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Dáil Éireann debate -
Thursday, 8 May 2014

Vol. 840 No. 3

Central Bank Bill 2014: Report and Final Stages

I move amendment No. 1:

In page 3, after line 31, to insert the following:

"(2) All assets transferred under this section shall continue to be burdened with the legal protections attached to them through the Code of Conduct on Mortgage Arrears and the Central Bank and Financial Services Authority of Ireland Act 2004 and shall not be transferred to any entity where these legal protections are not present.".

I believe this is the only amendment before us that is in order. The Bill has two sections. One obviously concerns the deal that was done for the Greeks in respect of their debt, the restructuring of it and the role the Central Bank plays in that. Obviously, that is something that we do not object to. Our only objection is that we never got a similar type of deal. It was very disappointing when we heard on Committee Stage that our officials who were negotiating at that time did not even seek such a venture for this State.

That being said, the second part of it deals with the loan book of ICS and other matters surrounding that. The amendment I have put forward is straightforward. It is obviously very much in the public interest given the fact we have seen a number of financial institutions in this State sell on their loan books to unregulated entities. We saw that happen last year. The most notable and recent example has been the sale of the IBRC loan book by KPMG to vulture funds. This is something that has exercised not only those who held those loans. We have seen a number of loan holders taking action and holding a sit-in at the KPMG offices last week. It has also exercised the minds of people who may have loans with other financial institutions which could follow suit and sell on their loan books to unregulated entities. People are concerned about being able to access different instruments of the State such as the Ombudsman for Financial Services or the protections of the code of conduct on mortgage arrears, despite how limited that code is. That is a real risk and fear that has been acknowledged by the Government given the fact that in the legislative programme the Minister for Finance identified the need to bring in legislation in this area to ensure that any loan book sold in the future would come under these provisions.

Here we are today looking at legislation that has been well flagged. It is part of the troika agreement and was supposed to have been passed before the end of last year. It was delayed and we are now looking at the final Stages of it here. About €1 billion of loans at ICS will potentially be sold to vulture funds. It is very clear that when these loans are transferred, the intention is that they will be transferred on. The amendment is quite simple. It basically says that all assets transferred under this section shall continue to be burdened with the legal protections attached to them through the code of conduct on mortgage arrears and the Central Bank and Financial Services Authority of Ireland Act 2004 and shall not be transferred to any entity where these legal protections are not present. I have heard the counter arguments from the Minister at the pre-legislative stage and on Committee Stage. He talks about the fact that it is likely that the loan book will be bought by a regulated entity in the State because it also buys the infrastructure and it is the infrastructure that it is after. However, the potential is still there for this to be sold to a vulture fund and €1 billion in loans could be held by a vulture fund so that there is no recourse to the Ombudsman for Financial Services and the code of conduct on mortgage arrears. In addition, we would probably be in the same situation as we were a few weeks ago where verbal commitments would be given by these same vulture funds to say that they would live up to these type of commitments. This is wholly inadequate. Yesterday, the Minister told my colleague, Deputy Stanley, that the legislation to ensure that unregulated entities that buy loan books in the future will be burdened by the provisions that exist at this point in time will not be in place until next year. Accepting this amendment and giving security, comfort and reassurance to those whose loans are with ICS and who are fearful they will be sold to vulture funds in the coming days, weeks or months is necessary, prudent and the right thing to do.

I speak in support of Deputy Pearse Doherty's amendment. We discussed this issue at some length on Committee Stage, at which time I welcomed the Minister's commitment to bring forward the legislation promised by the Government at an earlier date than 2015, the date provided for in the Government's legislative programme. He said it would be much sooner than this and I hope the Government will bring forward the legislation without delay. Governor Honohan recently attended a meeting of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform and said he was not happy with the current position of mortgage holders whose mortgages were sold to unregulated entities. He clearly wants this issue to be dealt with and I know that the Central Bank has raised its concerns directly with the Government. In view of the fact that all of the IBRC mortgages are now likely to be sold to unregulated entities, this is an urgent issue. I hope the Minister can update the House on the stage the legislation is at and when we can expect to debate it. The bottom line is that mortgage holders whose mortgages are sold to unregulated third parties, notwithstanding any commitment to voluntarily sign up to the code of conduct, are left exposed and in a vulnerable position, particularly if they get into difficulty with their mortgage. They do not have the statutory backing of the CCMA, which position is unacceptable. The issue must be dealt with, which is why my party is supporting the amendment.

