Bernard Durkan (Kildare North, Fine Gael)
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Question 213: To ask the Tánaiste and Minister for Finance the extent of sub-prime lending here; the expected impact on the economy; and if he will make a statement on the matter. [24044/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The information available suggests that the level of lending in the sub-prime market is currently extremely small. For instance it is estimated that sub-prime loans make up roughly 2.5% of the overall mortgage market. The sub-prime market exists to provide finance to those who have difficulty accessing mainstream credit, usually due to an adverse credit history or difficulties proving income. Consequently, interest on such loans is normally higher than in the case of mainstream credit, as the lender must allow for a greater degree of credit risk. In practice, various credit providers offer loans where the interest rate or conditions differ from those generally available in the market. These interest rates and conditions depend on a number of factors, including risk.

As there is no single category of 'sub prime lender' it would not be possible to quantify the impact on the economy of sub-prime lending. Where responsibly used, credit provided on this basis can generate advantages in terms of investment or lifestyle opportunities. The benefits and costs accrue to individual borrowers and lenders and are not readily identifiable in the aggregate. The fact that borrowers who establish a track record in relation to repayment of sub-prime can re-finance the loan on better terms and access mainstream loan finance is an important benefit of these loans at the individual level. As far as the disadvantages of this type of lending is concerned I have consistently highlighted the need for responsible behaviour by both borrowers and lenders and in particular the need to factor into their financial decision making the effects of potential future changes in the economic and financial conditions.

I have already announced my intention to propose an amendment to the Markets in Financial Instruments and Miscellaneous Provisions Bill 2007, at Committee Stage this week, with a view to regulating the non-deposit taking lending sector, including sub-prime lenders. The text of the amendment has already been circulated. The main aim of the proposed measures is to ensure that borrowers from sub-prime lenders, or from other lenders in that sector, will be able to benefit from the additional safeguards which the Financial Regulator's Consumer Protection Code provides.

Bernard Durkan (Kildare North, Fine Gael)
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Question 214: To ask the Tánaiste and Minister for Finance if guidelines have existed to ensure prudent borrowing and prudent lending; the degree to which such guidelines have not been adhered to; his proposals to address such issues; and if he will make a statement on the matter. [24045/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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A comprehensive system of banking supervision is in place under both EU and domestic law to ensure that credit institutions do not put customers' deposits at risk through imprudent lending practices. Banking Supervision encompasses the authorisation of banks and building societies, their prudential supervision on an ongoing basis and the development of supervisory guidance and requirements for their operation. Prudential supervision involves monitoring the business of banks and building societies and how it is planned, managed, and controlled and checking compliance with statutory and non-statutory requirements.

This system is administered in Ireland by the Financial Regulator, who can increase the level of surveillance of particular practices once a concern arises. Thus, for instance, when there was heightened concern about rising levels of mortgage debt mortgage lenders were asked to review their practices and to stress test every would-be borrower's ability to meet their credit obligations in the event of more challenging times.

As regards prudent borrowing the Consumer Credit Act 1995 obliges credit providers to include specific information in all credit agreements in order to ensure that a consumer, when making credit decisions, has access to the fullest possible information in relation to the agreement being entered into and the impact that servicing a loan will have on the consumer's household budget.

In addition to its oversight role in relation to the Consumer Credit Act 1995, the Financial Regulator have sought to raise the level of awareness of both borrowers and lenders of the importance of prudent borrowing and responsible lending. For instance, the Financial Regulator, with its statutory consumer mandate, has developed a number of specific initiatives to help consumers make informed choices in terms of the financial products they choose, the amount of risk they take on and the cost of financial products. These initiatives have been developed through the framework of the Financial Regulator's "It's Your Money" campaign and have involved publishing consumer guides on credit products, fact sheets, cost surveys on personal loans, all of which are intended to assist borrowers in making the most appropriate credit decisions given their circumstances.