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Credit Institutions (Stabilisation) Act 2010: Motion (Continued)

Friday, 14 December 2012

Dáil Éireann Debate
Vol. 786 No. 4

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(Speaker Continuing)

[Deputy Seamus Healy: Information on Seamus Healy Zoom on Seamus Healy] This is not an ideological issue. It is the only practical way by which the people can get their money back if the banks become profitable again. It is the only way by which mortgage holders can be dealt with fairly and adequate credit can be provided for small businesses. If, for instance, ownership of Bank of Ireland, Allied Irish Banks and Permanent TSB was transferred to the European Stability Mechanism or some other foreign entity at their current value of approximately €8 billion, although the State has borrowed approximately €30 billion to rescue them, citizens would have paid a huge debt and international venture capitalists would make huge profits on such a transfer. That simply must not happen. Such a transfer was suggested as a possibility, although I note that there has not been much talk of it happening more recently. The Government should take direct control of the banks to ensure the investment of the people is protected. Decisions on the pay and pensions of top executives and the disposal of assets should be taken by the Oireachtas in full public view and after adequate debate. The Government's policy is unacceptable. I will, therefore, be opposing the motion.

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan I thank all of the Deputies who contributed to the debate and Deputy Michael McGrath for his support. A key commitment given in the troika support programme was that there would be comprehensive restructuring of the banking system. The Credit Institutions (Stabilisation) Act provides the broad powers needed to act, on financial stability grounds, to effect necessary restructuring actions and the recapitalisation measures as envisaged in the programme. The Act has enabled these necessary actions to be taken swiftly, efficiently and with legal clarity. The level of restructuring of the banking sector achieved in the past two years would not have been possible without it. The Governor of the Central Bank agrees that the provisions of the Act should be available for an extended period to the end of 2014. This will facilitate transactions, including possible further restructuring of the Irish banks that may require a direction or transfer order to implement. I have set out the instances where the powers available to the Minister under the Act have enabled the substantial and significant restructuring actions envisaged in the support programme to be progressed. I have also outlined the progress made in the banking sector. However, the sector is certainly not out of the woods and further actions may be required, for which the powers under the Credit Institutions (Stabilisation) Act would be appropriate.

Deputy Michael McGrath raised the issue of lending to SMEs. The Government imposed SME lending targets on the two domestic pillar banks for the three calendar years 2011 to 2013. Both banks were required to sanction lending of at least €3 billion in 2011, €3.5 billion in 2012 and €4 billion in 2013 for new or increased credit facilities for SMEs. They achieved their 2011 targets. The head of the Credit Review Office, Mr. John Trethowan, stated in his recently published ninth quarterly review that "€3.5bn of sanctions for each bank is a very challenging target, however the remaining five months typically show more lending activity and I am of the view that, after a slow start to the year, the targets will be a challenge but still may be achieved."

In addition to the lending targets imposed, the pillar banks are required to submit their lending plans to the Department and the Credit Review Office at the beginning of each year outlining how they intend to achieve their lending targets. The banks also meet the Department and the Credit Review Office on a quarterly basis to discuss progress. The office is also available to review cases where credit facilities up to €500,000 are refused, withdrawn or offered under unreasonable conditions. During recent appearances before the Joint Committee on Finance and Public Expenditure representatives of both banks were confident of achieving their 2012 targets.

The Central Bank has published a revised statutory code of conduct for business lending to small and medium-sized enterprises setting out new requirements for lenders when dealing with SMEs in or facing financial difficulties. The code came into effect on 1 January 2012 and a full review will be undertaken in the second half of 2013.

Deputy Michael McGrath also knows that an independent Mazars survey of SME credit facilities was published last year. On foot of this report, a series of seven regional meetings with local representatives took place in different parts of the country. These were hosted by the Minister of State, Deputy John Perry, and supported by Mr. John Moran, Secretary General of the Department of Finance. The aim of the meetings was to examine further the actions that might be taken to improve access to credit for SMEs.

In the Action Plan for Jobs a range of actions are outlined to encourage access to credit for SMEs and enhance the measurement and reporting by the banks of their lending to the sector. These include working with the banks on one-to-one firm issues and assisting them in a cultural shift in lending practices towards sectors critical to economic growth. We also want them to develop better protocols and enhance the sectoral expertise within the banks and the range of lending products to meet the needs of exporters and tourism providers.

Deputy Michael McGrath also raised the issue of mortgage arrears. The introduction of the new Personal Insolvency Bill will incentivise the banks to reach an agreed solution with individual borrowers in resolving mortgage arrears cases. The Bill will conclude its parliamentary process next week and the Government will press ahead with the establishment of the Insolvency Service of Ireland early next year. We expect the personal insolvency arrangements framework, which is part of this legislation, to provide for a more effective and efficient resolution process as an alternative to judicial bankruptcy for a greater number of insolvent debtors to address their insolvency. The primary purpose of the personal insolvency arrangement is to provide a realistic alternative to bankruptcy for insolvent debtors with secured debts. As an insolvency resolution mechanism, the personal insolvency arrangement is intended not only to address mortgage or consumer debt situations but also to be capable of dealing with insolvent debtors who have debts arising from a business, trade or profession. A functional repossession regime should, however, also be part of the toolkit to deal with unsustainable legacy debts. While repossession should remain a measure of last resort, it is important to maintain balanced incentives between mortgage borrowers and creditors. In this regard, the legal uncertainty arising from recent case law which identified constraints which could hinder repossession of collateral in some cases involving debtor default will be addressed some time next year.

At a future date we can deal with some of the other issues raised. The Mercer review is proceeding and I hope to receive a full report early in the new year.

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