As the Deputy is aware, non-performing loans remain at an elevated level across the European banking system and addressing this issue is one of the key priorities for the Single Supervisory Mechanism, SSM. In Ireland, significant progress has been made across the banking sector in reducing the level of non-performing loans since the financial crisis. Despite this progress, the level of such loans in the banking sector remains well above the European average. Hence, the SSM has tasked the management and board of each institution with developing and implementing a strategy to address this challenge. This challenge will have to be met irrespective of whether the State has a shareholding in the bank concerned.
As the Deputy knows, the relationship between the Minister for Finance and banks in which the State is a shareholder is governed by relationship frameworks, which can be found on my Department's website. In accordance with these relationship frameworks, the Minister for Finance has no direct function in commercial decisions made by the banks and these decisions are the responsibility of the board and management of the relevant institution. Notwithstanding the State's shareholdings in the banks, I must ensure the banks are run on a commercial, cost-effective and independent basis to protect their value as an asset to the State.
Similarly, I do not have a role in the National Asset Management Agency's commercial decisions. Under the National Asset Management Agency Act 2009, the agency has a well-established mandate to achieve the best possible return to the State by protecting, enhancing where possible, and ultimately realising the value of assets it has acquired. To achieve the maximum return to the taxpayer, NAMA was established as an independent commercial body under the direction of an independent board. I highlight for the Deputy that NAMA is operating within its mandate and progressing its objectives.
I should also highlight that there are substantial protections in place for customers in the event that a loan is sold to a third party. The Consumer Protection Act 2015 was designed to protect borrowers in this circumstance. Under the Act, purchasers of loan books must either be regulated by the Central Bank or the loans must be serviced by a credit servicing firm which is regulated by the Central Bank.
Additional information not given on the floor of the House
Under the Consumer Protection Act 2015, relevant borrowers whose loans are sold to third parties maintain the same regulatory protections they had prior to the sale, including under the various statutory codes, such as the consumer protection code and the code of conduct on mortgage arrears, issued by the Central Bank of Ireland and the Central Bank Act 2013 Regulations 2015, which came into operation on 1 July 2016. The sale of a loan does not change the terms of the contract or the borrower's rights and obligations under the original contract.
My Department will continue to keep all relevant legislation under review to ensure borrowers whose loans have been sold are properly protected and do not lose any protections which they previously enjoyed. In addition, the Department of Finance expects that the Central Bank, as regulator of credit servicing firms, will be vigilant in this area and raise any specific instances where they have found consumers have not had their protections upheld.