Thursday, 21 June 2012
Department of Finance
Question 38: To ask the Minister for Finance the reason the EBS are in a position to raise interest rates on their mortgages in the manner that they are doing; the action he will take to help struggling home owners who have mortgages with the EBS; and if he will make a statement on the matter. [30120/12]
The Deputy will be aware that the Bank's policy in relation to interest rates is a matter for the management and board of the institution. I have no role in the day-to-day commercial and operational decisions of the banks, which include these matters. These decisions are taken by the board and management of the institution. Notwithstanding the fact that the State is a significant shareholder in the institution, I must ensure that the bank is run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State, as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. However, EBS has informed me that they have no immediate plans to raise variable interest rates. The last time that EBS raised variable interest rates was August 2011. EBS subsequently reduced its variable rates in December 2011 and again in January 2012.
In terms of assisting struggling mortgage holders in general, last summer the Government's Economic Management Council established an inter-departmental group to consider further actions that could be deployed to address the increasing problem of mortgage over-indebtedness. This group, which was chaired by Mr Declan Keane, produced its report at the end of September and it was subsequently published by Government last October. The report recommended a number of additional measures to assist mortgage holders experiencing significant and genuine difficulty with their mortgage repayments such as personal insolvency reform, "mortgage to rent" initiatives, the provision of an enhanced mortgage advisory function and the development and provision by banks of more flexible and sustainable options to their customers experiencing mortgage difficulty. The Government has accepted the "Keane Report" recommendations as the most appropriate way to address the problem of significant mortgage arrears. A high level steering group of senior officials, chaired by the Secretary General of the Department of Finance, is now overseeing the implementation of these measures across Government and, with Central Bank involvement, the banking sector. In addition, a temporary Government committee, chaired by the Taoiseach, is now meeting on regular basis on the mortgage arrears issue.
EBS has also informed me that as part of AIB Group, it has been participating in the Mortgage to Rent scheme, as recommended in the "Keane Report". Subject to Central Bank approval, EBS also intends to shortly put live a number of other solutions, aligned with the recommendations in the Keane Report.