Go raibh maith agat. I welcome Professor Honohan and Mr. Elderfield. I have a series of questions, some of which have already been answered and some of which I would like to elaborate on. I will direct my first questions to Professor Honohan.
In the past few weeks, €16.4 billion worth of taxpayers' money has been injected into the banks. The taxpayer has the right to know how much of that money was injected into the bank for the purpose of projected losses that the stress test identified for domestic mortgages. How much was identified in the PCARs stress test in March for domestic mortgages? I know it became convoluted afterwards because some of them had been sold on. How much did the banks' stress tests identify that mortgage payers would not be able to pay back to the banks over the lifetime of their loans? It shapes some of the policy on how much scope is there within the capital injected into the banks to avail of some of the solutions mentioned by Professor Honohan, some of which I would support. It will give us an idea of the scope that exists for the write-down process.
The Minister spoke yesterday about the cross-departmental working group on recommendations. He said yesterday that it is not so much an expert group, but rather a cross-departmental group. That might be an area of concern. I am not sure who is on that working group. I am not sure if the Central Bank is represented on that working group, or whether Professor Honohan is on the group. Maybe he could inform us of the list of members of the group. He mentioned in his opening statement the types of solution he would like to see from the group, and said that we have already seen debt write-downs and that there are other issues being dealt with by the banks on a one-to-one basis. What additional recommendations must come from the group for actions that are not being taken by the banks at this point? He mentioned debt-for-equity swaps, something my party has proposed, along with the idea of short selling and mortgage-to-rent arrangements. Does he have any idea, if such a scheme were to be put in place, what the cost to the banks would be? I know it would be difficult to estimate a cost, but is there any idea of the ballpark figure we are talking about if such a scheme were to be implemented?
There is another issue about which I am concerned. Anybody working with and meeting people out there knows all too well that this process is not going fast enough. Professor Honohan said in his opening remarks that the banks need to do more. This is not something we just learned about because of press attention in recent weeks; it has been going on for many months, and is not being focused on by the banks or the Government. We need to impose something. It is not good enough for the Governor of the Central Bank to tell the banks they need to go further and faster. We see cases all the time in our constituencies of people who we know, from our limited experience and expertise, will not be in a position either now or in the future to pay back their loans, yet the best the banks are offering, as of last week and the week before, was a two-month interest-only repayment schedule, which is nonsense from banks that are being kept alive by the taxpayer. Would Professor Honohan agree there is a need for a mortgage debt resolution agency that would have the legal capacity to impose settlements on the banks where the banks are not coming up with settlements? In this way we can deal with the issue once and for all, restore confidence to the market and increase the spending power of those who are not spending at the moment because their debt is completely out of control.
There has been much focus on mortgage debt, but my party and I are concerned about the issue of household debt. Has new data been released, or does the Governor have the latest figures on personal and household debt? How does he see those figures rising or decreasing over the coming months, given the austerity budgets being introduced by the Government? Maybe he could shed some light on household debt and its sustainability.
Policy makers need to focus on Anglo Irish Bank and the promissory note. I mentioned this to the Minister, Deputy Noonan, yesterday. The promissory note is a huge drag on the Irish State. It is my view and that of Sinn Féin that we should not pay it. We will park that issue, but to get to that point the Government may need to come up with solutions or ideas. If, for example, we were not to pay the promissory note, it would reduce our debt-to-GDP ratio by about 20%. It would put us in a healthier position, although there would be other things to be done in terms of the Exchequer balance. The cost of that promissory note in full will be about €44 billion when we include the interest payments. Is there a way to reduce the immediate cost of the promissory note? For example, there is a school of thought that the EFSF, in an expanded role, could buy back the emergency lending assistance extended by the Central Bank and the European Central Bank to Anglo Irish Bank and reschedule those payments, thereby dragging out our promissory note over a 50-year period, or a 30-year period as agreed by the EFSF in terms of its new loan restructuring. This would reduce our Exchequer deficit this year by around €2 billion. Are there any ideas or solutions for this issue within the Central Bank, given that the promissory note will pay the emergency loan assistance that was extended by the Central Bank and the European Central Bank? There are one or two major creditors within that bank at this point, so it might be easier to deal with it. We need to come up with some ideas.
Emergency liquidity assistance, ELA, was extended by the Central Bank. It has come to light in recent months that the Central Bank required letters of comfort from the previous Minister for Finance, the late Brian Lenihan. I have seen the letters of comfort and this baffles me. Why were they requested? The e-mails sent refer to the Government's intent and policy and in my view they are not legally standing. If these soft e-mails were required by the Central Bank so that it would extend tens of billions of euro in liquidity to banks that were, in effect, bust at the time, what was the requirement and do these letters of comfort have any legal effect? Is the State now liable as a result of the letters that were sent without the approval or the knowledge of the Dáil? What would happen if that money was not repaid by the State? What would happen to the Central Bank's accounts if the ELA extended to Anglo Irish Bank was not repaid to it? I am keen to tease out the matter and to understand the views of Mr. Honohan.
