but we welcome and will support the reduction in the bankruptcy term from 12 years to three years.

There are aspects to the proposals that must be considered seriously. With regard to the debt relief certificate and the unsecured debt, the threshold the Government has set for people in order to avail of this is extremely high. With regard to unsecured debt, the level for the person's net disposable income is set at €60 per month and net assets must be no more than €400. Therefore, this will pretty much just apply to a person without a car and with no assets whatsoever. More needs to be done in that regard.

The Minister has issued the figures today with regard to mortgage debt, an issue I and many Members have been raising here for some time. The figures issued mention 10.2% of people in mortgage arrears of 90 days or more. The Department and the banks also have figures with regard to those in arrears of between 30 and 90 days, who are moving in the same direction. That figure is closer to 15%. What is the Minister's view with regard to how many of this 15% of people who hold residential mortgages will be helped by the personal insolvency legislation published last week by the Government? My view is that not very many will be helped by it in its current form. There are a number of reasons for this, one of which is the veto regarding 65% of creditors. For most people, the banks will make up 65% of creditors as their mortgage makes up 65% or more of their debt. The situation now is that the veto will apply because the creditors must agree if someone is to proceed with insolvency arrangements.

With regard to the position people are in when considering insolvency, we are dealing with people who are extremely distressed. They have come to the end of their tether and have no alternatives but to take this massive step towards insolvency or bankruptcy. However, something is missing from the process, although the Minister alluded to it in his speech, namely, the mortgage arrears resolution strategy from the banks. We have heard again that this will be issued shortly. Tens of thousands of families are in need of help from this strategy, as pointed out recently by the Irish League of Credit Unions report. Over 50% of families have less than €100 per month left to spend after all the bills are paid. Therefore, the nut that needs to be cracked does not just concern the people in severe mortgage difficulties, but also those just keeping their heads above water. As the Minister has said, domestic demand is flat. Forbearance and a moratorium are all very well, but they will not stimulate domestic demand. We have not moved forward with issues such as zero interest or split mortgages, which would be interesting. Has the Minister set a timeframe for the banks to come back with the mortgage arrears resolution strategies? Are all lenders committed to that, not just the covered institutions? These strategies are an important part of the solution.

To return to the Personal Insolvency Bill, the fact the veto exists at such a high threshold is an issue. We had proposed a Bill that would provide an independent debt settlement office that would be arbitrary. I know Minister for Justice and Equality said that would not be constitutional, but that is not correct once someone has recourse to the courts. Once the agency has recourse to the courts, we can do that. It would be far preferable were a lender and a mortgagee to submit their position to someone truly independent who could make an arbitrary ruling on it. Instead, we now have a situation where all the creditors will sit around the table with the borrower and the personal insolvency adviser. We do not know yet know how this will be regulated or how it will work out, but this is what will happen. Therefore, things are stacked against the borrower straight away.

There is also no appeals process although this was a strong recommendation of the report of those who worked in the committee on this. As things stand, if the decision is taken and if the lenders, 65% of them, decide they will not accept the application for insolvency, where does the borrower go then? The appeals mechanism is missing, but it should be included. The Minister for Justice and Equality has said he does not expect the Bill to be enacted until October. An appeals mechanism should form a significant part of this Bill.

We were promised it would be a non-judicial process. How will the courts deal with all of these orders? Why are we going down the road of a judicial process? The Minister referred to people who can pay but who do not want to. I believe there are very few of them and that the figure would be minute. Effectively, we will be bringing people, who have been going through an extremely difficult time, through the courts.

In regard to the mortgage arrears strategy, to which the Minister referred, it places a strong onus on mortgage lenders to develop solutions and to present them to the Central Bank of Ireland. I would like to know when that will happen. The Minister is right that this is extremely complex. He said that every year, the mortgage arrears situation is getting worse. Fortunately for most people on variable or tracker mortgages, they have had their mortgage interest rates reduced because of low ECB lending rates. The only lender which gave the full reduction the last time was AIB. Bank of Ireland was let off the hook and ICS Building Society, which is owned by Bank of Ireland, has one of the highest variable lending rates. Permanent TSB gave a small reduction to existing customers.

Thousands of people who are struggling to pay will not feature on the Minister's arrears figures. Those people, who are three months or more in arrears, are really struggling. As I said, we reckon approximately 15% of people are in arrears of 30 to 90 days. If the Minister wants to see an increase in domestic demand and the economy taking off like a rocket, he will not see that happen any day soon unless we can free up disposable income for hard pressed mortgage holders.

I mention the extension of mortgage terms - I am not talking about debt write-down - split mortgages, to which the Minister referred, and the zeroising of interest. All a moratorium does for someone is add to his or her interest bill and make the situation worse. The mortgage-to-rent scheme is an absolute con. I would never advise anyone to go down that route. Someone who has paid thousands of euro to a lender will hand his or her house over, the local authority will manage it and he or she will pay rent for his or her house. Does that take into consideration the mortgage that has already been paid? I do not welcome the fact 60 people are already availing of this scheme and that perhaps 100 families will access this scheme.

I thank the Minister for the update he gave us but the Minister of State, Deputy Brian Hayes, said in the House a few weeks ago that the Personal Insolvency Bill would be a game changer. It is not a game changer and much more needs to be done on it.

Michael D'Arcy (Fine Gael)
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I welcome the Minister and the work done in the past week by the Taoiseach. I am sure the Minister will be putting flesh on the bones of what has been agreed to date. It looks like a big step in the right direction on behalf of the nation and I think everybody would agree with that.

I refer Senator O'Brien to the Minister's contribution where he said that the recently published Bill should act as a stimulus for banks to develop and bring forward realistic and sustainable options and that it is hoped the majority of agreements can be done on a bilateral basis and will not require use of the formal provisions of the Bill. That was a crucial statement, specifically in regard to mortgage arrears.

I have concerns about the banking sector. We saw another scandal in London in the past number of days and we see a scandal developing in the United States with JP Morgan. There seems to be no end to what the banking world is prepared to do. The big issue, which was not reported as it should have been, is Europe-wide supervision of the banking sector. As we saw in Ireland, too often governments have not had sufficient control over banking. This may have happened in the past in Ireland, although it is not happening currently. The Taoiseach has been critical of the situation in the banking and development sector. It was insanity in its highest form.

