Seán Haughey (Dublin Bay North, Fianna Fail)
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125. To ask the Minister for Finance his views on the recent sale by banks (details supplied) and other financial institutions of performing and non-performing loans to vulture funds; if these sales will be prevented; the advice offered to affected mortgage holders that are concerned in relation to same; and if he will make a statement on the matter. [36049/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Deputy may be aware that in my role as Minister for Finance, I cannot stop loan sales even by the banks in which the State has a shareholding. These decisions are the responsibility of the board and management of the banks which must be run on an independent and commercial basis. The banks’ independence is protected by Relationship Frameworks which are legally binding documents that I cannot change unilaterally. These frameworks, which are publicly available, were insisted upon by the European Commission to protect competition in the Irish market.

Despite the significant progress already made by the Irish banks in reducing NPLs, their ratios are still well above the European average of around 4%. PTSB is a particular outlier in this regard with a ratio of 25%, before the recently announced loan sale – Project Glas. Given this position, banking regulators have tasked each bank with developing and implementing strategies with the expectation that their ratios will be reduced towards the European average. Given the scale of reduction required, Project Glas was a necessary action taken by PTSB.

In relation to the position following a loan sale, I have commented on a number of occasions that the protections for borrowers are unchanged. All terms and conditions attached to their mortgage contract remain in place. In addition, Start Mortgages the purchaser of the PTSB loan book, is a retail credit firm regulated by the Central Bank of Ireland. When dealing with borrowers, retail credit firms are bound by the same regulations that currently apply to PTSB.  Like PTSB, they are required to comply with the Consumer Protection Code (CPC) and the Code of Conduct for Mortgage Arrears (CCMA) when dealing with borrowers who are in arrears.

I should also highlight that regardless of the protections that are currently in place for mortgage holders, I have confirmed that I am prepared to engage with Deputies from other parties in an effort to see if these protections can be strengthened further in a sensible manner.

This commitment has been demonstrated recently by the Government’s support for the Bill introduced by Deputy Michael McGrath, T.D., which seeks to regulate the purchasers of mortgage loans. In addition, earlier this year I asked the Central Bank to carry out a review of the CCMA to ensure it remains as effective as possible.  I have has asked for the report to be completed as soon as is practicable. The Central Bank has stated that it is their intention to deliver the report by the end of September 2018.   If as a result of this review, the CCMA requires amendment, a full public consultation process would be required in line with normal guidelines. 

Tommy Broughan (Dublin Bay North, Independent)
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126. To ask the Minister for Finance the discussions taking place with partially State owned banks regarding the sale of non-performing loans to vulture funds; the criteria being used to decide on the make-up of the portfolios; and if he will make a statement on the matter. [36133/18]

Tommy Broughan (Dublin Bay North, Independent)
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130. To ask the Minister for Finance the level of interaction he has with the CEOs of the various partially State owned banks and the non-performing loans of each; and if he will make a statement on the matter. [36137/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 126 and 130 together.

In the first instance, I should highlight for the Deputy that in my role as Minister for Finance, I cannot stop loan sales even by the banks in which the State has a shareholding. Decisions in this regard, as well as the criteria used to decide the make-up of loans to be included, are the sole responsibility of the board and management of the banks which must be run on an independent and commercial basis. The banks’ independence is protected by Relationship Frameworks which are legally binding documents that I cannot change unilaterally. These frameworks which are publicly available, were insisted upon by the European Commission to protect competition in the Irish market.

Despite the significant progress already made by the Irish banks in reducing NPLs, their ratios are still well above the European average of around 4%. PTSB is a particular outlier in this regard with a ratio of 25%, before the recently announced loan sale – Project Glas. Given this position, banking regulators have tasked each bank with developing and implementing strategies with the expectation that their ratios will be reduced towards the European average. Given the sale of reduction required, it was inevitable though unfortunate, that Project Glas was a necessary action taken by PTSB.

