John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Question 39: To ask the Minister for Finance the precise mechanism by which banks extend loans and facilities to clients; the process by which banks raise the moneys they loan out; the source of that money; if a bank has typically to first secure the written contract with a would be borrower and then use that promissory note to raise the necessary loans from other institutions or individuals; if it is standard or common practice for banks to sell on the agreements they have put in place with their borrowers in order to raise a line of credit that will in part benefit the borrower. [6982/12]

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Question 43: To ask the Minister for Finance the legal requirements governing financial institutions selling on loans that they have advanced to borrowers; the statues governing the selling of loans and debt here; if a debt is sold on is it accurate to say that the original debt has been repaid to the original lender, whereas no direct contact exists between the borrower and the new purchasing owner; is it lawful for a financial institution to sell on a debt without full prior disclosure to the borrower and potentially changing the conditions of the loan; and are there any conditions governing the selling-on of loans by foreign financial institutions operating here. [6989/12]

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Question 44: To ask the Minister for Finance when a mortgage is securitised and sold to the market, is it sold as a security; if so, does it remain a mortgage following the sale; if it is no longer a mortgage, can it ever become a mortgage again; and if it is true that the Irish banks prepare and submit promissory notes of the Central Bank of Ireland as mortgage-backed debt instruments, on what are they based. [6990/12]

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Question 45: To ask the Minister for Finance when a mortgage is logged as an asset, does the bank also open a liability account for it; the implications of that provision; the purpose of opening the asset book and the liability book for the same transaction; is a bank statement to a borrower a full and true account of the bank's affairs with that borrower; if a bank is asked to verify a claim of injury by presenting their accounts when a person does not repay a loan, do those accounts show a loss for the bank in regard to that person; does the bank lodge all account information into one broad client account or does it keep individual account in relation to each client; when a mortgage is taken out by a lender it is logged into the bank's asset book; what is the specific asset that the bank is logging as theirs; what is the name given to the document that is created to record the sale of a bank asset; and who prepares the documents and what information does it contain. [6991/12]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 39 and 43 to 45, inclusive, together.

If a bank makes a mortgage, the bank may, if the mortgage contract allows, use that legal mortgage as security for funding their balance sheet. It does not alter the nature of the relationship between the bank and its customer. There are two possible routes. If the mortgage is securitised in a Residential Mortgage Backed Security (RMBS), the first (legal) charge to the bank from the customer is pledged to the security pool by virtue of an equitable right. The quality of the performance of the mortgage pool is borne by the purchaser of the securitised bond but the primary bank/customer relationship remains intact, subject to the terms of the securitisation itself. The bank remains, unless it is replaced by the terms of the securitisation, the servicing entity facing the customer and, indeed, the customer will not be aware that their mortgage has been funded in this way. RMBS are, generally, eligible collateral under ECB terms. In the situation where the RMBS is sold to the capital markets, the transaction may be 'off-balance sheet', however, if the bank retains sufficient levels of investment in the RMBS, it will remain an 'on-balance sheet' transaction and be recorded in the balance sheet. In the case of an RMBS transaction being completed, there is extensive accounting and legal advice provided to ensure compliance with all relevant rules.Mortgages may also be used for funding via the Central Bank of Ireland using Mortgage Backed Promissory Notes. These Notes are short term funding products that are not full securitisations, but once again, the mortgage charge is pledged to the Central Bank for security purposes. At present, these can be funded using Exceptional Liquidity Assistance (ELA) rather than through eurosystem borrowing via the ECB. However, in both cases, the bank/customer relationship remains paramount and intact.