Dáil Éireann debate -
Thursday, 20 Nov 2008

Vol. 668 No. 2

Report of the Joint Committee on European Affairs: Statements.

Deputy Bernard J. Durkan

I thank the Whips and the Government for facilitating this debate. This report is one of four that the Oireachtas Joint Committee on European Affairs has produced in the current year. Given the importance of being at the coalface of discussions of European-related issues, the committee felt this was an area in which it had a worthwhile submission to make.

The White Paper on Integration of EU Mortgage Credit Markets summarises the conclusions of a comprehensive review of the functioning and the level of integration of EU mortgage credit markets. It presents a package of measures to improve the efficiency and competitiveness of EU residential mortgage markets. The Commission believes that EU action is warranted in this area and that the treaty provides the basis for the creation of a single market. Evidence shows that the single market for residential mortgages is far from integrated. Obstacles exist that restrict the level of cross-border activity on the supply and demand sides, thus reducing competition and choice in the market.

The Commission recognises that consumers predominantly shop locally for mortgage credit and that the majority will probably continue to do so for the foreseeable future. The integration of EU mortgage markets will therefore be essentially supply-driven, in particular through various forms of establishment in the member state of the consumer. The Commission has also duly taken account of the lessons that can already be drawn from the recent events in financial markets. However, this White Paper is not as such a response to the current financial turmoil that originated from problems in the US sub-prime market.

When the committee first debated this issue in July, the full extent of the mortgage and financial services turmoil that we now see had not emerged. However, the committee is charged with the responsibility of ensuring that we in the Houses of the Oireachtas have an input into what the EU institutions propose. We were invited by the Commission to make a submission, which we did. The objectives of the White Paper are to facilitate the cross-border supply and funding of mortgage credit, increase product diversity, improve consumer confidence and facilitate customer mobility.

I wish to thank the Commission for its invitation to national parliaments to submit their views and comments on Commission proposals received under the Barroso initiative, including Green and White Papers. As part of this welcome initiative, the committee has considered in great detail the Commission's White Paper on the Integration of EU Mortgage Credit Markets. As part of this consideration, the committee invited and received submissions from the key stakeholders in the Irish mortgage market, namely the Financial Regulator, the Department of Finance, the Irish Bankers Federation and Financial Services Ireland. The committee also held indepth discussions with these stakeholders at two of its public meetings on 23 July and 29 July 2008. The committee would like to thank these groups for their co-operation and worthwhile inputs.

The committee supports the White Paper's objective to further enhance the competitiveness and efficiency of the residential mortgage market in Europe by facilitating market integration. The committee agrees that the integration of the retail mortgage markets will be supply driven as consumers predominantly shop locally for mortgage credit. In this context, the committee underlines the vital importance that any further actions in this area, whether legislative or otherwise, should be consumer focused. It does not agree with integrating mortgage markets for the sake of achieving a pure internal market. Any future measures proposed in this area on foot of the White Paper must demonstrate clear and tangible benefits to European consumers. This is further underlined by the recent financial turmoil brought about by the credit crunch and, some would argue, irresponsible lending by financial institutions. A great deal of debate time during the committee's perusal of this document was taken up with what the committee members regarded as irresponsible lending and the possible consequences for the consumer. Not only were there consequences, as there now appears, for the consumer, but there were also consequences for the banking system and the lending agencies in general.

The committee makes the following specific comments which it would ask the Commission to take into account in its further work on the White Paper. Any proposed measures aimed at integrating Europe's retail mortgage markets must have at their core consumer protection. The committee welcomes, therefore, the White Paper's proposals on enhancing the rights of consumers such as better and more comparable pre-contractual information, improved access to credit data and a ban on product tying and restrictive practices.

The White Paper singles out early repayment as one of the most important issues for integrating EU mortgage markets. Irish law at present gives some consumers considerable rights when they want to pay off their loans early. The committee is anxious that these rights are not diminished in any way by EU proposals. Any effort at harmonisation should not undermine the Irish consumers' advantages in this area.

The committee welcomes the White Paper's call for member states to improve the efficiency of land registration procedures. The committee supports calls that land registers be available on-line and would welcome a move to e-conveyancing in Ireland which would lead to greater transparency, efficiency, consistency and speed in terms of property transactions. This would benefit consumers both directly in terms of their basic transactions and indirectly through potentially attracting more lenders to the market.

