Other Questions

National Asset Management Agency

Brendan Smith


6Deputy Brendan Smith asked the Minister for Finance the timetable he envisages for the National Assets Management Agency redeeming its bonds; and if he will make a statement on the matter. [32707/12]

The debt repayment goals for the National Asset Management Agency, NAMA, have been set by its board and include several targets set out over three-year periods. These are a repayment of 25% of NAMA senior bonds by the end of 2013, 50% by the end of 2016, 90% by the end of 2019 and full repayment of NAMA senior bonds by the end of 2020. These targets are based on a combination of expected asset sales, interest and other income receipts from NAMA debtors and the utilisation of NAMA's cash reserves. NAMA has repaid €3.25 billion of NAMA senior bonds, €1.25 billion in 2011 and €2 billion to date in 2012. This amounts to almost 11% of the NAMA senior bonds in issue.

It is important to consider the repayment of NAMA debt is not the only determination in deciding on the use of NAMA's cash balances. By the end of the first quarter 2012, NAMA had generated € 7.2 billion in cash receipts from borrowers since its inception. Under the National Asset Management Agency Act 2009, NAMA may invest funds to protect or enhance the value of the collateral securing its loans. Where it considers that it makes commercial sense to do so, NAMA may advance funds to projects, including projects located in Ireland, under the control of its debtors or receivers.

NAMA's board recognises that its success in meeting its objectives is closely linked to the performance of the economy in general. A vibrant domestic economy means increased demand for the property assets which secure NAMA's loans. NAMA has advised that it recognises its role in making whatever contribution it can towards instigating a renewal of sustainable activity in the property market in Ireland. I am advised by NAMA that it plans to invest substantial funding over its lifetime in preserving and enhancing the assets that secure its loans, including significant investment in assets located in Ireland, and that a substantial portion of its cash reserves will be used for this purpose. The chairman of NAMA recently announced plans to invest €2 billion by 2016.

Additional information not given on the floor of the House

Acting on my direction, on 29 March 2012 the NAMA board approved the short-term facility with Irish Bank Resolution Corporation Limited, IBRC, collateralised by an Irish Government bond. The €3.06 billion facility was drawn on the 3 April 2012 and repaid on 20 June 2012.

The board of NAMA has primary responsibility for setting strategy in NAMA and for determining and implementing any proposed changes. It is, therefore, a matter for the board to develop and have implemented an appropriate strategy for the management of the cash reserves and assets of the agency.

I thank the Minister for his reply. I understand NAMA intends to repay €7.5 billion of the bonds by the end of next year. The Minister set out the timeline for the redemption of the remaining bonds, namely, 25% of NAMA senior bonds will be paid by the end of 2013, 50% by the end of 2016, 90% by the end of 2019 and full repayment of NAMA senior bonds by the end of 2020. We should not nail ourselves down, however, to too rigid a schedule in redeeming these bonds but retain some level of flexibility. We do not want to engineer a situation where NAMA is forced to engage in fire sales or selling assets in a distressed market to redeem the bonds. I accept the bonds will have to be redeemed. In the fullness of time the objective of winding NAMA up by 2020 may well be ambitious and may have to be revisited given the scale of its work. We should retain flexibility. NAMA has sold many of its best assets abroad. The vast bulk of its sales have been foreign assets such as the gold-plated hotels in London and so forth. It will find it much more difficult when it gets down to the nitty gritty in Ireland. Will the Minister consider retaining flexibility on the redemption of the bonds?

There is not really a timeline set down by NAMA's creditors or the European authorities. There are figures in the programme but there is flexibility in those. So far, NAMA has sufficient moneys to fulfil its objectives. The Deputy will recall when we needed to make a payment on a promissory note, it was cash in hand from NAMA that did it until Bank of Ireland could organise a shareholders' meeting to do it. That money, some €2 billion, was paid back in mid-June.

NAMA keeps cash in hand. Between now and 2016, it will use €2 billion to improve the quality of the properties it holds. Some properties, such as blocks of apartments, are unfinished. NAMA enhances the value of the property and then moves it on. Of course, it can use the money in question on a roll-over basis.

There will also be a second fund of €2 billion, as announced by Mr. Frank Daly, which will focus on vendor financing. As a result, there will be two funds and each will contain €2 billion. The first will pay for the refurbishment and improvement of NAMA's asset base and the second will finance joint ventures with developers to either enhance existing properties or develop them from scratch. IDA Ireland has been in discussions with NAMA because there is a shortage of high quality offices in Dublin that would be suitable for the new tech industries. IDA Ireland has asked NAMA to help to fill the void in this regard.