The Government has already placed €7 billion into the covered banks, based on the Black Rock assessment. That is a lot of money, when one considers the mortgage loan book. It amounts to approximately 10% of the amount that would be required if people default fully. That is unlikely to happen, and I hope it will not happen. The €7 billion is there for the banks to write down the debts of those who have no prospect of meeting their debts. That is what it is for, but it is intended to last for the life of all outstanding mortgages. People must understand that.

The number of repossessions in the State is not large. We are told they are being logged in the courts and are occurring in double figures and not in hundreds or thousands. I welcome that. Repossession is something no Irish person likes. The number of repossessions is low, partly because of the quantity of emergency lending assistance from the Central Bank and the European Central Bank. At the end of May, €128 billion had come from those two governing banks, which is a huge amount of money. I believe it is the reason the banks are not repossessing or chasing creditors in the same aggressive manner as other lenders. Those others, unlike the Irish covered banks, are doing genuine deals and are writing down all the remaining debt of people who return the keys of their properties. Many sub-prime lenders are prepared to do this because they want to cease trading in this jurisdiction.

I welcome what looks like the severance of the link between bank and sovereign debt. The Minister has been an advocate of this and has worked to bring it about since coming to office. I do not wish to overstate what the Minister has done, but he is the one person who has said repeatedly that the mistake made in Ireland should not be repeated in other jurisdictions. At one stage, it looked as though it would happen in Spain but, as a result of the leaders' communiqué last week, it looks as though it will not now happen.

The loop of doom being predicted by some, whereby the ECB would dole out money to banks that were not properly capitalised so that they could buy government bonds at spreads that were too high, was bound to end in a collapse. We thought we were going in that direction but it now seems that will not continue.

I welcome European oversight. I have been critical of how business was done in this State between regulators, Government and the banking sector. The sooner the working document on recovery and resolution of credit institutions is concluded so that the banking sector can put its own funds in place to cover collapses, the better. That will be the real game changer on a European-wide level. If we can get that in place there will no longer be a need for sovereign support of banks. It is an enormous piece of work but it will be crucial. The working document, at least, is there to be assessed.

The passing of the referendum on the stability treaty was crucial. Calm voices were listened to by the voting public and prevailed. The European Stability Mechanism, ESM, is in place. If we had listened to those who advocated a "No" vote in the referendum we would not have access to the ESM and our banks would not have access to direct funding. Those who stated that would not be the case are wrong and I would hope that they will accept that they are wrong.

We must grow. Without growth the economy is doomed. The levels of growth on decadenal analysis show that we will grow. We are going through the worst of it. We have had four tough years of recession. While our growth levels are low, our numbers at still at least in the positive; other countries are in the negative.

Looking at the numbers, there is, potentially, €120 billion available from EU income. I very much welcome that some of those funds will be channelled through the EIB and that there will be consideration given to those countries that are in programmes which are not able to be funded via the bond markets.

There has been much comment that we should remain in a programme because the funding we are receiving is cheaper. No doubt it is cheaper. However, we are in a programme because we are locked out of the bond markets. One stays in a programme, not because it is cheap but because it makes funds available when one is locked out. It is something that needs to be understood.

I stated on a number of occasions that everything will revolve around trying to get to grips with the deficit. While the Government is in office 15 or 16 months, it spent that time trying to grab hold of the reins of power, steady the ship and get us to a position where we can advance. To put it in context, the deficit of the past two years is the equivalent of what Anglo Irish Bank cost the State. While the people seem to be okay with the deficit, they certainly are not okay with the cost of Anglo Irish Bank to the State.

As always, the Minister, Deputy Noonan, is welcome. Some very good work has been done and I wish him well in advancing the detail on it.

Marie Louise O'Donnell (Independent)
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I wish to share my time with the leader of the Independent group.

I welcome the Minister to the House. I compliment him on his work and congratulate him on the evident progress on banking debt and sovereign debt.

I want to ask some general questions and make some general observations. As I know very little about high finance and less about economics, I do so as a citizen who just happens to be a Senator. Since I knew what a bank was, what it does and how it does it, I knew greed was the driving factor. It is a given that banks must make profits, but it is greed, in interest rate, in the systems, in the directors and in the executives, that fuels the banks. They have beggared citizens and families. If they have not beggared them financially, they have certainly done what Paddy Kavanagh referred to as poverty - they beggared them in anxiety and in worry.

As another Senator mentioned, the interest rates in Britain and internationally have possibly been falsified. I would go so far as to say this is endemic across the banking world. I get the feeling - I do not know about other Senators - that we are living with a banking-incompetent state, not with a state, as the bankers would say, "going forward".

I have one or two simple questions for the Minister. Is it possible for the Minister for Finance to fine Ulster Bank €1 million a day for its incompetence? That would certainly get it working. Is it possible that he could set up a situation where the people of this island might leave an incompetent useless bank without penalty? The people of this island are trapped in banks that cannot and do not work and they are unable to move.

Is it also possible that he might be able to get rid of executives who are still in place and who are getting other jobs? Sometimes I think this is the only country in the world or certainly in Europe, whose bankers and ex-bankers who have cost the State millions of euro are seen in golf clubs, getting in and out of cars, or coming and going from expensive hotels as though laughing at the system.

Mr. Elderfield is a fine person who has made outstanding changes, under the Minister's direction, to banking in Ireland. Was he as successful, however, when he was in charge of vetting people? Are we back to the Patrick Neary days when it comes to Mr. Boucher and Mr. Murphy? Have they fooled Mr. Elderfield-----

Michael Mullins (Fine Gael)
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The Senator should avoid naming individuals.

Marie Louise O'Donnell (Independent)
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Have certain executives fooled Mr. Elderfield as they fooled his predecessors in the past? How are some of these individuals still in place? The State has given €3.7 billion to Bank of Ireland, for example, while a Canadian investor has put €1.1 billion into that bank. However, the latter's share of the business, at one third, is larger than the State's shareholding of 12%. On what basis did the boards of the banks give some of these executives a clean bill of health?

There is a question for all of us to consider in terms of what has fuelled our passivity on this issue. Is it fear of debt or of executives, systems or directors? Every day we watch the continuing incompetence, arrogance and greed of the banks and do nothing, even though their doors are open only because of our money. I am utterly tired of hearing about what the banks are not capable of doing. They are now at the stage of rejecting the Minister's theory of solvency, or making it difficult to bring it about. It seems they are trying to counteract what the Minister is seeking to do. It begs the question as to whether people would be better off, as they were in north Mayo in my father's time, putting their money in biscuit tins? I do not say this in a flippant or humorous way. One might ultimately be grateful for having done that because there is some degree of security in it. One is also obliged to wonder whether, as John Waters has mused, the fact that alcohol is so cheap in this country is the reason we have not had riots in the streets.