As regards improving the efficiency of forced sales procedures, the committee is concerned that any Commission proposal aimed at shortening or quickening these procedures would have unwelcome consequences for the Irish system. Ireland has one of the slower foreclosure and forced sales procedures in the EU. However, this has the unintended positive effect of encouraging creditors to seek mediation and renegotiation of loans rather than pursuing costly and long drawn out legal procedures. In addition, the difficulty in securing repossession of properties is an incentive for mortgage lenders to consider carefully whether the consumer has the initial capacity to repay a loan, a key practice for responsible lending. The committee spent considerable time discussing this aspect of the market, particularly since members felt that irresponsible lending by financial institutions should not be rewarded by early foreclosure.

The committee believes the current problems in the world economy brought on by the credit crunch and the crisis in the banking sector are due, in part, to irresponsible lending by financial institutions that has left them exposed to unnecessary risk and placed consumers in very vulnerable positions. The committee, therefore, welcomes the White Paper's focus on the issue of responsible lending and recommends that future work on foot of the White Paper should seek to tackle the issue as a matter of urgency.

Recognising that events have moved on significantly since the publication of the White Paper and given the current crisis in the financial markets, and in particular the banking sector, the committee recommends that the Commission re-evaluate the economic benefits of the White Paper's objectives. The committee welcomes that the Commission has entered into extensive consultations with all relevant stakeholders on the issues raised and proposals made by the White Paper. However, given the scale and importance of the mortgage sector to every part of the EU economy and the worldwide economy, a point underlined by the current crisis and its impact on businesses and consumers alike, the committee believes it is vital that any proposals be fully considered, robust impact assessments undertaken and cost-benefit implications rigorously analysed.

It was agreed on 24 September 2008 that this report of the joint committee be laid before the Houses of the Oireachtas, published and put on the Oireachtas website and copies forwarded to the European Commission and the Department of Finance for their consideration and to those who contributed to the exchange of views, the Joint Committee on Finance and Public Service, and all Irish Members of the European Parliament for information. The committee studied the White Paper and gave its views without reservation. Its views were based purely and simply on national and international experiences and particularly the experiences at local level in the present financial and economic environment.

The committee was particularly emphatic in insisting that we, being very much committed to the European project, should have full access to whatever benefits accrue and become available throughout the European Union. It is vital that in any future discussions any opt-outs that we might feel it necessary to indulge in should not become part of a cherry-picking exercise which might ultimately lead to this country being disadvantaged in any aspect of our entitlements under EU law either proposed or existing. I commend the report to the House and welcome the Minister of State at the Department of the Taoiseach with responsibility for European affairs, who is in the House to give his response.

Minister of State at the Department of the Taoiseach (Deputy Dick Roche)

The first point which should be made is that the proposals for improved efficiency and competitiveness in residential mortgage markets are, as Deputy Durkan mentioned, in a general sense very welcome because consumers will benefit. The manner in which these proposals are being handled demonstrates that the mythology propagated by Libertas and a number of other europhobic organisations in this country about how European law is made, and the particular suggestion that European lawmaking is a closed shop, is absolutely false. Nothing could demonstrate more objectively just how false those assertions are.

Another point which should be made is that the extraordinary step-by-step approach adopted by the European Commission in the matter gives lie to the suggestion that somehow or another European laws are rammed through without any kind of discussion, consideration or democratic input. Nothing could be more democratic than the approaches being adopted here.

Deputy Durkan and his committee have made a very valuable contribution and not just in terms of the national discussion on this matter. They have used the Barroso initiative to make a specific input into European-wide consideration of this issue particularly welcome. This must be put on the record of this House because we have had more mendacious and inaccurate statements about the process of European lawmaking than we have had on just about any other issue.

The White Paper on the integration of EU mortgage credit markets summarises the conclusions of a very comprehensive review on the functioning of the level of integration of EU mortgage markets. It presents a package of measures to improve the efficiency and competitiveness of EU residential mortgage markets. This packet of measures, when finally operational — we are some time before that date — will be of tremendous benefit to consumers and will increase and enhance consumers' rights.

The objectives of the White Paper are to facilitate cross-border supply and funding of mortgage credit. I agree with the well-made point by Deputy Durkan that this is not an end in itself but it should be part of a step to improve competitiveness and consumer choice. It will increase product diversity, improve consumer confidence and facilitate consumer mobility, which are the objectives of the proposition.

