Michael McGrath (Cork South Central, Fianna Fail)
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Question 63: To ask the Minister for Finance if there is any evidence that financial institutions, regulated by the Central Bank of Ireland have sought to break the contractual arrangement in place with borrowers in respect of tracker mortgages; and if he will make a statement on the matter. [27778/11]

Michael Noonan (Limerick City, Fine Gael)
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The Central Bank's revised Code of Conduct on Mortgage Arrears (the Code) applies to mortgage lending activities with borrowers in respect of their principal private residence in the State. Compliance with the Code is mandatory on all mortgage lenders registered with the Central Bank. The Code came into effect on 1 January 2011. With effect from 30 June 2011, lenders must have in place the required systems and trained staff necessary to support the implementation of the Code. The Code sets out the framework that lenders must adhere to when dealing with borrowers who are in arrears or in pre-arrears. Pre-arrears arises when a borrower contacts a lender stating that he or she is in danger of getting into financial difficulties.

Under the Code, lenders must establish a Mortgage Arrears Resolution Process known as MARP and use this framework when dealing with borrowers who are in arrears or in pre-arrears situations. For MARP cases, the lender must not require the borrower to change from an existing tracker mortgage to another mortgage type, as part of any alternative arrangement offered by the borrower. For MARP cases on existing tracker mortgages, where an alternative repayment arrangement this is put in place includes a fixed interest period, the borrower must be permitted to revert to an interest rate that corresponds to the margin over prevailing ECB rate or other tracked rate as specified in the original mortgage contract, at the end of the fixed interest period.

In August 2010, the Central Bank published the findings of an examination of switching practices related to tracker mortgages by lenders and relevant customer communications. The examination did not find any evidence that customers are being offered incentives to move off tracker rate mortgages but mortgage lenders have been instructed to give careful consideration before offering any incentive to customers to move from tracker rate mortgages and to notify the Central Bank in advance of any such proposals. Concerns were also identified during the examination about the level of disclosure and transparency when consumers moved from tracker rate mortgages to other forms of mortgages.

As a result of this finding, mortgage lenders were requested to disclose fully, with immediate effect, the impact of any switch from a tracker mortgage rate in all customer communications. Customers must be notified that switching from a tracker rate may mean they will lose the ability to avail of a tracker rate mortgage in the future, where this is the case.

Mortgage lenders have been advised to include new information in all customer communications regarding switching from tracker rate mortgages, for any reason, with immediate effect. This information should include:

· indicative comparisons of the cost of monthly repayments of the customer's current tracker rate mortgage and the rates being offered,

· details of the advantages and disadvantages of the tracker mortgage rate compared to the other rates being offered.

The examination did not find evidence that customers were being offered incentives to move off tracker rate mortgages. Mortgage lenders have been instructed, by the Central Bank, to give careful consideration before offering any incentives to customers to move from tracker rate mortgages and to notify the Central Bank in advance of any such proposals.

I have been informed by the Central Bank that, where banks and other lending agencies made errors in removing persons from tracker rate mortgages, the Bank expects that such customers have been or will be compensated by the agency in question.

Michael McGrath (Cork South Central, Fianna Fail)
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Question 64: To ask the Minister for Finance if there is legislation on the Statute Book which provides for the offence of reckless management of a financial institution; and if he will make a statement on the matter. [27779/11]

Michael Noonan (Limerick City, Fine Gael)
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There is no specific provision for an offence of reckless management of a financial institution in the statute book . However, most incorporated financial institutions are subject to potential liability for reckless or fraudulent trading under the Companies Acts and to the supervision requirements of the Central Bank.

On the broader question of enforcement action and sanctions applicable to those who have contravened Irish financial services law, the Central Bank (Supervision and Enforcement) Bill 2011 enhances the Central Bank's ability to ensure compliance and take enforcement action where necessary. The Bill also provides for a doubling of the maximum fine applicable to individuals found to have contravened Irish financial services legislation. These provisions will complement the roll-out of the Central Bank fitness and probity regime which sets the standards to apply to those performing senior and influential roles in financial institutions. Those found not to be in compliance with those standards may be suspended or prohibited from performing certain functions or, in the case of pre-approval controlled functions, prevented from performing those functions in the first place.

The question of ensuring the necessary legislative provisions are in place to provide for proper supervision of financial institutions is under continuing review by my Department.