Pearse Doherty (Donegal, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

90. To ask the Minister for Finance the way in which a change to the rules to include the warehoused element of a split mortgage as a non-performing loan would alter the capital requirements of each Irish bank in view of the ECB's capitalisation rules and buffers; and if he will make a statement on the matter. [42020/17]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

As the Deputy is aware, I have no role in the day-to-day management or financial reporting of any bank in which the State is a shareholder. Financial reporting obligations and accounting practices are matters solely for the Board and Management of each institution. Each of the SSM (Single Supervisory Mechanism) regulated institutions produces detailed, externally audited accounts in line with international accounting best practice. In addition, these banks have required minimum capital levels, which are assessed and scrutinised by the Joint Supervisory team (JST) comprising officials of both the SSM and the Central Bank of Ireland.

The capital treatment of Non-Performing Loans and mortgage restructures, including split loans with a warehoused element, is in accordance with the CRD IV which forms the basis of prudential requirements for banks. The minimum capital requirements are determined by the annual Supervisory Review and Evaluation Process (SREP) conducted by the SSM. 

The Central Bank have confirmed to my officials that "credit institutions are required to comply with a range of classification requirements including the Regulatory definition of default as per Article 178 of the Capital Requirements Regulation; the Accounting definition of impaired as per the applicable accounting framework (e.g. IAS 39) and the Supervisory definition of non-performing as per the EBA ITS* on forbearance and non-performing exposures."

Therefore, each bank would need to consider the impact on its reporting and compliance obligations in the event of a hypothetical change as described by the Deputy. One cannot assume, in this regard, a direct impact from a change in definition determining the recognition of NPLs on the minimum capital requirements that would be assigned to an institution by the SSM as part of their SREP.

*Implementing Technical Standard.