Jillian van Turnhout (Independent)
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I thank Senator Marie-Louise O'Donnell for sharing time. The new mortgage to rent scheme, which is designed to assist those in severe mortgage distress, will only assist homeowners whose mortgage has been deemed unsustainable, are eligible for social housing, agree to the voluntary repossession of the property and do not have significant positive equity. Is there a standard definition of an "unsustainable mortgage" to which all banks must adhere or are decisions in this regard made on a case-by-case basis by each bank after homeowners have completed the mortgage arrears resolution process?

Under the new rules regarding mortgage interest supplement, newly-unemployed mortgage holders will, as I understand it, first have to approach their lender and negotiate a restructuring of their mortgage. The restructuring plan must then be in place for 12 months before they can even apply to the Department of Social Protection for the mortgage interest supplement. This means that a person who is newly unemployed could be left for up to 18 months without any State support or assistance. Does the Minister share my concern that this could add greatly to the arrears problems and reduce the ability of distressed mortgage holders to make repayments to their lenders when they find themselves in these circumstances?

I will refrain from commenting on the Personal Insolvency Bill until I have had an opportunity to wade through it and understand fully its implications.

Ivana Bacik (Independent)
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I welcome the Minister, Deputy Michael Noonan, to the House. I am pleased to have the opportunity to lead for the Labour Party group today in this rather broad discussion on mortgage arrears, banking and the economy. After the grand master of the Grand Orange Lodge of Ireland, Mr. Drew Nelson, addressed the House earlier today, most of the speeches from Members referred to history, tradition and the peace process. Mr. Nelson made an interesting point in his response when he spoke about the centre of economic strength moving eastward away from Europe, referring specifically to his concerns arising from the announcement yesterday of the transfer of 200 jobs from Belfast to China. While that was, undoubtedly, a worrying announcement, one of real concern for all of us and a portent of things to come, there was something positive to be taken from his address, namely, having a member of the Orange Order speaking here about the economy and jobs which was, I thought, part of a normalisation process where Northern politicians are engaged on economic and political matters which affect people's day-to-day lives. It was an interesting interlude.

While I want to focus on mortgage arrears and the Personal Insolvency Bill I want first to speak a little about banking. As stated by Senator D'Arcy, our banks are currently under the spotlight, in particular Ulster Bank in terms of the extraordinary fiasco of what was initially described as a technical glitch. Senator Higgins has already spoken about the need for an inquiry in this regard. I welcome that representatives of Ulster Bank and the Central Bank have in this regard been called to appear before the Joint Committee on Finance, Public Expenditure and Reform this week. It is extraordinary that three weeks on, this matter has still not been resolved and that there are still customers who cannot access their accounts and who are unsure whether payments on mortgages and so on have been made. It is a strange incident, although it appears this was a mere case of carelessness or negligence. What has been happening in Britain in terms of the fixing of rates at Barclays Bank is much more sinister and clearly warranted the resignation of its chairman and CEO. That is an ongoing story about which I am sure we will hear more. What happened in that instance is more than mere carelessness or a technical glitch.

With regard to the eurozone crisis, there is increased recognition that a key flaw in the design of the euro and, perhaps, some of the causal factors of the crisis we face was the absence of adequate financial regulation at a transnational level. We all recognise now that there should have been closer banking union alongside the monetary union developed with the common currency. However, when speaking about developments in the eurozone, we must acknowledge and welcome, as others have done, the seismic shift that occurred late last week in terms of a change in policy, with Chancellor Merkel apparently finally giving in, in respect of which she may pay a political price in Germany. This was a welcome announcement for Ireland and a sign of a greater commitment to a united approach to getting out of our eurozone difficulties and of decoupling banking and sovereign debt, which is of huge importance for Ireland. That day will in the future be seen as a critical day in terms of the development of a way out of the crisis. However, when we come to look back at the events that have given rise to the eurozone crisis, the role of Britain or, more significantly, the absence of Britain and the British Government in seeking to find a resolution, will be recorded as a key factor. From an Irish point of view, it is significant that our nearest trading partner has been so absent from seeking to find a resolution of the position. It is most unfortunate that Prime Minister Cameron and his euro-scepticism has damaged the prospects for recovery and has created problems for us and more generally for the eurozone.

Despite the problems we face, Department of Finance figures show that we are meeting the targets set by the troika and project positive growth for a second successive year, albeit small levels of growth. GDP growth of 0.7% is forecast for this year, to which the export sector is contributing significantly. There have also been positive foreign direct investment announcements in recent months, with hundreds of jobs being created, all of which are welcome. These positive announcements will feed into the ongoing path to recovery. The biggest problem in this area is the unemployment rate of 14%, which is disappointingly high. The Government aims to address this through its jobs strategy. The signs are that this will stabilise and fall after 2012. We all very much hope that is the case.

As everyone is aware, one of the biggest problems facing the Government is weak domestic demand, much of which is due to ongoing issues around mortgage arrears. As expressed by the Taoiseach and the Tánaiste, there has been great disappointment among everyone in regard to the slowness with which this issue has been addressed. Despite the establishment of the Cabinet sub-committee on mortgage arrears that appeared to be taking some time. Other speakers referred to the report of the Joint Committee on Justice, Defence and Equality on the heads of the Personal Insolvency Bill. It was evident to everyone when we produced our report in February just how complex dealing with personal insolvency alone was and how important it was that we got this right in the Bill.

The report of the Oireachtas Joint Committee on Justice, Defence and Equality made certain points which I hope will be addressed when we come to debate the Bill. I am delighted, as everyone is, to see the Bill being published and to hear the Minister say it is likely to go through Second Stage in the Dáil before the end of July. We look forward to receiving it in the Seanad in September or October. It is important that we tease out issues on the threshold of agreement by creditors and whether these thresholds remain too high. Some changes have been made since we debated the heads of the Bill but an issue still remains that it may still give creditors a veto.

Senator Darragh O'Brien raised another key question on an independent appeals process. This was raised with the joint committee by the Free Legal Advice Centres and many others. We need to see how we can incorporate something like this into the Bill.