My primary motivation in raising this issue is to make the point that I do not want a situation to develop where NAMA will be obliged to sell assets in distressed circumstances in a market which may well be on the brink of recovery but in which it will not obtain the best possible return for the taxpayer. In the most recent memorandum of understanding with the troika, provision is made for the redemption of €7.5 billion by the end of next year. I not sure it is a good idea to be elevating commitments relating to the redemption of NAMA bonds into memorandums of understanding. We should retain an element of flexibility in order to give NAMA the opportunity to work out the assets in its possession over time. NAMA should dispose of these assets in the best possible circumstances in order to obtain the best return for the taxpayer.

In general terms I agree with the approach suggested by the Deputy. However, the authorities which provided us with the money do not have a repayment schedule. That schedule is contained in the programme. Those to whom I refer are flexible and sensible individuals and do not want fire sales to occur.

They are also providing cheap money.

There is another difficulty; it is important remember that we must strike a balance. So much property in Dublin, in particular, but also elsewhere throughout the country is in the hands of NAMA that unless it puts some of it on the market, there will be no market. NAMA is obliged to both create a market and then avail of it. The actions we took by means of the Finance Act have proved to be very effective.

Financial Transactions Tax

Mick Wallace


7Deputy Mick Wallace asked the Minister for Finance if he has carried out a cost-benefit analysis in order to assess the benefits or consequences for Ireland of adopting a European financial transaction tax; the conclusions of any such analysis; and if he will make a statement on the matter. [32719/12]

Mick Wallace


9Deputy Mick Wallace asked the Minister for Finance if he will explain in detail the reasons behind his decision not to participate in the new European tax on financial transactions agreed in principle by nine EU countries on 22 June 2012; and if he will make a statement on the matter. [32718/12]

I propose to take Questions Nos. 7 and 9 together.

The ESRI and the Central Bank of Ireland prepared a report on the financial transactions tax at my request. I circulated this report to Deputies last Monday, 2 July, and published it yesterday. I thank the bodies for their work on the report which indicates that the "net revenue gain for Ireland from the introduction of an FTT ... is likely to be modest". Based on assumptions used by the European Commission, the report estimates the potential yield from a financial transactions tax in Ireland to be between €490 million and €730 million. Under the Commission's proposal, two thirds of this yield would have gone directly to the European Union to fund its budget. The Commission estimated that, if a financial transactions tax was introduced on an EU-wide basis, the overall yield would be €57 billion.

The report outlines the downsides and potential downsides to the introduction of a financial transactions tax. The first of these would be the impact on the financial sector. A financial transactions tax could displace financial sector activity, especially when alternative locations - in our case, London - are readily available. This would pose a real risk to Ireland, given that the financial services sector accounts for 10% of GDP. The macro-economic impact of a financial transactions tax would be that it would likely lead to a lower level of economic activity in the financial sector, which might also result in lower receipts from income tax and corporation tax. There would also be an impact on the Exchequer. A 1% rate of stamp duty applies to transfers of shares in Irish companies. The Commission's proposal would involve the abolition of this tax and the loss of existing stamp duty revenue which was €180 million in 2010 and €195 million in 2011. In the light of the wide variation in the estimated revenue yield from a financial transactions tax when different factors are taken into account and in the context of the uncertainty relating to the form such a tax would take, the report states more detail would be needed on the final shape and scope of the tax before a definitive conclusion could be reached about its impact on the Irish financial system and taxation revenue.

At the most recent ECOFIN meeting on Friday, 22 June, it became clear that EU-wide agreement on a financial transactions tax would not be reached. Those countries that want to introduce such as tax will now request that this be done via enhanced co-operation. This mechanism would require at least nine member states to participate and agreement by qualified majority voting, comprising 72% of the overall votes and states representing 65% of the total EU population. Ireland is not going to be among the enhanced co-operation countries, but it will not stand in the way of those who want to introduce an financial transactions tax under this mechanism. I have stated clearly in the past that if a financial transactions tax cannot be introduced on a global basis, it would be better if it were introduced on an EU-wide basis. This would prevent distortion of activity within the European Union. I have also indicated our principled opposition to dealing with tax measures under the heading of enhanced co-operation. In such circumstances, our non-participation in the new enhanced co-operation initiative is consistent with the position we have taken to date on the introduction of a financial transactions tax.

It is also not clear what shape a financial transactions tax will finally take. The draft directive only received one initial reading and the current proposal could be modified. Ireland will continue to monitor the discussions which take place. Whatever measure is introduced should not interfere with the Single Market and would have to take account of the positions of other member states. For example, any financial transactions tax on share transactions would have to take account of the existing stamp duty charged on dealings in Irish shares.

