What the Central Bank said yesterday confirmed the tragedy facing so many people in mortgage arrears. I am worried, however, that yesterday's warnings from the watchdog have not been heard. The dog that did not bark in 2008 is barking very loudly today. I hope the Taoiseach has not missed the warning that came from the big guns in the Central Bank, namely, the Governor and the deputy governor. The deputy governor said he was not comfortable with the behaviour of the bankers. He went on to say the bankers were "overwhelmed" by the scale of the problem. We should be very worried about the bigger picture as well as the smaller picture. His boss, Governor Honohan, also issued a veiled warning. In Central Bank speak, it was a serious warning. He said he believed there was no immediate need for new capital. This gels with the comment of the Minister for Finance, Deputy Noonan, when he said that as of today – which was last week – the banks do not need new capital. What is scary about the mortgage arrears problem is that we are going down a similar road to 2008 because the banks are notably not writing down the loans adequately in their balance sheets. The Taoiseach was asked to comment on a report from Deutsche Bank issued last Friday. I understand that he could not comment-----
Leaders’ Questions (Resumed)
A question, please.
-----on the report that the bankers in Ireland were not recognising the problem on their balance sheets and that they are already underproviding for the problem. This will mean that we must recapitalise. The warning from Deutsche Bank is that the banks are going down the route that will land us in a second bailout sooner then the end of 2013.
Will the Taoiseach comment on that? Is this the reason stress tests have been postponed? Would the banks fail the stress tests that have been postponed because of the underprovision in the mortgage arrears column?
I welcome the comments of the Governor of the Central Bank and how seriously he is taking his position. The decision by Danske Bank, which is a Danish bank, was in respect of a write-down of National Irish Bank, which is clearly the decision of the bank. This is of the most serious concern to the people who face this on a daily basis. Every Deputy comes across cases on a weekly basis where this stress is causing a problem for families and individuals. The Keane report, the new initiatives, the Government's decision in respect of mortgage interest, the decision to go down the road of a personal insolvency Bill, which will be published in June, the plan and its structure from each bank and lender, which will be worked through with the Central Bank and presented to the regulator, are all of the utmost importance. I refer to the necessity to do this as quickly as possible. The stress tests in respect of banks here, to which Deputy Ross referred, will not be conducted in the autumn but in conjunction with other stress tests for other banks in European countries at the same time. In this way, no one bank will be singled out for stress tests this autumn as against others in the spring of next year.
The trade down mortgages, the split mortgages, mortgages to lease and to rent and the selling of houses are all matters of the gravest concern to the Government. Far from the assertion that nothing is happening, we are acutely concerned at the scale of this and the impact on the social well-being of our people. It essentially boils down to sitting face-to-face with borrowers in respect of their individual circumstances in order to work out a solution in their best interests and in the interests of sorting out an opportunity for them to retain their home, meet their commitments and get on with their lives. It will not happen in a uniform sense and, in order for it to happen, we must have the accuracy with regard to the nature and categories of the problems. From a Government point of view, pressure is on the banks to get on with this. The banks are working with the Central Bank and the regulator with the same intent.
I understand what the Taoiseach is saying but it has nothing to do with what I asked. Does he recognise that the two top civil servants in the country were issuing a warning, which they did not issue in 2008, that the banks must be recapitalised again because of mortgage arrears? What is the Government doing about it? The warning was not reiterated by Danske Bank. Perhaps the Taoiseach misunderstood me and perhaps my German pronunciation is not very good. Deutsche Bank is the German bank and Danske Bank owns NIB. Deutsche Bank said there was a serious danger that Ireland must recapitalise the banks by several billion euro in the very near future because of the absolute refusal of the bankers, who are leading us by the nose, to write off these loans in their books. If that happens, we are facing a similar situation to 2008, although not as dramatic. The difference is that this time we will have been warned and will have ignored it. Last time, they were not warned about it and they got it wrong.
I am not sure what Deputy Ross is saying we should do. Is he suggesting the Government should suddenly announce a further recapitalisation of the banks? That seems to be what he is suggesting. There is no such evidence of the need for that here. I take the comments of the two top officials very seriously. They are serious individuals and the Government is serious in hearing the message they have given us. That is why the range of initiatives introduced by the Government, to be followed through by the banks in respect of each case, is of the utmost importance. There is nothing more important to a family under stress because of mounting mortgage arrears. It is a requirement to understand and know the categories and sectors involved and have the recapitalised lenders sit down to deal with these issues. Banks have not pursued a rigorous policy of taking people's roofs from over their heads. A small number of people will find it virtually impossible to meet the requirements of the mortgages they undertook at the height of the property boom but there are other cases where a solution can be achieved to give families relief and allow them to meet their commitments, depending on the options considered.
We take into account what the Governor and others have said. As I pointed out to Deputy McDonald, stress tests showed losses assumed on the mortgage books of between €5.7 billion and €9 billion for 2011 to 2013 under base case and stress case scenarios. This is a case where the Government is rigorously pursuing, in so far as it can, the solution for each case. It requires the banks and lenders to sit down with borrowers to work out a solution in each case. This will have our utmost consideration.