The reduction of the length of the bankruptcy period from 12 years to three is very welcome. We had a very significant debate in this House on the Civil Law (Miscellaneous Provisions) Bill 2011, which has now been enacted, in which we examined the bankruptcy period. I was struck by Senator Quinn warning against over-shortening the bankruptcy period. He did not agree with the one-year period in Britain which he felt was too short and he felt three years was a better compromise. I am glad to see we will see it instituted. However, something that was raised with the joint committee was the issue of bankruptcy payment orders which may survive beyond the three-year period and amount to a longer period in practice. I ask that we examine this, as we might examine thresholds. The joint committee suggested thresholds of €50,000 rather than €20,000 for debt relief notices and that €10 million rather than €3 million for personal insolvency arrangements might be more appropriate. These are all matters I hope we will have a chance to raise during the debates on the Bill. Senator Hayden and I will speak at length on the Bill when it comes to the House.

Criticisms have been made of the announcements by the Minister of State, Deputy Jan O'Sullivan, on the mortgage to rent scheme. In response I state it is a scheme of last resort and Senator Michael D'Arcy addressed it. It will not be suitable for everyone but it is vital we have some final safety net for families who would otherwise be in social housing and who are unable to pay mortgage arrears on their principal private residence. The joint committee saw protection of the family home as a critical aspect of any Bill dealing with mortgage arrears and personal insolvency.

I welcome the breaking of the vicious circle between banks and the sovereign we saw announced at European level. I very much wish the Minister well in his attempts to ensure we can see this circle being broken.

Sean Barrett (Independent)
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I welcome the Minister to the House. This morning the people who used to say "Ulster says "No"" were here and we got on very well with them. They have been replaced by "Ulster Bank says "No"" with equal damage to the wider economy.

The section of the Minister's speech dealing with the banking problem was tentative but I take it as a reflection on the banks and not on himself. The Minister stated it is now hoped that following intensive engagement with the Central Bank, lenders will be in a position to move to providing suitable long-term forbearance options. He also stated the Bill should be a stimulus for the banks to develop and bring forward realistic and sustainable options. The Minister also stated lenders have provided details to the Central Bank which it is understood are broadly in line with the recommendations and they hope to reach the roll-out stage shortly.

We must be stronger with the banks. They have been at this for four years and have done untold damage to the country. The Minister will have the support of everybody in the House in this regard. The costs are huge, not least in the Minister's constituency. A report this week from the Central Statistics Office shows Limerick city has 18 unemployment blackspots and an average unemployment rate of 42.9%. A total of 18 of the 38 electoral districts in Limerick city were unemployment blackspots. The city also accounted for seven out of the ten electoral districts with the highest unemployment rates in the State. At individual level, St. John's A had 56.8% unemployment and Galvone B had 55.2% unemployment. This is a problem which has done untold damage to the country and which the Minister has faced during his 14 months in office.

When I studied economics, people such as James Meenan, Louden Ryan and Paddy Lynch, who were economists of the highest calibre, were on the boards of banks. They seem to have been eased out. The Irish Banking Review was shut down, which was a forum for economists and banks and had an international rating in the Journal of Economic Literature. The banks went off with madcap policies which have done so much damage to the country. We are still waiting for them to be called to account.

I support what the Minister stated last week, which he also mentioned in his speech, on the need to break the link between bank debt and sovereign debt. We need to get this quantified and to have certainty. We got into rescuing banks on the basis it was one of the cheapest bank rescues ever but the bill has kept increasing. Already, what exactly was agreed last week is in some doubt. The Sunday Times mentioned €32 billion and yesterday the Irish Independent mentioned €21 billion. An academic study from the University of Limerick states the banks have cost us €279.3 billion and they dominate the national debt much more than what we have borrowed ourselves. We must know the extent of this, otherwise the agreement reached at the summit, as has happened frequently, will unravel. I see today the Finns and the Dutch have doubts about what they agreed.

Europe needs a council of economic advisers analogous to the Irish Fiscal Advisory Council so the issues are not presented in simplistic terms such as that it was a bad night for Ms Merkel. The problem of a badly designed currency, as the euro undoubtedly was, being solved with all its design faults is not a matter of whether Ms Merkel was defeated or whether people were watching a soccer match at the time. We have a serious problem. What is the extent of the debts we want to transfer through Europe from the Exchequer to the banking system and what is the amount they are willing to accept? What is the level of agreement that exists for this to be accomplished? If we corrected the banking situation it would make a huge difference to how the country operates.

One of the figures mentioned as the cost for rescuing the banks to date is €64 billion and this would save approximately €32,000 per each of the 2 million taxpayers, which would be a huge benefit to the country were it to happen. I appeal for more precision from these meetings, and perhaps not doing business at 4 a.m. Europe needs a solution to a problem which can be seen not least in the Minister's constituency, where he has much more direct experience than I do with electoral districts where more than half the people are unemployed. I wish the Minister success in dealing with our banks and he will have the support of everybody in the House, and in dealing with rectifying how Europe can remedy the design faults in the euro from the beginning. The experiment has certainly given us four terrible years of recession.

During the week Mr. Jim Flaherty, the Canadian Minister for Finance, was presented with an honorary degree from NUI Galway. I have some Canadian guests in the Gallery. It is a country which has run its banking regulation in a manner we could seek to emulate. I hope he pays the Minister a courtesy call during the week because there are countries which regulated banks much better than we did and perhaps we have much to learn from them.

Kathryn Reilly (Sinn Fein)
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Like other speakers I wish to touch on the issue of mortgage arrears. While I welcome the move which will ease the burden on some of those in distress, the first reaction of my party to the proposed legislation is that it is a missed opportunity. What is needed is an independent and responsive insolvency service to deal with insolvencies and bankruptcies, but what is proposed is a one-sided veto where ultimately the bank will be able to impose its decision regardless of the specifics of each case. The move to a three-year bankruptcy term is also to be welcomed, but the lack of an independent service to rule on individual cases is a major flaw which undermines the legislation. Will the Minister consider or commit to re-examining our proposal in this regard?

Like Senators O'Donnell and Bacik, I would like to comment on whether people are better off having their money in biscuit tins in the context of the issues at Ulster Bank. I worked as a credit control agent for a company in a previous life. I had to make telephone calls if a direct debit failed to be paid on three occasions. In such circumstances, we would seek to recoup the complete sum of money. Direct debits have not been leaving Ulster Bank accounts for the last two or three weeks. What is being done to assist people whose direct debit payments are not coming out of their accounts for reasons that are not of their making? This technical glitch is not their fault. It is not as if they do not want to pay their bills, or that they do not have the money to do so. What is being done to make sure such people are not being pursued for the full payment amounts? It might affect an insurance policy, for example. Another problem is that rent is not coming out of people's accounts. That is affecting landlords who might have mortgages with other banks. What is being done to make sure that these people are not being penalised in such a manner?