I realise that if London does not play ball by buying into the notion of a financial transactions tax, this will prove problematic for Ireland. However, in principle, we should argue in favour of the introduction of such a tax. Perhaps the Minister might try to convince George Osborne about the merits of a financial transactions tax. Having such a tax must be a good idea in the long term, particularly as it would lead to greater stability in the financial system. In the light of the fact that the financial sector played such a major role in causing the difficulties which obtain across the globe, it is only fair that it should be obliged to carry the can to some extent.

The European Commissioner on Taxation and Customs Union, Audit and Anti-Fraud, Mr. Algirdas Šemeta, has made a number of interesting points on this matter. He stated the cost of a financial transactions tax would be small and absolutely legitimate, particularly in the light of the support the financial sector has been granted in recent years. He went on to say, "The financial markets have to make a fair contribution to the crisis they provoked". Furthermore, he commented that a financial transactions tax "will act as a disincentive to high frequency trading and other practices which increase risk without ensuring liquidity". Does the Minister agree that the benefits of introducing a financial transactions tax would include an equal distribution of the tax burden and a more responsible financial sector? As he indicated, such a tax, particularly if it were introduced on an EU-wide basis, would yield revenues of as much as €57 billion. Does he agree that it would be great if the financial sector was made to work for society again rather than having it the other way around?

In all the discussions which have taken place to date Ireland has never opposed the principle of a financial transactions tax. However, we have pragmatic reasons for believing it might not work in all circumstances. Our first position is that if it could be introduced through the G20 at a global level, we would be in favour. Our fall-back position is that if it could be introduced across the 28 countries in the European Union - Croatia acceded to the Union four days ago - this would also be acceptable. The difficulty is that in Dublin there are 33,000 people working in the industry which is responsible for 10% of GDP. If a tax on financial transactions is introduced in Dublin and not in London which is only an hour away by aeroplane, there will be dislocation. In the circumstances in which we find ourselves, we cannot take the risk.

The nine countries forging ahead in this regard are moving away from what is contained in the Commission's paper and considering the imposition of stamp duty on financial transactions. Ireland already imposes stamp duty of 1% on these transactions, while the United Kingdom charges 0.5%. Current thinking seems to be leaning towards widening the base and imposing stamp duty on transactions other than those which relate to dealings in shares. There also appear to be moves afoot to deal with the problem to which the Deputy referred, namely, high speed computerised transactions which are certainly placing systems at risk.

We will see what emerges and I will report fully on the matter, either in the House or at the joint committee. We will then make a judgment on the matter. Even though we have opted out of joining the other nine states which are moving ahead, there is nothing to prevent us from joining them at a later date if they develop a tax which is acceptable to us. We will see. With the way our economy is and our high levels of unemployment, the main important matter is to preserve the financial services industry Ireland, especially in Dublin, because it is one of the sectors expanding at present.

Without England, the idea is seriously problematic for Ireland. Given the size of the English financial sector, it needs England's involvement if it is going to work effectively at European level. Perhaps the Minister will consider going over and having a cup of tea with George Osborne and appealing to his social conscience.

I will meet him on Tuesday in Brussels.

The ESRI report said there would be a modest increase and the Minister mentioned figures between €490 million and €730 million. Many people in Ireland see that as a nice sum of money to bring in through a financial transaction tax. I am glad the Minister accepts the principle relating to €57 billion across Europe. We need to get everyone on board in Europe and internationally. With the amount of revenue out there and the good it could do, I urge the Minister to push it at EU level and at international level.

Is the Minister 100% sure that, if we did something with the other eight or nine European countries, it would severely damage 33,000 jobs?

No, I am not sure. Politics is an inexact science. We are trying to evaluate risk and we are making our best judgment on the risk. The type of financial transaction tax proposed in the European Commission paper would have a significant impact on jobs in Ireland, and particularly in Dublin. Ireland already has stamp duty, so if the Commission goes down the stamp duty route, we will see how it plays and we will keep an open mind.

There was very little information about how a financial transaction tax would have an impact in Ireland, so I asked the ESRI to evaluate the Commission paper to help me take up a negotiating position. I decided then that Deputies may as well share in it. It is somewhat dated now because the Commission has moved away from the idea in the Commission paper and is following a different route.

Financial Services Regulation

Pearse Doherty


8Deputy Pearse Doherty asked the Minister for Finance his plans for improving the regulation of licensed money lenders and in particular the high interest rates these lenders may charge; and if he will make a statement on the matter. [32744/12]

Caoimhghín Ó Caoláin


10Deputy Caoimhghín Ó Caoláin asked the Minister for Finance if he is satisfied with the current legislation governing the operation of illegal money lenders; his plans to amend the Consumer Credit Act to increase penalties on illegal money lenders; and if he will make a statement on the matter. [32745/12]

I propose to take Questions Nos. 8 and 10 together.

