Clare Daly (Dublin Fingal, Independent)
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134. To ask the Minister for Finance his views that the incorrect valuation of loan assets is enriching wealthy hedge funds at the expense of small business owners, given that according to the Tomlinson Report banks are deliberately closing down businesses and forcing small business owners to sell assets on distressed terms to favoured clients including companies (details supplied); that a law firm has examined if an Irish bank is engaged in the same activities; that his assurances that banks are not systemically overvaluing assets is in direct contradiction to evidence to the Banking Inquiry where bankers have admitted that by following International Accounting Standard 39 they are deliberately overvaluing assets. [16878/16]

Michael Noonan (Limerick City, Fine Gael)
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The Deputy will be aware that the valuation of assets for accounting purposes must be in accordance with International Accounting Standards. IAS 39 provided that assets must be valued at a point in time and it did not allow for the provision of potential future losses which was highlighted by the financial crisis, as noted by the Banking Inquiry. I understand that IAS 39 is being replaced by IFRS 9. The package of improvements introduced by IFRS 9 includes a logical model for classification and measurement, a single, forward-looking 'expected loss' impairment model and a substantially-reformed approach to hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018.

The Deputy will also be aware that the Central Bank has issued regulations aimed at protecting SMEs when dealing with regulated and unregulated firms as set out below.

The Consumer Protection (Regulation of Credit Servicing Firms) Act, 2015 was enacted on 8 July 2015. It was introduced to fill the consumer protection gap where loans were sold by the original lender to an unregulated firm. The 2015 Act introduced a regulatory regime for a new type of entity called a 'credit servicing firm'. Credit Servicing Firms are now subject to the provisions of Irish financial services law that apply to 'regulated financial service providers'. This ensures that relevant borrowers, whose loans are sold to third parties, maintain the same regulatory protections they had prior to the sale, including under the various statutory codes (such as the Consumer Protection Code, the Code of Conduct on Mortgage Arrears, the Code of Conduct for Business Lending to Small and Medium Enterprises and the Minimum Competency Code) issued by the Central Bank of Ireland.

Also, following a review in 2015, the Code of Conduct for Business Lending to Small and Medium Enterprises, has been strengthened in certain areas resulting in the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015 which comes into operation on 1 July 2016. 

It is widely recognised that the financial crisis of the previous decade uncovered significant deficiencies in the financial regulatory and supervisory framework and its operation. These have been the subject of extensive and objective analysis. The reports from Professor Patrick Honohan, Regling and Watson, and the Nyberg commission point out the problems to be addressed. A significant amount of legislation has been enacted at national and EU level to deal with these issues.

The Single Supervisory Mechanism (SSM) transfers key supervisory tasks for significant banks in the euro area to the European Central Bank, which means additional oversight beyond national Central Banks.  

At a national level, there has been a substantial increase in the Central Bank's staff resources, particularly in the area of regulation and the revised Central Bank Acts have enhanced peer review and independent oversight arrangements for the Central Bank's operations.