The White Paper states that in 2008 the Commission is to investigate the following issues and assess the costs and benefits of different policy options available to it in its efforts to tackle each issue. The point must be made that the European Commission has broken down all the different elements and is stress-testing them. It is putting each of them before committees made up of representatives of member state governments, interested parties and national parliaments. It gives lie to the suggestion often made in this State that, somehow or other, European law is plucked from the atmosphere and imposed on member states. Nothing is further from the truth, and it is time we began to nail those particular lies in this country. The issues are inimical to our interest and run counter to the facts. The public in a democracy is always entitled to unadorned facts.

I compliment Deputy Durkan and his committee, which has struggled long and hard with this White Paper, which is difficult to read. They have put much time into it and their effort has been largely ignored. I hope that in particular the national broadcaster will tonight put some effort into redressing the balance of these issues and give the committee and its extraordinary work some airtime.

The White Paper will consider a series of complex issues, such as the point touched on by Deputy Durkan, namely, early repayment. The Department of Finance is keeping a very close eye on that because, as the Deputy pointed out very well, we have a particular set of circumstances here which are caveat emptor not for the buyer but for the lender. The issue of improving quality and comparability of information is also being dealt with in this. It is a critical area because it is urgent that those who receive mortgages are fully aware of the implications. It will also promote responsible lending and borrowing. What in the name of goodness could be more relevant to the current economic climate than responsible lending and borrowing? As Deputy Durkan has illustrated, we have all become painfully aware of the effects of irresponsibility in the area.

It illustrates the perverse nature of the debate sometimes undertaken in this country. How can anybody argue these steps are not called for when they must be? How can anybody argue that doing all this work on a pan-European basis is not the most efficient and effective way of dealing with the matter?

The Commission has established a series of expert and study groups, one of which is dealing with financial histories to examine ways to improve accessibility, comparability and a completeness of credit ideas. Ireland is represented on that by a member of the Irish Credit Bureau. The White Paper also notes the efforts of the Commission and the member states on financial education and improving financial awareness within the general public. This will be a very powerful tool to help customers choose the right products and services to meet individual needs.

Another area of focus for the Commission is the follow-up of earlier work on securitisation and it may establish a working or expert group in this area. This could be nothing but beneficial. Further research is to be undertaken in areas such as the role of the regulation of non-credit institutions in EU mortgage markets. For example, the Commission has also published draft recommendations on land registration, foreclosure and property valuation. The Department of Finance has consulted with the relevant stakeholders on the draft recommendations and responded to the Commission on this issue. This illustrates again, as if it is required, the reality that nothing happens out of the air at European level. Each individual stage, line, paragraph, full stop and comma is examined at national level.

A study began earlier this year on the equity release products in EU markets and a study on tying-in and other unfair practices has recently commenced. Tying is unfair because people are exposed to additional costs over and above their mortgage payment. A further study on the use of interest rate restrictions in member states is set to follow up on this at the end of the year.

I mention all these points to illustrate the extraordinary detail in which the European Commission, member state governments, national parliaments and the people who care about progress not just in this country but in Europe take to ensure measures we are intending to take are not only timely but appropriate.

Ireland supports the moves towards a single European mortgage market. The programme for Government specifically refers to this issue and indicates particular priority should be given to the retail and financial services area. Many of the initiatives discussed in the White Paper are already in place in this country, such as regulation of non-credit institutions, which includes sub-prime lenders, and a ban on the linking of services.

We agree with the Commission's position on stressing the importance of mortgage credit for European Union citizens, the citizens of Ireland and the economy as a whole. We also agree with the tackling of barriers in order to achieve greater integration of mortgage credit markets. As Deputy Durkan has said so succinctly, it is not just to create some wide market but rather a market where the consumer is king and well-informed.

The approach used by the Commission, which relies on the rigorous impact assessment of various policy options for all issues, is very welcome. Each issue is being examined in an open, transparent, democratic and very thorough way. That is as it should be. Notwithstanding the need to protect further and empower consumers, we recognise the potential for integration is determined by a range of factors which includes, for example, culture, language and customer preferences, and further integration is likely to be supply-driven rather than demand-driven.

Deputy Durkan's point in this area was apposite. Ireland shares the Commission's view that further work is needed to develop the European policy framework for integration of mortgage credit in Europe and assess the need for legislation. In particular, Ireland is concentrating efforts on two key areas.