As my position has not changed since Committee Stage, the Deputies will not be surprised to hear that I am not accepting the amendment. As I said on Committee Stage, there are a number of issues with it. First, it would prevent the sale of mortgages to an entity which was in the process of obtaining authorisation from the Central Bank. It could also potentially prevent the sale of these assets permanently in the event that the CCMA was repealed or replaced by the Central Bank, even if equivalent or greater protection applied to a potential purchaser. In addition, it could potentially give rise to legal complexities in any further sale of loan assets by Bank of Ireland by having a containment effect on the broader pool of assets of the bank, making it difficult to identify which assets had been transferred from ICS under the Bill into the broader pool of Bank of Ireland's assets.

I agree, however, with the objective of the amendment. The Government is committed to bringing forward legislation that will protect mortgage holders and believes the sale of loan books to unregulated third parties Bill is the most effective way to address the issue in a comprehensive manner. The legislation will ensure the protection of the CCMA or any replacement code in the future will continue to apply to mortgages which are sold to unregulated financial service providers. The legislation is being actively progressed and will be brought before the Oireachtas once it has been finalised. As I said in response to Deputy Michael McGrath on Committee Stage, Deputies can take it that the legislation will be ready a lot sooner than the 2015 date listed for publication. It is on the C list of the Government's legislative programme, but I intend to have it included in the A list of legislative proposals for the next Oireachtas session, if it is not possible to publish it before then.

The protection of mortgage holders is an important issue and I assure Deputies that I want to give priority to this legislation. The issue, however, does not arise under the legislation which we are discussing which enables transfers to be made to banks. As all banks are regulated financial service providers, they are required to comply with the Central Bank's code of conduct on mortgage arrears. The amendment proposed by Deputy Pearse Doherty would address the matter in an incomplete manner as it refers specifically to the current CCMA. As I have said, it is not appropriate to refer to the specific code in primary legislation as it could necessitate a change to primary legislation were the code to be superseded or repealed. I cannot commend the amendment to the House, as it would not achieve the objective the Deputy is pursuing. Officials in the Department are engaged with the Central Bank and the Attorney General's office to ensure mortgage holders will be protected under the sale of loan books to unregulated third parties Bill. The Government will continue to work with interested parties to achieve the best result for consumers. The sale of loan books to unregulated third parties Bill will be dedicated legislation capable of addressing the issue in a more considered and complete way. That is my position.

There is a lot in the Minister's contribution on which we do not see eye to eye. The one thing on which we do see eye to eye is that the best way of dealing with the issue is through the legislation that has been promised, that is, the sale of loan books to unregulated third parties Bill. It is also welcome that it is being brought forward and I believe the Minister will see generosity on the part of the Opposition when it is brought before the House. However, I still cannot see why we will have to wait until autumn for its publication. That being said, I take issue with a number of the Minister's points, including on the issue of the CCMA in primary legislation. It should be included in primary legislation. It is hugely important and many thousands of people rely on it. Banks also rely on it in terms of repossession and so forth, as do the courts, even though it does not have legal status in primary legislation. There has never been a debate on it in this House. It is dealt with by officials at Central Bank level. It went out for consultation and most people who were consulted were completely against the changes that were made in the recent code. As legislators, we should have a say on the CCMA and including it in primary legislation might be a starting point in giving it legal clarity.

The second point is that we know that this is a two-step process. The Bill is about ICS loans transferring to a financial institution regulated in the State, but the second step is that they have to be transferred out of that financial institution. That is where the real risk lies, which is why we should be taking a step now, as clumsy as it may be. There was an opportunity for the Minister, his officials and the Attorney General, with all of the resources at their disposal, to fine tune this proposal because this issue was flagged at pre-legislative stage. However, as with IBRC mortgage holders, the Minister is again acting in the interests of major financial institutions instead of mortgage holders. It is only because of pressure from me, Deputy Michael McGrath and others, including many Independent Deputies, that we have seen the fast-tracking of the Bill, if one could even call it that since we will not see it until the autumn.

