As the Deputy is aware, I have no statutory function in relation to banking decisions made by individual lending institutions at any particular time. These are ultimately commercial decisions for the management team and board of each bank, having due regard to their customers and the impact on profitability. Notwithstanding the fact that the State is a minority shareholder in Bank of Ireland, I must ensure that the banks are run on a commercial, cost effective and independent basis to ensure their value as an asset to the State, as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. A Relationship Framework has been specified that defines the nature of the relationship between the Minister for Finance and each bank. These Frameworks were published on 30 March 2012 and can be found at; http://banking.finance.gov.ie/presentations-and-latest-documents/.
As I responded to the Deputy in PQ 37717/12, the Life Loan in question was available from February 2001 to November 2010. It provided long term equity release for people over the age of 65. It was a way of unlocking part of the value of your property, without having to move home. The amount a customer could borrow depended primarily on their age and the value of the property in question.
No repayments are required on the loan until one of the following events occur:
1. The property is sold
2. The death of the borrower (In joint cases, the last surviving borrower)
3. The property is vacated for six months or more (In joint cases, by the last surviving borrower).
As the maximum loan to value available was 30% of the house value, the incidence of potential negative equity in these cases is not material.
Notwithstanding this, where a repayment event occurs, the Bank’s recourse is limited to the market value of the property at the point of sale. The borrower or their estate has no liability for any potential shortfall following sale.
I have been informed that as no payments are required during the term of the loan, by definition it cannot accrue arrears and as a result the product does not fall within the scope of the Bank’s MARS strategies.