Early repayment is one of the most important issues for the integrated EU mortgage market. The Consumer Credit Act 1995 already provides consumers with considerable rights in cases where they want to pay off loans earlier and we are anxious that these rights will not be diminished in any way. We will ensure that is the case in this area. Most other member states have a preponderance of long-term, fixed rate and-or bond financed loans, redemption of which may involve a substantial cost and hence, a redemption fee, which itself can be substantial. We are concerned that any effort at harmonisation could adversely affect the consumer protections we enjoy in this area. We will make certain that does not happen.

Deputy Durkan has made a wise point in saying that any proposal at shortening or quickening of forced sales procedures should be examined with the utmost care. As he indicated, the slow procedures that operate in Ireland have the unintended but positive consequence of encouraging creditors to seek mediation and to renegotiate loans in the first place rather than the pursuit of costly and drawn out legal proceedings. It is correct that lenders be aware that their recklessness is something that should be visited on their heads not on the heads of unfortunate mortgage borrowers.

The Joint Oireachtas Committee on European Affairs has produced its report on the White Paper and that report has been submitted to Europe and is now part of the process of European policy formulation. That is the exemplar of the way European policy will develop, and that will happen to a greater extent if the Lisbon treaty is put into effect because then each and every national parliament will play a much more active, open and democratic part in Europe.

I put on record my personal appreciation of Deputy Durkan and the members of the committee. I wish the media, especially the national broadcaster, which receives huge support by way of licence fee, would play its part and highlight the work that is being done, and let the Irish people see that we have a democratic law making process at European level, as we have at national level.

Deputy Joe Costello

I am delighted to have an opportunity to speak today. The debate is important for two reasons, first because we are having it in the Chamber. The Minister of State, Deputy Roche, and Deputy Durkan are great champions of bringing as much European Union business to the Chamber as possible. I hope in the future that this will become a feature of how we conduct our business in the House.

A great deal of work has been done by the Joint Committee on European Affairs. It is extremely important that when its work is done that it sees the full light of day in plenary session in this Chamber. European affairs impact to an ever greater extent on this country, the economy and our lives.

We are discussing an extremely important issue. As both previous speakers indicated, this is entirely about the consumer; getting a better deal for the consumer and on a broader plane than is available domestically. In many ways that is the template of the European Union, namely, where areas of competence can be extended, that is done. We should extend our business across borders as far as possible, and if we can get a better deal for the consumer throughout any of the 27 member states of the European Union, then that should be pursued. The free movement of capital as well as labour are essential pillars of how the European Union conducts its business. That is the case for the small operator just as much as for the big one. As long as we put sufficient regulations and supports in place, there should not be any borders and I welcome that very much.

I echo what the Minister said in his closing remarks, that the national broadcaster, RTE, should be more cognisant of European Union matters dealt with in this House. It should recognise that those matters that we have been debating in recent months are not unrelated to the referendum we had on the Lisbon treaty. The dialogue that is taking place must get to the broadest possible audience because we have to engage the public in European affairs. If we do not engage the public there is a danger that the perception of the so-called democratic deficit and a sense of isolation will increase. There is also a danger that it will lead to hostility towards some of the institutions of the European Union. We would like to see European affairs presented in an attractive fashion. There is no reason we should not have an appealing programme that does not take place at midnight or 1 o'clock in the morning, which is the slot generally available for Oireachtas proceedings. The business of Europe should be dealt with by means of a more attractive package.

The committee conducted its proceedings in an appropriate manner. All the stakeholders were invited, including the Department of Finance and the Financial Regulator, the Irish Banking Federation and Financial Services Ireland. All delegations presented their views on the measures before us to improve the efficiency and competitiveness of the European residential mortgage market. The four objectives, as indicated in the White Paper prepared by the European Commission, are extremely important. They include the facilitation of the cross-border supply and funding of mortgage credit, an increase in product diversity, an improvement in consumer confidence and the facilitation of customer mobility.

The first objective, namely, to facilitate the cross-border supply and funding of mortgage credit, encapsulates the other objectives. That is an eminently desirable objective because we are talking about making available to the consumer a line of credit that may not be available otherwise. It is the case that 47% of European Union GDP is residential mortgage credit, which is a colossal amount. Ireland is top of the list in that respect. We seek more residential mortgage credit to purchase homes than any country in Europe.