I will conclude by speaking about the EU summit from which some good news emerged. I was disappointed with the stimulus package that was announced. The extra €10 billion facility that will be available to the European Investment Bank is pitifully small in the EU context, especially given that SIPTU was seeking a €10 billion stimulus for Ireland alone not so long ago. As we know, the other arm of the stimulus does not apply to Ireland, given that we have spent or committed our Structural Funds allocations already. The Commission has already said that funds earmarked for one country will not be used in another country. Will the Government seek to return to argue for a bigger and better stimulus package that will substantially deal with issues like youth unemployment?

Jillian van Turnhout (Independent)
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Does the Minister wish to respond to those who have spoken? After his reply, we will take questions from Senators.

Michael Noonan (Limerick City, Fine Gael)
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Many questions have been asked. I cannot really be expected to engage in a Committee Stage debate on the insolvency Bill before Second Stage has taken place. I cannot deal with the aspects of the legislation with which they might disagree in the level of detail they might demand. The Minister, Deputy Shatter, will take the Bill. He has already said he will consider further amendments over the summer after he has heard Second Stage contributions in the Dáil. I am sure he will listen to the views of Senators when the legislation is debated in this House. It is a work in progress. The Minister listened to the discussion on the heads of the Bill. Now it has moved on again. It is important to remember that the insolvency Bill is about insolvency in general. It is not just about insolvency due to impaired mortgages, which is the issue in the forefront of our minds. This corpus of legislation will deal with indebtedness in general, all the way from voluntary arrangements to bankruptcy. This is one of the revolutionary changes that are needed. We have had our bankruptcy legislation for a long time. When I was Minister for Justice in the 1980s, I introduced the bankruptcy legislation which is now being reformed. The previous Act had been in place for over 100 years. We are not great at addressing bankruptcy.

Senator Darragh O'Brien asked many detailed questions. I cannot really deal with them. The Minister, Deputy Shatter, will do so when the Bill is considered on Committee Stage in this House. I disagree with what he said about the mortgage-to-rent scheme being a single option. There is a range of options. If one is living in a housing estate and in long-term unemployment, having lost one's job, and the threat of repossession is hanging over one because one cannot make any contribution to one's mortgage repayments due to being on social welfare, the housing agency or the local authority will give one the status of somebody who is renting rather than somebody who is paying a mortgage. That will allow one to remain in one's family home with the same set of friends and neighbours. One's kids will continue to be able to attend the local school. One's status will change from being an owner-occupier to being a renter. That reasonable solution already applies to approximately 100 satisfied people. The Minister of State, Deputy Jan O'Sullivan, is driving that agenda forward rapidly.

I would like to acknowledge the contributions made by all the other Senators. We will take them into account. My officials are taking notes. We will ensure the thoughts of Senators are considered as part of the debate. Senator O'Donnell spoke about the importance of banks. Traditionally, we have given too much respect to the banks at times. Banks are shops that buy and sell money.

Marie Louise O'Donnell (Independent)
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Exactly.

Michael Noonan (Limerick City, Fine Gael)
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The price of it is the interest rate that is charged. That is what the banks do. Some of them have placed some very sophisticated items on their shelves in recent years. They are still shops that buy and sell money. We acknowledge the good work they have done in the past, but they have gone a great deal of harm internationally and domestically in recent times. To a large degree, they have not been straight with people. That has certainly been the case during our banking crisis. Questions continue to be asked.

I have a briefing note on Ulster Bank. It might be of general interest. The technical problems in Ulster Bank are having a very negative impact on banks in general. The bank has advised its customers that it has fixed the initial problem, but it needs to process the backlog of transactions. The bank is not in a position to give a clear indication of when normal services will resume. It is totally unacceptable that it has taken Ulster Bank so long to solve its technical problems and that the bank's customers have not been given a clear indication of when this issue will be resolved. The matter has been ongoing for two weeks, but we have not yet been given a final date for its resolution. Representatives of the Central Bank and Ulster Bank have agreed to appear before the Joint Committee on Finance, Public Expenditure and Reform later this week. The members of that committee will have an opportunity to question representatives of the bank on that occasion.

The Central Bank has been in ongoing contact with Ulster Bank and the Royal Bank of Scotland during the week. When Mr. Matthew Elderfield met the chief executive of the Royal Bank of Scotland, Mr. Stephen Hester, and the chief executive of Ulster Bank, Mr. Jim Brown, yesterday, he emphasised the need for this issue to be resolved speedily. The Minister, Deputy Burton, and senior officials in the Department of Social Protection have remained in ongoing contact with Ulster Bank regarding the payment of social welfare benefits. Some social welfare payments are made through Ulster Bank. It is an ongoing process. The chief executive, Mr. Brown, appeared before the economic management council last week. He gave us a commitment that this would be resolved. It is taking too long. It is not acceptable. I do not yet clearly understand the cause of the problem in the first instance. There seems to be a vagueness about what actually happened. We have heard about this patch, that patch and the other patch. The English language is not that complex. We should simply be told what happened. If it is done in that way, we will all have a reasonable understanding of it.

I have many notes in front of me. I expect that Senators already have much of the information in question. There is no point in going into great detail. Perhaps the time of the House could be better used by allowing Senators to ask individual questions to which I will reply.

Jillian van Turnhout (Independent)
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Three Senators have indicated that they would like to ask questions. Would the Minister prefer them to be taken individually or as a group?

Michael Noonan (Limerick City, Fine Gael)
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As a group.

Marc MacSharry (Fianna Fail)
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Will we be permitted to speak generally, or will we have to ask questions?

Jillian van Turnhout (Independent)
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It was agreed on the Order of Business that each Senator who is called will have two minutes in which to ask questions. I call Senator Colm Burke.