There has been much talk about lending from the banks to SMEs and they claim that there are no viable business plans coming forward because of a lack of demand. That has been dismissed by those within the industry. It is something that has been discussed as a major issue for a long time. There is a legal requirement on the pillar banks to extend €3 billion in loans to these sectors, a target unlikely to be reached as the Minister said yesterday. The CSO figures in May show that in 2007 some 90% of loans were successful but in 2010 only 50% of loans were successful. Let us consider what percentage of enterprises applied for loans. In 2007 some 37% of all enterprises applied for loans and in 2010 some 31% of all enterprises applied for loans. We saw a drop of 6% of enterprises applying for loans from 2007 to 2010 but the success rate of those loans has dropped from 95% to 55%. Does Mr. Honohan believe this is acceptable? Is it good enough that the banks are refusing in full 45% of all loans that they are receiving from enterprises last year? What can be done to enforce the legal requirement to extend the lending requirements that have been imposed on them by the State as a result of the recapitalisation?
I wish to put a personal question. There is a school of thought which has been well aired and it gives Mr. Honohan an opportunity to raise the matter. We are all dealing with the aftermath of what is a very bad EU-IMF deal. There has been comment that Mr. Honohan's intervention in this debate was unhelpful to say the least. At the time of very intense negotiations by those in the Irish Government, which was trying to hold off going into a bailout - I believe we should have held off going into the bailout - Mr. Honohan made certain comments. I understand he was at the board of the European Central Bank at the time and basically he cut the legs from under them. Is that something Mr. Honohan regrets with hindsight or does he believe that it was right and proper that the people were told the full and honest truth, that a bailout was required in his view and that negotiations were ongoing? Will Mr. Honohan comment on this?
Will Mr. Honohan comment on the European programme and what we are seeing at the minute? I say this in the context that he is a member of the board of the European Central Bank. Some commentators have argued that the European Central Bank's bond buying programme is a stop-gap to the point where the European Financial Stability Facility, EFSF, will start to buy Spanish and Italian bonds. If so, does Mr. Honohan believe that should be the role of the EFSF? Does he believe the current structure or what is being proposed is large enough? What does he believe to be necessary for that to happen? Is it Mr. Honohan's view that the ECB should launch a buying programme and that it should be the body to carry out that function?
I have several questions for Mr. Elderfield if that is okay, some of which have already been dealt with. The issue of negative equity mortgages has been dealt with by the previous speaker. Mr. Elderfield mentioned that it is something he would not like to advertise. There must be clarity and a transparent process for those who wish to avail of negative equity mortgages. Does the regulator plan to publish the guidelines issued to the banks in this regard? The banks' customers, including mortgage holders and others, should have a clear understanding of the rules within which the institutions are operating and the criteria under which it is possible to avail of that type of product.
There is a recognition that write-downs are already happening to some level. Can the delegates indicate how widespread this practice is? For example, is there a figure for the value of domestic mortgage write-downs since the beginning of the year? It is understood write-downs are also taking place in the commercial sector. What is Mr. Honohan's view on the Government's proposal to bring to an end upward-only rent reviews and the impact this might have on the banking sector? Several reports have indicated that the consequences of such a move might result in a surpassing of the most adverse stress tests criteria. In such a scenario would the banks require further capital?
On recapitalisation, Mr. Elderfield said in April that it was a step in the right direction. Is he satisfied that the level of capital injected into the banks is sufficient? Has he identified any pitfalls in the economy that might lead to a requirement for further capital following next year's stress tests? People in authority told us last year that the stress tests done were very thorough only for us to be told this year that €24 billion was required.
On the remuneration of bank officials, Mr. Elderfield has said it is time to freshen up the management teams in the banks, which probably points to a call to pay more in order to attract to attract qualified outsiders. However, much, if not all, of the banking system will be owned by taxpayers; therefore, it is a question of ensuring the best people are in place to get the best return for that investment. What does Mr. Elderfield consider to be a sufficient salary for a banking head?
On the issue of corporate governance, particularly in the light of the serious allegations being made by Anglo Irish Bank against its former employee, David Drumm, in a court in the United States, what action does Mr. Elderfield believe the State should take to ensure those accused of corporate crime are brought before the Irish justice system? In his view, are the relevant agencies doing enough and, if not, what should they do? Does he consider the agencies have sufficient powers and resources and, if not, what additional powers and resources should they be given?