Credit has dried up in this country. We can talk as much as we like about the over-extension of the construction industry, the housing market in terms of loans and the lack of self-regulation by some financial institutions. Those are important matters that we must examine, but the nub of the situation is that the consumer who wants to purchase a residential property must have access to the market to get a loan. If the domestic market is not able to supply it, then every avenue should be open to people to make the credit available. There is no reason the European market should not be available to us.

If the Acting Chairman were a big time operator in the city or in financial services in Dublin and he wanted to transfer large quantities of capital he would have no problem accessing any market in the European Union. However, if he were a poor punter who wanted to buy a house he could not get a mortgage in Germany, France or Italy. Is that not outrageous? Surely the European Union should be about the free movement of capital, as much for the small operator or citizen as the large-scale financial manager. This is the nub of what we are discussing today. Once this principle is recognised, it is only a matter of getting the formula right to ensure it is realised. We must ensure this is done correctly. Our committee has been working on getting it right for the Irish consumer and, I hope, consumers in each other member state. It is crucial to put together a package that fulfils the aims of the White Paper of the European Commission.

I was a little disappointed with the delegates from the Irish Banking Federation and Financial Services Ireland, but not with the Financial Regulator, who was very positive. The Chairman of the Joint Committee on European Affairs, Deputy Durkan, will remember that members had quite a tête-à-tête in respect of why eminent bodies such as the Irish Banking Federation and Financial Services Ireland were reluctant to engage in this process. A statement was made that the Irish consumer likes to shop in Irish shops. That is new to me as I believed the consumer likes to shop where he or she will get the best bargain. Some of the delegates before the committee attempted to put forward many arguments as to why we should not embark on our present course rather than embrace it positively and ensure the consumer is king. The arguments were, to some extent, anti-competitive. The delegates were certainly very cautious. The committee members took this on board and reflected very strongly on the fact that their present course is the best way forward.

I hope that, before long, the final package that will enable us to open up the market will be put together. There are obviously key issues to be addressed at the same time. Regulation is extremely important. To date, we have not been able to regulate our domestic residential property market properly and we have witnessed the consequent fallout. We need EU regulations and regulations that will apply effectively in this country. The idea of a lightly regulated, self-regulated or unregulated market is just not on because no protection is afforded to the consumer. As I stated, the consumer must be king in all circumstances.

Let me outline a very interesting aspect of the proposals. In many member states, mortgage insurance is not required when one takes out a mortgage. This means mortgages are much cheaper in other member states. There are sufficient legal protections in place, including the banks holding the deeds, such that the extra financial burden Irish mortgage lenders impose on purchasers is not required. It is quite expensive to obtain insurance for every property for which one receives a loan in Ireland. I would like a legal and regulatory mechanism put in place to lower or dispense with this cost.

Deputy Mary O’Rourke

I am glad of the opportunity to contribute to this debate as a member of the Joint Committee on European Affairs, which is chaired by Deputy Durkan. I commend him and the other members on their work on bringing the White Paper to its current stage. I am quite sure many matters remain to be resolved in its final compilation. The work is very good and contributes to the overall belief that what happens in EU headquarters is of the utmost importance in Ireland. That is what we are all trying to convey, irrespective of whether we are members of the Joint Committee on European Affairs or the Sub-Committee on Ireland's Future in the European Union. We are all doing the one job, that is, to make the EU more palatable and understandable. I do not know if we will all succeed in this regard.

Before I entered the Chamber, I noted an e-mail stating the sub-committee is meeting eminent communicators today, including Professor Richard Aldous, Mr. Eamon Dunphy and Mr. George Hook. Members of the sub-committee will be asking such people how they believe the EU can be made more understandable. Fresh from Limerick, Mr. Hook is here to tell us how to go about it. It is a very good idea to invite eminent communicators to appear before the sub-committee to determine what they can contribute to the debate.

With regard to the European project and strategy generally, we all noted last Monday's The Irish Times/TNS mrbi poll, which seemed to indicate there has been a softening of attitudes among the middle classes and farmers, who are now in the “Yes” camp in respect of the Lisbon treaty. I urge great caution in examining those findings. I am reminded somewhat of the rural saying “whistling past the graveyard”, which will perhaps delight the eminent communicators invited to appear before the sub-committee. I am sure they would understand what it means. It is exactly a question of whistling past the graveyard because we were doing so right up to a month before we all voted in the referendum. We know the result. To rely on polls is precisely to whistle past the graveyard.