Colm Burke (Fine Gael)
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I thank the Minister for making time available to deal with this matter today. I want to deviate slightly from the issue of insolvency. The Minister mentioned that 76,000 mortgages are in arrears. I would like to ask about the problems that banks have encountered with regard to legal undertakings that have been given. I am aware that in the case of a legal practice in Dublin, there were mortgages over just three of 33 properties. Have the banks reported on the extent to which money was given out, even though all of the terms of loans are not being complied with, and letters of undertaking from legal practices cannot be honoured as a result? In the cases that arose recently, people were acting as the solicitor and as the developer - acting in the mortgage to the bank and acting for the bank. In the issue that arose recently people were acting as both solicitor and developer. They were acting in regard to the mortgage to the bank and also for the bank. As a result, the banks have run into a lot of difficulty. Have we any clear idea of the level of problems in that area and about which banks are worst affected in this regard?

I have raised the second issue previously, namely, the German system of letting properties. In Ireland we seem to have the idea we can only let properties that are fully furnished but in Germany one can rent the shell of a property. It is up to the tenant to fit it out, including fitting the kitchen. As a result, tenants get properties at much lower rents, get security for ten to 20 years and landlords remain the property owners. This would apply also to the banks, which when they have to take possession of properties do not have the responsibility for normal day to day maintenance. It is an innovative way of looking at the problems banks have when they have possession of properties and need to get income from them.

Marc MacSharry (Fianna Fail)
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This might be a long-winded question given that I am not as familiar with this process as other Senators and have not participated in questioning Ministers on this issue. I welcome the Minister to the House. There is nobody from any party who does not have enormous respect for him. Everybody wholeheartedly supports him in what he is trying to do. It is how he does it that divides us politically and it is on that we may debate.

At what point will what Senator Barrett describes as the "back stairs" for the bankers in the Department of Finance close to them and be opened to the people? Increasingly, that is hoped, as stated in the Minister's text and highlighted by Senator Barrett. A strong onus is being put on the banks to do the right thing. As I stated on the Order of Business today, I welcome the publication of the legislation but regret the missed opportunities. It is like legislating to tell the kidnappers it is now the law to release their hostages - if it suits them In my view, that does not put the people at the front and in the centre. Will it be possible to have an independent authority, as opposed to the banks which are the larger proportion of any 65% of the creditors, to take control of this process so that the people can believe that, at minimum, they will have a fair crack of the whip? Those same people gave the banks a more than fair crack of the whip when they needed our support.

My second question relates to a European context. I am sure the Minister does not need encouragement from the likes of me but, at the same time I encourage him to do all he can to ensure that issues such as sovereign write-down are not thought to be crazy simply because they are portrayed by some aspects of German media in that way. He should remind those concerned that in the London agreement in the 1950s the entirety of lenders to Germany and those owed money by that country wrote down its sovereign debt by 50% and effectively wiped the level of interest rates Germany was being obliged to pay. Looking at the conditions of the London agreement, one finds the Germans broke them as recently as 1990 but they had a write-down of their debts at that time. This could greatly assist the case by case consideration of banks and the State in allowing banks to write off for individuals in difficulty. At what point are we going to put the people in command, rather than the banks? In my view, this legislation fails miserably in that regard.

Aideen Hayden (Labour)
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I, too, welcome the Minister to the House and welcome the measures being taken, both in respect of the Keane report outcomes and the personal insolvency legislation. One aspect of the mortgage crisis I wish to bring to the Minister's attention is that of the group of people who "rent to rent", as the term has it. These are people who bought their properties during the height of the Celtic tiger period and for whom the Minister made provision in the last budget by giving additional mortgage tax relief. Many of this group, however, are forced for certain reasons to move out of the properties they bought and rent elsewhere. It may be that they work in other parts of the country, or because in the interim they have had children and must rent more suitable properties, or simply that they cannot afford the mortgages they have. They have moved out to go back to live with family and are renting out the homes they bought. There is a difficulty there because, as our current legislation is structured, they are not eligible to receive mortgage interest tax relief. On top of that, they are liable for the non-prinicipal private residence charge of €200. They pay income tax on the income they receive from renting their properties while getting a derisory amount of tax relief on the money they must pay for the properties they are renting.

We are all aware the housing market is currently moribund - the reality is we do not have a market. Mortgage lending is now down to the 1970s level. A group of people is trapped in the homes they bought during the Celtic tiger years. The Minister attempted to make provision for them in the last budget but because they are renting elsewhere, they are not eligible for the reliefs the Minister attempted to give them. Will he revisit this issue and give mortgage interest tax relief to persons who are not, for various reasons, living in the properties they bought at the time and are now paying the NPPR charge? Will he make this charge a real second homes charge? I am sure it was never envisaged that we should penalise people who have nothing other than one home with which, in many instances, they are trapped and on which they are paying very high mortgages.

Jillian van Turnhout (Independent)
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Would the Minister like to reply? There remain four Senators who wish to speak.

Michael Noonan (Limerick City, Fine Gael)
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I refer to Senator Colm Burke's comment first, on letters of undertaking not being honoured. This is an issue. There is no doubt that slipshod solicitors as well as slipshod bankers were involved in much property dealing. Some of this came to light when loans were being transferred to NAMA and that organisation has a fairly good idea of the level of the problem with the deeds of some of the properties in question. However, it is not a very big issue in regard to individual mortgages. There is a lot of property on the loan-to-rent side which has issues but in the case of the individual family which takes out a mortgage the legal proceedings are not so complex and I do not believe there is a very large difficulty about the letters of undertaking. The solution we propose to all mortgage impairment is to take it on a case by case basis. If there is a legal flaw, that needs to be resolved in the context of resolving the repayment schedule, if that is being addressed.

I refer to letting unfurnished as distinct from furnished property, the latter being the practice in Ireland. That is a matter for the market. The market here is being driven by the fact that most people in Ireland aspire to own rather than rent their homes. Traditionally, the rental element of the Irish property market has been for the young, the carefree and the single, who want their place furnished because they do not want the capital investment required by an empty apartment before taking up residence in it. When they settle down and have partners and children they aspire to acquire their own home, get a mortgage and make the purchase. There now appears to be a breakdown in that and information is coming from the banks that shows that some couples are looking at rental as a permanent solution. The market may now respond in the German way, as described by the Senator.

I do not agree with Senator Mac Sharry's suggestion that the banks are being favoured by the Department of Finance - they are not.

Thomas Byrne (Fianna Fail)
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Senator Mac Sharry apologises. He had to leave.

Michael Noonan (Limerick City, Fine Gael)
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The banks are being held to account by the Department of Finance. The regulator of the banks is the Central Bank which applies the rules.

