Michael McGrath (Cork South Central, Fianna Fail)
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252. To ask the Minister for Finance if Irish banks’ holdings of tracker mortgages will be eligible for the recently announced plan by the ECB to buy asset-backed securities and covered bonds; the potential benefits of this plan for the economy here; and if he will make a statement on the matter. [34120/14]

Michael Noonan (Limerick City, Fine Gael)
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I have been informed that the detailed modalities of the ECB proposal to purchase Asset Backed Securities ("ABS") and Covered Bonds ("ACS") will not be announced until after the ECB Governing Council meeting on 2 October 2014.  As a result it is currently unclear whether existing bonds retained as collateral or newly created bonds by relevant banks in Ireland will be eligible for the schemes.  However, to the extent that the ECB proposals reduce the cost of market funding in the ABS and ACS markets then banks could benefit from lower funding costs on any future issuance of such instruments.  If tracker mortgages are contained within an eligible ABS and ACS vehicle they will be indirectly eligible for the scheme.

It is also worth noting that the ECB is this month commencing a funding scheme, Targeted Long Term Refinancing Operation ("TLTRO"), which aims to incentivise SME lending growth amongst Euro area banks.  The details of the scheme are complex but I expect that Irish banks involved in SME lending will access the scheme.   

While it is probable that the Irish banks will be able to access market funding at lower costs the reduction in ECB base rates will negatively impact the profitability of their tracker mortgages.  For consumers the ECB announcement is positive for those holding tracker mortgages, a significant proportion of the total mortgage pool, but could be negative for savers if banks lower deposit rates.  The impact of these proposals on the economy is uncertain, though I would expect  them to be positive for the domestic economy.