Be that as it may, both committees are working very hard to make the Irish realise "to be at the heart of Europe" is not just a trite saying but a phrase of considerable importance to everyone. I wonder where idealism is gone — I do not wonder; it is "with O'Leary in the grave" in a big way — in that the very idea that we are part of the European project, which is of enormous significance in so many people's minds and hearts, is not emphasised sufficiently.

Over the past two weeks, very interesting reminiscences and memorial services were held to mark 90 years since the First World War, which war was to end all wars. Of course it did not end all wars because, some 20 years later, it was followed by an equally vicious and divisive war to end all wars. Be that as it may, I felt very moved looking at very old people who could still remember what it was like to be in the France and Belgium during that period.

The European project was established so there would never again be a need for a war such as the Second World War. This point is not emphasised sufficiently, be it at meetings of the Joint Committee on European Affairs, chaired by Deputy Durkan, or the Sub-Committee on Ireland's Future in the European Union, chaired by Senator Donohoe. These chairmen are eminent politicians. The belief that so many people of different nations could live together in harmony should surely strike a chord with many people. The broadcasting of memorial services in recent weeks emphasised the numbers who died in various battles. In one particular battle — Verdun, I believe — there were 50,000 casualties in one day alone. When one considers this, one must ask what was it all for. It was surely so we would learn to live in peace. I hope we have done so and that the European project has achieved this.

We do not place sufficient emphasis on the fact that we are all in the one ideological bind. Could we not emphasise this further, particularly to young people? That would be along the ideological lines of looking at what happened in the past and referencing it to what is happening now.

Europe has been of considerable benefit to us. People say that we are only as good as the last trick, that the last handout from Europe is the one that must be followed and that if we cannot better that we should stay at home. That is not the case. When I was in the Department of Education, I saw the significant benefits that came to Ireland through our participation at the Council of Ministers. In particular, I single out the Erasmus programme which continues to be of great benefit. Young students travel abroad and other students come here, to learn and taste of life in other countries and to continue their formal education in the process. The Leargas programme has also been of considerable benefit. The institutes of technology would not have survived had it not been for the significant input into their budgets from Europe.

There are the farmers who, sadly, let us down in the vote on the Lisbon treaty last June. In the latest MRBI poll it appears they are swinging around but for how long will they swing in that way? I had hoped that Deputy Costello would be present when I spoke. I looked into the committee chamber on Tuesday when he was speaking to Mr. Ganley. I do not wish to talk about Mr. Ganley because the more one talks to or about him the more notice he gets and the bigger his head grows. Deputy Costello was remarkable. He put to Mr. Ganley the issue he had raised concerning children being taken away from their parents. Last night TV3 showed Mr. Ganley saying the things he denied he had said. We saw a clip of him being interviewed by Deputy Eamon Gilmore during the course of the referendum campaign. Mr. Ganley was seen to say that young people would be taken from their parents.

We can talk for ever about financial institutions and what the eminent work of the Joint Committee on European Affairs will mean. None the less, there are terraces and roads full of people who are firmly of the belief that all children under the age of three years were to be snatched from their parents, and that if somehow the children were hidden under the beds and escaped being snatched, then when they were 16 years of age they would be drafted into the European army. Whatever the outcome, parents would not have their children and would have no rights over them. This belief was due to the work and the utterances of a group, Cóir, a very hardline right-wing group, with which that protagonist who appeared on Tuesday is strongly allied, as the TV3 interview with Deputy Eamon Gilmore showed. It was riveting to see him telling the lie, or the untruth, if the Acting Chairman, Deputy Kirk, believes I should not use the other word, at the committee on Tuesday. People of that kind are to be very much avoided but they are a fact of life.

I do not know how we are going to debunk every similar matter. The Chairman of the Joint Committee on European Affairs is present in the Chamber. There is talk of having different codicils which would address taxation, sovereignty and other issues. They will not address fear. Fear was the predominant sentiment of the Lisbon treaty debate. People had utter fear that their lives would be disrupted and that everything would happen to turn their lives inside out.

I strongly recommend what the Chairman has done in gaining time for this debate today. It is about mortgages. Can there be anything more matter of fact than mortgages? They permeate the lives of all of us. I hope the debate will go as far as the White Paper and further. We are to be followed by the Joint Committee on European Scrutiny, chaired by Deputy John Perry. He will show that committee's work in scrutinising impenetrable EU directives, putting them into plain language and somehow trying desperately to bring back the connection between Europe and the people of this country.