Reference was made to the people who caused the problem still being in position. There were about 80 senior people, between directors and senior management, on the infamous night of the guarantee in 2008 and now there are only two left. We have moved everybody out. One of the people who has left has already handed in his letter of resignation. One of the people Senator MacSharry referred to will stay on because he has been endorsed by the regulator as a suitable person to hold his position but, more importantly, he has the support of the private shareholders who are the main investors in the bank. More than 70 of them have moved on. Therefore, it is not true to say that the people who caused the problem are still in position, all drawing salaries and that everything is moving on.

I remind the Senator that my predecessor, the late Brian Lenihan, put public interest directors into the banks and I hope they are looking after the public interest. The Senator would personally know at least one of them. He could have a conversation with him-----

Michael D'Arcy (Fine Gael)
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When he goes home.

Michael Noonan (Limerick City, Fine Gael)
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-----when he goes home.

On the policy position, Senator MacSharry outlined that write-downs should be an acceptable part of resolving the banks' problems. We do not agree that write-downs should be part of the policy in the Irish banks and it is not accepted in Europe either. An exception was made in Greece with the PSI and the communiqué that accompanied the secondary bailout made it clear that this was an exceptional case and that there would not be write-downs elsewhere in Europe. That is the policy as laid down and we operate within it. There have been write-downs in other countries, all across South America and in Argentina in the past decade, in 2006 and in 2008. Inflation there is running at 24% at present and it has nationalised some foreign industry. I do not consider it to be in great shape but it is not for me to prescribe for other countries. Write-downs are not a policy option for the Irish Government.

I know the people Senator Hayden spoke about, those who have a home, their mortgage is too high, they move back to live with one of their parents, they rent their home and then they are not treated in the same way as owner-occupiers. It is quite difficult. I had a look at that in the context of the last budget and I will have a look at it again. It is not a huge issue in terms of the numbers involved. There are a number of people involved but it is an exception rather than the rule. I will look at it again.

Jillian van Turnhout (Independent)
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I thank the Minister for that. I have an ever increasing list of Senators who wish to speak and I will take them in groups of three. I remind Senators that the Minister has to leave at 5.45 p.m.

Thomas Byrne (Fianna Fail)
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Go raibh maith agat a Aire ag teacht anseo inniu. In some ways the Minister's presence here today is unfortunate because as Minister for Finance he has many things to do rather than attend the Seanad for the taking of statements. We should be passing legislation, passing the Personal Insolvency Bill, rather than just talking about it. This Oireachtas will have let the people down if we do not do everything possible to pass that Bill before the summer recess. If we break up for the summer without having passed it, we will send a bad message to the public. I am willing for the House to sit as long as it takes to pass it because it must be welcomed in principle.

There is a number of issues for the Minister to consider. The case by case approach needs to be radically re-considered within the policy-making set up of the Department. That approach is the root cause of many of the problems we have today. People do not know where they stand with their banks. If there are objective criteria with which the banks and borrowers in distress are obliged to comply, then it is far easier for those borrowers to negotiate with their banks, but currently because of Central Bank regulation they are forced to go their banks and set out, in humiliating fashion, the list of their expenditures on a weekly basis and the banks has to judge as to whether they are appropriate. What is needed is the setting of a standard amount of money people in distress should have to spend on mortgages, be it 25%, 30% or 35% of disposable income, and they should be let spend the remainder of their income on anything else, which inevitably will be the ordinary necessities. It will not be luxuries or other goods about which the banks are concerned. The case by case approach is putting borrowers in very vulnerable positions and needs to be radically rethought.

We need to make the family home inviolable in this context. While the Bill goes some way towards that - I read the provisions regarding the family home - and that is positive, we need to go a step further and stipulate that the family home will not be repossessed and to have some authority, as we proposed in our Bill, to decide on that and to give people options in regard to the family home and not have a get out clause, as is provided in the Bill in regard to the family home. The family home should be made inviolable subject to people working with their banks. Has the Minister considered the introduction of a tax relief for persons who are forced to leave their family home to rent it out, on which there may or may not be a tax liability? A person who has left his or her house or apartment to rent elsewhere to make up ends meet should be exempted from income tax for at least a year or two. I am not sure that would involve much of a cost to the State but it would give people encouragement.

Is it true that the banks submitted their proposals to the Central Bank and the Department about a year ago and that we have been waiting a year for policy makers in the Department and in the Central Bank to sift through the ideas submitted by the banks? I understand from those in the banking sector it has been a year of delay.

Marie Louise O'Donnell (Independent)
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I am pleased the Minister is here for purposes of clarification and communication and if Senator Byrne had spent less time giving out to us about him the Minister would have more time to answer the Senator's questions. I am in deep despair much of the time when I talk about the banks but there is one question I would like to ask the Minster, namely, if the banks are shops, which he rightly suggests they are, can he bring about a situation where customers can leave them and shop elsewhere without penalty?

Tony Mulcahy (Fine Gael)
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The Minister is welcome to House. I apologise for not being here earlier as I was attending a committee meeting. I welcome the general thrust of the Bill. Like some other Senators, I have a concern that we are relying on those, the bankers, who made no effort to solve the problem in recent years and we are going to trust them a little bit more to solve the current problem. I have not read the Bill, which I intend to read, but I have read some of the notes on it. Key to this measure are the mortgage facilitators who are the personal insolvency practitioners and the toolkit they will be afforded in bringing about a resolution with the banks. I would appreciate it if the Minister would elaborate on how he envisages that process working because these are the key people. The banks have not made a great effort with their clients to bring about a resolution. I welcome the Bill which is vast in its scope and it sets out a methodology for resolving the crisis, even though we may have to revisit it in a year and a half or two years time.

Michael Noonan (Limerick City, Fine Gael)
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On Senator Byrne's points, he is arguing his case as if the only taxpayer involved is the individual with an impaired mortgage but because we collectively own the banks and the building societies that got us into trouble we have an interest in that side of the argument as well as taxpayers. In protecting the taxpayers, we have to protect the generality of the taxpayers who now own some of the big building societies that were originally private and at the same time we have to ensure that individuals who have impaired mortgages are brought back towards a position where they are solvent again and can make ends meet. That is why it is being approached on a case by case basis. There is no rule of thumb or recipe where, as the Senator said, we can let everybody pay 30% of what they have and they can all keep their houses. That does not work.

Thomas Byrne (Fianna Fail)
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The IMF proposed that in the papers it put forward.

Michael Noonan (Limerick City, Fine Gael)
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It did not.