I thank the Minister for his response which is along similar lines to what he said on Committee Stage. It is welcome that the Bill is going to be brought forward, presumably some time this year. I accept that there are complexities involved and that it is not straightforward, but I am sure that if there is the will - I hope there is - to deal with this issue swiftly, it can be done. When the legislation is brought forward, will it be retrospective? Will it deal with mortgages that have already been sold and are held by unregulated third parties? Will such mortgages come under the code once the legislation is passed? It is particularly important that there be such reassurance and that the legislation will not only apply to future sales.

I do not have anything to add to my previous contribution. I have set out the position from my perspective. At the level of principle, we are ad idem. I will bring forward the legislation as a matter of priority and it will have retrospective impact to cover loan books already sold.

Amendment put:
The Dáil divided: Tá, 34; Níl, 61.

  • Adams, Gerry.
  • Broughan, Thomas P.
  • Calleary, Dara.
  • Collins, Joan.
  • Collins, Niall.
  • Colreavy, Michael.
  • Crowe, Seán.
  • Doherty, Pearse.
  • Donnelly, Stephen S.
  • Dooley, Timmy.
  • Ferris, Martin.
  • Halligan, John.
  • Kelleher, Billy.
  • Kirk, Seamus.
  • Mac Lochlainn, Pádraig.
  • McConalogue, Charlie.
  • McDonald, Mary Lou.
  • McGrath, Finian.
  • McGrath, Michael.
  • McLellan, Sandra.
  • Martin, Micheál.
  • Murphy, Catherine.
  • Naughten, Denis.
  • Ó Caoláin, Caoimhghín.
  • Ó Fearghaíl, Seán.
  • O'Brien, Jonathan.
  • O'Sullivan, Maureen.
  • Pringle, Thomas.
  • Ross, Shane.
  • Shortall, Róisín.
  • Stanley, Brian.
  • Tóibín, Peadar.
  • Troy, Robert.
  • Wallace, Mick.


  • Breen, Pat.
  • Burton, Joan.
  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Catherine.
  • Byrne, Eric.
  • Carey, Joe.
  • Collins, Áine.
  • Conlan, Seán.
  • Connaughton, Paul J.
  • Coonan, Noel.
  • Corcoran Kennedy, Marcella.
  • Creed, Michael.
  • Daly, Jim.
  • Deering, Pat.
  • Doherty, Regina.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Feighan, Frank.
  • Ferris, Anne.
  • Fitzpatrick, Peter.
  • Griffin, Brendan.
  • Hannigan, Dominic.
  • Harrington, Noel.
  • Hayes, Tom.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Humphreys, Kevin.
  • Keating, Derek.
  • Kehoe, Paul.
  • Kyne, Seán.
  • Lawlor, Anthony.
  • Lynch, Ciarán.
  • Lyons, John.
  • McCarthy, Michael.
  • McEntee, Helen.
  • McLoughlin, Tony.
  • McNamara, Michael.
  • Maloney, Eamonn.
  • Mitchell, Olivia.
  • Mitchell O'Connor, Mary.
  • Mulherin, Michelle.
  • Nash, Gerald.
  • Neville, Dan.
  • Noonan, Michael.
  • Ó Ríordáin, Aodhán.
  • O'Donovan, Patrick.
  • O'Mahony, John.
  • Phelan, Ann.
  • Phelan, John Paul.
  • Quinn, Ruairí.
  • Ring, Michael.
  • Ryan, Brendan.
  • Sherlock, Sean.
  • Spring, Arthur.
  • Stagg, Emmet.
  • Stanton, David.
  • Wall, Jack.
  • Walsh, Brian.
Tellers: Tá, Deputies Pearse Doherty and Seán Ó Fearghaíl; Níl, Deputies Paul Kehoe and Emmet Stagg.
Amendment declared lost.
Amendment No. 2 not moved.
Bill received for final consideration and passed.