I was very put out by a magazine, Alive!, that was distributed through churches during the campaign. It told the most horrendous untruths——

Deputy Bernard J. Durkan

Hear, hear.

Deputy Mary O’Rourke

——about what was proposed in the Lisbon treaty. I was equally affronted by the espousal of Alive! by many of the clergy from the altars of their churches. Surely, they above all, should know what Europe gave Ireland and what we gave Europe. If one goes to cities such as Salzburg, Paris or Bruges, one sees streets and churches named after Irish saints. They went there to spread the message and in return those cities provided a haven for young students who, during the penal times in this country, could not practise or promulgate their religion.

This may appear as if from the mists of time but it is not. I strongly rebut the articles published in Alive! at the time of the Lisbon treaty referendum and I am glad of the opportunity to speak. The Acting Chairman may say that I have strayed from the point. I have not. This is a European debate and I commend the Chairman of our committee, Deputy Bernard Durkan, who has given great commitment to the European cause.

Deputy Dan Neville

I welcome the opportunity to discuss the White Paper on the integration of EU mortgage credit markets. I also commend the Oireachtas Joint Committee on European Affairs for its work, in particular its Chairman, Deputy Bernard Durkan, for the work he is doing.

The White Paper we are discussing summarises the conclusions of a comprehensive review of the functioning and the level of integration of the European Union mortgage credit markets. It presents a package of measures to improve the efficiency and the competitiveness of European Union residential mortgage markets. The Commission believes EU action is warranted in this area as the Treaty on the European Union, provides the basis for the creation of a single market. Evidence shows that the single market for residential mortgages is far from integrated. Obstacles exist that restrict the level of cross-border activity on the supply and demand sides, thus reducing competition and choice in the market. The Commission recognises that consumers predominantly shop locally for mortgage credit and that the majority would probably continue to do so, at least for the foreseeable future.

The integration of EU mortgage markets will therefore be essentially supply driven, in particular through forms of establishment in the member states of the consumer. The Commission has duly taken account of the lessons that can already be drawn from the recent events in financial markets. However, the White Paper under discussion is not a response, as such, to the financial turmoil that originated with problems in the United States sub-prime market.

The objectives of the White Paper are to facilitate the cross-border supply and funding of mortgage credit, to increase product diversity, to improve customer confidence and to facilitate customer mobility. The Commission aims to achieve these objectives through a number of different ways, including the encouragement of early payment, improving the quality and comparability of information and promoting responsible lending and borrowing.

With regard to the latter, an expert group on financial histories is to be established to examine ways to improve the accessibility, comparability and completeness of credit data. The White Paper does not announce any legislative measures. However, the Commission does not rule out proposing further legislative measures, such as extending the consumer credit directive to include mortgage credit and banning the use of tying practices. These oblige the consumer to open a current account with the mortgage provider. Until rigorous impact assessment, including a quantitative cost benefit analysis, has been undertaken, and further consultation with all stakeholders has been concluded, the Commission considers it would be premature to decide on whether a legislative approach would, at this stage, deliver the necessary added value. That said, non-legislative measures have been announced, in particular in the field of land registration, property valuation, and forced sales-foreclosure procedures.

What is Ireland's position? The Department of Finance has indicated that until the extent of legislative proposals required in this area is known, it will not be possible to accurately assess the implications for Ireland of the White Paper. Much will depend on whether the Commission is able to move forward the objectives of the White Paper without extensive recourse to EU legislative initiatives. The programme for Government states that moves towards a single European mortgage market should be a particular priority in the retail financial services area. Ireland's mortgage market is already well developed and many of the initiatives discussed in the White Paper, for example, regulation of non-deposit taking lenders and a ban on linking of services, are in place.

What further action is proposed? The White Paper is considered by the Commission to be a major initiative and has resulted from its detailed review of the Single Market. While the implications of the initiatives announced and discussed in the White Paper are difficult to assess at this stage, if legislative proposals emerge following continuing consultations with the stakeholders, it could have a significant impact for mortgage providers and consumers in Ireland. For this reason, it was recommended that the Joint Committee on European Affairs consider this White Paper further, with a view to offering its views to the Commission and Minister. To assist this consideration it was proposed that the joint committee invite a representative of the European Commission to brief it in detail on the content of the White Paper and answer any specific questions members have. It was also proposed that the joint committee write to key stakeholders inviting them to submit their assessment of the White Paper.