Thomas Byrne (Fianna Fail)
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It is not poppycock. It was proposed by the IMF and other reputable bodies.

Jillian van Turnhout (Independent)
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Allow the Minister to reply without interruption.

Michael Noonan (Limerick City, Fine Gael)
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It does not work out.

Thomas Byrne (Fianna Fail)
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When people go to the banks they are humiliated in that they have to show their Sky TV bills.

Michael Noonan (Limerick City, Fine Gael)
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People go to a mortgage provider, whether it be a bank or a building society, they have some type of a relationship with the person behind the counter, they do a deal to get a mortgage, time goes by, they lose their job, they cannot pay their mortgage and what is so detestable about somebody going back to the same person and saying "I need a new arrangement"?

Thomas Byrne (Fianna Fail)
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It is humiliating. That is what is detestable about it.

Michael Noonan (Limerick City, Fine Gael)
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What is humiliating about it? If a person wants to hold on to his or her house-----

Thomas Byrne (Fianna Fail)
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The bank is asking the person why they have Sky Sports and why they eat Kellogg's cornflakes instead of Dunnes cornflakes.

Jillian van Turnhout (Independent)
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Can we have the Minister without interruption?

Michael Noonan (Limerick City, Fine Gael)
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Is the Senator suggesting that the person behind the counter in the bank should accept any old yarn from the person on the other side of the counter and say, "That is grand, just give me 5 schillings and sixpence and you can have the house."

Thomas Byrne (Fianna Fail)
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The Minister has not been in that position.

Michael Noonan (Limerick City, Fine Gael)
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It has to be talked through.

Thomas Byrne (Fianna Fail)
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If the Minister had to go to the bank about his own mortgage, he would know.

Michael Noonan (Limerick City, Fine Gael)
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The Senator should not get personal. We all have our personal lives and we all do our own thing in our personal lives. The Senator does not know anything about my personal life and he should not throw stuff across the House about what I do not know and what he knows and that I was never in a bank. This is all nonsense. The Senator should take this matter seriously.

What we are trying to do is to give a hierarchy of solutions to people who have impaired mortgages. The first solution is, without any recourse to the law, to try to do a deal with the mortgage provider. The banks and building societies have just agreed with the Central Bank that they will bring forward a menu of solutions. They have also segmented their lending books to see what solutions would apply to certain categories of lenders. They are also hiring in people who are in a position to talk to customers and resolve their issues in a fair and frank way. This is the first tranche. Last Wednesday, most of the banks put out press statements indicating the approach which they would take. They have committed to the Central Bank and to the economic management council of the Government, that they will put the arrangements in place between now and the end of the year. Simultaneously, the insolvency Bill will proceed through the Houses of the Oireachtas. The Bill amounts to 200 pages of legislation. If the Senator wants to ram it through during the next three weeks without due consideration, I do not think this is the way to carry out legislative business because this Bill needs some consideration-----

Thomas Byrne (Fianna Fail)
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That will be the exception to the guillotine rule then.

Michael Noonan (Limerick City, Fine Gael)
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-----and as for the Senator's big promise that the House will stay here until August to vote it through, that is great stuff but the Senator is not doing justice to himself as a serious legislator-----

Thomas Byrne (Fianna Fail)
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Some 90% of Bills are guillotined in this House.

Michael Noonan (Limerick City, Fine Gael)
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-----to make that kind of commitment. This is serious piece of legislation which sets out a range of options and it is revolutionary in the sense that it is a generational change or a three generational change in the law on insolvency.

The Bill will not just apply to mortgagees; it will apply to insolvency in general. There are different arrangements. For instance, in the case of a person who has debt up to €20,000 with no assets and no way of paying the debt, the Bill will provide a method for writing-off that debt in a non-judicial way. The person is clear of the debt and is back in business and can start living his or her life and also make a contribution to the economy. Bankruptcy is at the other extreme. A bankruptcy order is imposed on an individual which will involve repayment over five or six years but he or she is out of bankruptcy after three years which means there is the opportunity to start again in business or to move on. I refer to the United States where one's first bankruptcy is a sign of success and this is being held up to us all the time. This Bill moves the situation in that direction. In between there is a range of non-judicial proceedings.

The Senator asked why there is registration in court - a court involvement in one of the processes. On the advice of the Attorney General, it was thought prudent to ensure that it would not be subject to constitutional challenge that the arrangement would be registered in court. However, it is not a court hearing but rather it is a registration in court of an agreement.

On the question of the lack of an appeals mechanism, the intent in the sections shows that it is an arrangement by agreement. How can one appeal something that is supposed to have been reached by agreement because either there is an agreement or there is not? To appeal the lack of an agreement is legal nonsense. The bank does not have a veto but rather it has a vote, the same as any other creditor and it has a vote in proportion to what it is owed. The banks and the other creditors have votes but they do not have vetoes. If there is no agreement, the option exists to move to bankruptcy. This is the big pressure on the bank because if it makes an agreement under the non-judicial arrangements, there is a great chance that it will recover a high proportion of what it is owed. If there is no agreement, bankruptcy follows and the bank may then get very little in the case of a limited payments order over a short period of time and a person emerging from bankruptcy in three years. I do not say the Bill is a perfect piece of legislation but it is breaking new ground. I ask the Senators to consider it and to table amendments and we can move on. There are people waiting for this legislation. The Senator's point is that this is a useless Bill. In case anybody would feel anyway hopeful about dealing with a mortgage issue, Senator Darragh O'Brien says, "There is no hope here lads, you are still in the swamp." That is not helpful.

Thomas Byrne (Fianna Fail)
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He never said that. We welcome this Bill.

Michael Noonan (Limerick City, Fine Gael)
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That was in Senator Byrne's speech.

Thomas Byrne (Fianna Fail)
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We never said that; it is a complete misrepresentation of what we said. We welcome the Bill.

Michael Noonan (Limerick City, Fine Gael)
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The Senator should encourage people to avail of this legislation so that they can get out of the trouble they are in.

Thomas Byrne (Fianna Fail)
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I asked for the Bill to be passed as quickly as possible. That is hardly trying to tell people there is no hope.

Jillian van Turnhout (Independent)
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As it now 5.45 p.m. statements on mortgage arrears, banking and the economy, must conclude. My apologies to the remaining four Senators who wished to ask questions.

When is it proposed to sit again?

Maurice Cummins (Fine Gael)
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At 10.30 p.m. tomorrow morning.