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

166. To ask the Minister for Finance his views on the use of securitisation vehicles by banks in which the State has an interest to reduce the liabilities on its balance sheet; and if he will make a statement on the matter. [31191/18]

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

As the Deputy will be aware, securitisation allows banks transfer the risk of some loans to other banks or long-term investors such as insurance companies and asset managers. This allows banks to use the capital that was set aside to cover the risk in those loans to create and sell new loans.

The reputation of securitisation was tarnished during the global financial crisis due to the problems created by some complex, opaquely structured asset-backed securities vehicles that contained poorly underwritten loans.

However the concept of securitisation retains value and institutions like the European Central Bank still support its use. When used well it can generate funding and transfer risk away from the banking sector, which may support monetary policy as it can help banks free up bank capital, allowing them to extend new credit to the real economy.

Across the market we live in an era of far more stringent regulation and the securities market is no different with new standards requiring simple, transparent and standardised backed securities products. It seems likely that in a normalising European and Irish financial landscape that securitisations will play a role.

Notwithstanding the fact that the State is a significant shareholder in a number of banks, I must ensure that they are run on a commercial and independent basis. The day to day running of the banks and decisions around securitisation options are the responsibility of management within those banks.