The following organisations were invited to submit their views — the Financial Regulator, the regulator of credit providers which is tasked with ensuring sufficient protection is afforded to consumers; Financial Services Ireland and the Irish Bankers Federation, the main representative bodies for financial service providers in Ireland; the Consumers Association of Ireland, the independent watchdog for the protection of consumer rights; and the Department of Finance.

As to the objectives of the White Paper, competitive and efficient EU mortgage credit markets can be achieved by measures which facilitate the cross-border supply and funding of mortgage credit, increase the diversity of products, improve consumer confidence and promote customer mobility. Financial services providers can supply mortgages across borders in several ways — through local presence, for example, branches, subsidiaries, mergers and acquisitions; through direct distribution channels, for example, via telephone or the Internet; or through local intermediaries, for example, brokers. Financial services providers can also engage in cross-border activity by purchasing a mortgage portfolio from a mortgage lender in another member state.

The existence of differing legal and consumer protection frameworks and fragmented infrastructures such as credit registers as well as the lack of appropriate legal frameworks in some instances, for example, for mortgage funding, create legal and economic barriers which restrict cross-border lending and prevent the development of cost-efficient, pan-European Union funding strategies. The Commission, therefore, seeks to remove disproportionate obstacles, thus reducing the costs of selling mortgage products across the European Union.

The Commission believes the different mortgage funding instruments are complementary rather than substitutable. The aim should be to facilitate rather than restrict the development of a wide range of mortgage funding instruments. The use of funding techniques which transfer the risk of mortgage loans from the originating mortgage lenders to the capital markets provides benefits in terms of risk diversification and funding costs. However, recent experiences have highlighted the need to ensure such techniques are used in a way that is not detrimental to financial stability.

Although a wide range of products is available across the European Union, no single domestic market can be considered as having a complete range of mortgage products in terms of either product characteristics or borrowers served. This is due, to some extent, to factors such as consumer preferences or different business strategies adopted by mortgage lenders. However, economic and legal barriers also exist which prevent mortgage lenders from offering certain products in certain markets or opting for a given funding strategy. In this respect, barriers to product diversity are closely related to other barriers inhibiting cross-border activity by mortgage lenders.

An increase in product diversity has been identified by a number of studies as the crucial element for achieving most of the benefits of mortgage market integration. One study estimates that removing the barriers to product availability alone would increase EU consumption by 0.4% and GDP by 0.6% over the next ten years, compared to an estimated overall increase in EU consumption by 0.5% and in GDP by 0.7%. Another study suggests that improved product diversity would lead to a 10% expansion in the market size by enabling new borrowers to access mortgage credit and a quarter of existing borrowers to find more suitable products, bringing annual benefits of between 0.15% and 0.3% of residential mortgage balances.

The Commission seeks to increase the diversity of products that could meet consumers' needs by removing barriers to the distribution and sale of products, particularly new and innovative mortgage products. The Commission recognises that many of the rules which restrict the offering of certain products on a cross-border basis have been designed to protect consumers and-or preserve financial stability. The problems which occurred recently on the US sub-prime market serve as useful reminders of the importance of not taking undue risks with these crucial public policy objectives. The Commission wishes, nevertheless, to explore ways through which greater product diversity can be combined with strong consumer protection and adequate financial stability.

Taking out a mortgage credit is an important decision for any consumer. The Commission believes there can be no efficient market without confident and empowered consumers, who are able to seek out and choose the best mortgage product for their needs, regardless of the location of the mortgage lender. To make an appropriate choice consumers require clear, correct, complete and comparable information on different mortgage products.

The Commission considers it essential that mortgage lenders lend responsibly, in particular by thoroughly assessing the borrowers' ability to pay instalments in the context of the transaction envisaged. They can do such an assessment in a variety of ways, for example, by consulting a database. Irresponsible lending and misselling of mortgage loans by mortgage lenders or unscrupulous credit intermediaries can, as illustrated by the current sub-prime turmoil, have a negative impact on the economy at large.

Good advice, including legal advice, is an important element in enhancing consumer confidence. It is distinct from information, which is merely a description of the product. The Commission wishes to promote high level mortgage advice standards, while recognising that not all consumers need the same level of advice.

Deputy Bernard J. Durkan

I acknowledge the worthwhile and useful contributions made by the Minister of State and other speakers.