There is already a comprehensive licensing system in place for moneylenders. I refer to Part VIII of the Consumer Credit Act 1995, as amended, for detailed information in this regard. Moneylenders have to apply to the Central Bank annually to have their licences renewed. Section 93 of the Consumer Credit Act 1995 sets out the Central Bank's powers on the grant or refusal of a moneylender's licence. I am advised by the Central Bank that the appropriate moneylending application form, for new licences or renewal, must be completed and returned to the Central Bank with a number of items for review and consideration. A moneylender's licence granted by the Central Bank is specific to that moneylender. Each individual moneylender's licence outlines the specific products that the moneylender offers, the annual percentage rate, APR, for each product and the total cost of credit for each product.

Before applying for a moneylender's licence, an applicant must give notice of this intention in a local or national newspaper, published in Ireland and circulating in the District Court area in which the applicant intends to engage in the business of moneylending. The Central Bank may refuse to grant a moneylender's licence if, in the bank's opinion, the cost of the credit to be charged is excessive or if any of the terms and conditions attaching thereto are unfair.

One of the conclusions of the report on the licensed moneylending industry published by the Central Bank in March 2007 was that the introduction of an interest ceiling for moneylenders may not achieve the objectives of lowering the cost of credit to consumers. In February 2011, the Central Bank published the results of a themed inspection of licensed moneylenders. The Central Bank advised me the themed inspection showed a high level of compliance among firms. Overall, the inspection found that customers were charged in accordance with the moneylenders' authorised APRs and cost of credit. I have no plans to amend the regulation of licensed moneylenders at this time. Currently, there are 46 moneylenders licensed by the Central Bank.

Persons who engage in moneylending and who do not hold the necessary licence granted by the Central Bank are in breach of the law under section 98 of the Consumer Credit Act 1995. Complaints may be made to An Garda Síochána, which has the power to bring prosecutions against such operators. A person guilty of an offence under the Act is liable, on summary conviction, to a fine not exceeding €3,000 or imprisonment for a term not exceeding 12 months or both, or, on conviction on indictment, to a fine not exceeding €100,000 or imprisonment for a term not exceeding five years or both. There are no plans to bring proposals to Government to increase these penalties.

A number of provisions in the criminal law may be of relevance to the practice of moneylending in particular circumstances. For example, these may include section 10, harassment, and section 11, demands for payment of debt causing alarm, of the Non-Fatal Offences Against the Person Act 1997, and the Criminal Justice (Public Order) Act 1994, which specifies offences of blackmail, extortion and demanding money with menaces.

This is an important issue and there is evidence of considerable activity in illegal moneylending. There are 46 licensed moneylenders but an unknown number are operating illegally. They prey on vulnerable people, especially at a time when people find it difficult to access loans from banks. Credit conditions tightened considerably and more people are turning to illegal moneylenders. Is the Minister satisfied there is sufficient enforcement? The Minister referred to the penalties that apply on conviction, but I do not read about convictions in the newspaper too often. Illegal moneylending activities are taking place. Is there enough focus on enforcement?

Enforcement can be difficult when moneylending is carried out illegally on a small scale and when the people to whom the money is lent are reluctant to come forward to assist the Garda Síochána in proceedings. There is reasonably good control and it is not out of control. A strong credit union movement is the best antidote to widespread moneylending coming in to our system.

I apologise for having to leave the Chamber. Credit unions have restrictions placed on them and this causes more people to go to moneylenders. I listened to a story on Joe Duffy's "Liveline" where a woman had to go to a moneylender. He sat outside the post office every week, gave her the post office card, she went into the post office to get payments and she handed the payments to the moneylender along with the card. She told the programme she considered committing suicide.

I asked a question about this a number of weeks ago. No illegal moneylender has been prosecuted in the State in recent years. The legislation allows legal moneylenders to charge an annual percentage rate of over 180% per year. Let us take the case of a moneylender lending money in Dublin over a 25-week period. A €500 loan accrues over €470 in interest. That is the case when a person goes to one of the 63 legal moneylenders licensed in this State. They all have different rates but many have rates of up to 180%. This is completely legal. Is it necessary to introduce legislation to curb the interest rates charged by legal moneylenders?

The Central Bank looked at this point recently in a review of moneylending and advised against it. My reply to the question referred to the detail in the report. Deputies should table questions to the Minister for Justice and Equality on the incidence of prosecutions.

We did; there is none.

It is not for me to frame the Deputy's questions but he might ask why, in the Minister's opinion, there are not more prosecutions if, as the Deputy says, there is widespread abuse. The legal money lenders are operating within the law and there are no complaints about them coming through. The complaints we are getting are about illegal money lending. Enforcement is a justice matter but the legal side is regulated.

The Dáil adjourned at 5.50 p.m. until 10.30 a.m. on Friday, 6 July 2012.