Notwithstanding a loan sale, I wish to highlight that the protections for borrowers in place before the sale remain unchanged. In this regard, it is important to note that there are no changes to the rights of a borrower whose loan is sold by a bank. All terms and conditions attached to their mortgage contract remain in place. In addition, Start Mortgages, the purchaser of the PTSB loan book, is a retail credit firm regulated by the Central Bank of Ireland since 2008. When dealing with borrowers, retail credit firms are bound by the same regulations that currently apply to PTSB.  Like PTSB, they are required to comply with the Consumer Protection Code (CPC) and the Code of Conduct for Mortgage Arrears (CCMA) when dealing with borrowers who are in arrears.

I should also highlight that regardless of the protections that are currently in place for mortgage holders, I am prepared to engage with Deputies from other parties in an effort to see if these protections can be strengthened further in a sensible manner. This commitment has been demonstrated recently by the Government’s support for the Bill introduced by Deputy Michael McGrath, T.D., which seeks to regulate the purchasers of mortgage loans.

In addition, earlier this year I asked the Central Bank to carry out a review of the CCMA to ensure it remains as effective as possible.  I have asked for the report to be completed as soon as is practicable. The Central Bank has stated that it is their intention to deliver the report by the end of September 2018.   If as a result of this review, the CCMA requires amendment, a full public consultation process would be required in line with normal guidelines. 

The interaction between both Department officials and myself and senior management of the banks in which the State has an investment takes place on a regular basis. As part of their ongoing engagement with the banks, Department officials meet with bank management during which a wide range of topics are discussed, including loan sales where relevant. Subsequent to these meetings, Department officials brief me as required. In addition to these meetings, I meet directly with the CEOs of each of the banks from time to time and loan sales would be included as an agenda item again where relevant.

Tommy Broughan (Dublin Bay North, Independent)
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127. To ask the Minister for Finance his views on the inclusion of split mortgages in bank sales of non-performing loans to vulture funds; his further views on the inclusion of mortgages of families that are engaging and meeting their arrears arrangements in bank sales of non-performing loans to vulture funds; the measures he is taking to protect these owner occupier mortgages; and if he will make a statement on the matter. [36134/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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Since the establishment of the Single Supervisory Mechanism (SSM) in November 2014, the focus has shifted from reducing mortgage arrears levels to reducing Non-performing Loans (NPLs). This shift in focus has been accompanied by a new strict Europe-wide definition of what constitutes an NPL by the European Banking Authority (EBA), which means that certain restructures are deemed NPL even if customers are meeting the revised payment schedule. 

Officials in my Department met with staff of the SSM at the highest level on two occasions since late 2016. I also met Ms Nouy, Chair of the Supervisory Board of the ECB. In the course of these discussions, my officials outlined the background and history to the restructuring effort in Ireland and made the case against continuing to classify some types of restructured loans, including certain split mortgages, as NPLs. While we have been informed that the SSM is looking into the regulatory treatment of split mortgages across a number of European member states I have no evidence at this point that this categorisation is going to change. 

Dealing specifically with Deputy Broughan’s question about the inclusion of these split mortgages in bank sales, the Deputy will be aware that when PTSB first announced Project Glas - its planned sale of NPLs – back in February, the bank confirmed that loans which were restructured by way of a split mortgage were within the scope of the overall portfolio being considered for sale. However, the bank subsequently announced in May that it had withdrawn approximately €0.9bn of principal dwelling houses (PDHs) split mortgages from the sale where borrowers were meeting the terms agreed with the bank. The removal of these restructured loans from the sale was a positive outcome for the borrowers which I welcomed.  

In terms of restructured loans that are performing being included in loan sales, most loan agreements include a clause that allows the original lender to sell the loan on to another firm.  The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (“the 2015 Act”) was introduced to fill the consumer protection gap where loans are sold by the original lender to an unregulated firm. Under the 2015 Act, if the firm who bought loans from the original lender is an unregulated firm, then the loans must be serviced by a ‘credit servicing firm’ which is regulated by the Central Bank.  Credit Servicing Firms are firms that manage or administer credit agreements such as mortgages or other loans on behalf of unregulated entities.

Credit servicing firms must act in accordance with the requirements of Irish financial services law that applies to ‘regulated financial service providers’. This ensures that consumers, whose loans are sold to another firm, maintain the same regulatory protections that they had prior to the sale, including under the various statutory Codes of Conduct issued by the Central Bank such as the Consumer Protection Code 2012, Code of Conduct on Mortgage Arrears 2013, and the SME Regulations.  Contractual terms are not changed by the sale of the loan.

Provision 3.11 of the Central Bank’s (the Code) requires that, where a regulated lender intends to transfer all or part of its ‘regulated activities’ to another regulated entity, it must provide advance notification to both the Central Bank and affected consumers.  Specifically, a lender must provide a consumer with at least 2 months’ notice before transferring all or part of its loan book covered by the Code to another person, including where the transferee is an unregulated entity. Where the transferee is an unregulated entity, the Code requires that the regulated lender also notify the consumer of the name of the regulated entity that will be ‘servicing’ the loan for the unregulated entity.  In the event that there is a change in the credit servicing firm, the existing credit servicing firm must also notify the Central Bank and the consumer in advance, in accordance with the timelines set out under Provision 3.11 of the Code. Furthermore, I understand that the Central Bank expects all affected consumers to be informed of the term of their loan agreement which allows the loan to be sold and the identity and address of the new owner.

The Deputy will be aware that a Private Member’s Bill now titled the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2018 was considered by Select committee on 12 July. My officials worked with Deputy McGrath and other stakeholders to develop the Bill as initiated. This Bill will require that loan owners are regulated by the Central Bank. I expect that Report Stage will be taken after the summer recess.

I have also asked the Central Bank to carry out a review of the Code of Conduct on Mortgage Arrears (CCMA) to ensure it remains effective and for the review to be completed as soon as possible. 

Ensuring that the interests of consumers of financial services are protected is a key priority for the Government and the Central Bank.

Tommy Broughan (Dublin Bay North, Independent)
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128. To ask the Minister for Finance if he has requested a report on the number of owner occupier mortgages of a bank (details supplied) that were included in a project in cases in which mortgage holders have been engaging with the bank and meeting the arrangements for repayments and arrears; and if he will make a statement on the matter. [36135/18]

Tommy Broughan (Dublin Bay North, Independent)
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129. To ask the Minister for Finance the number of non-owner occupier mortgages that are accommodating tenants in the private rented sector that have been sold by a bank (details supplied) to a company; and if he will make a statement on the matter. [36136/18]

Tommy Broughan (Dublin Bay North, Independent)
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131. To ask the Minister for Finance the number of non-owner occupier mortgages being sold by a bank (details supplied) that are accommodating tenants in the private rented sector and are in receipt of HAP, RS and RAS payments; and if he will make a statement on the matter. [36138/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 128, 129 and 131 together.

As the Deputy will be aware the decisions around loan sales are the responsibility of the board and management of the banks which must be run on an independent and commercial basis. The Minister for Finance cannot stop loan sales, even by the banks in which the State has a shareholding. 

I wish to advise the Deputy that while my department has had a number of interactions with PTSB in connection with the sale, it does not hold the specific information that is being sought. Officials from my department contacted PTSB and they provided the following response:

"Permanent TSB plc (the ‘Bank’) has agreed to sell a Non-Performing Loan portfolio to the retail credit firm Start Mortgages DAC, supported by LSF Irish Holdings 97 DAC, both affiliates of the Lone Star Funds. Start Mortgages has been authorised by the Central Bank of Ireland since November 2008 and will become the servicer of the loans when the transaction completes later this year.

The loan sale was undertaken as part of the Bank’s strategy to reduce the ratio of Non-Performing Loans on the Bank’s balance sheet from c.26% in line with regulatory requirements.

The portfolio contains loans linked to c.10,700 properties.  In terms of the make-up of the portfolio by loan type (Variable, Fixed, Tracker), the book broadly reflects the make-up of the Bank’s overall loan book.

The loan sale includes circa 3,300 Buy-To-Let (BTL) properties which are classified as Non-Performing reflecting the Non-Performing Classification guidelines set out by European and Local Regulators. Comprehensive occupancy information on this BTL population is not available.

All loans included in the sale are either Non-Performing or are cross-collateralised/connected to another loan which is Non-Performing, reflecting the Non-Performing Classification guidelines set out by European and Local Regulators. Customers will continue to be afforded the protection of existing regulatory protections after the transfer completes."