Banking Sector in Ireland: Permanent TSB

I remind members to ensure their mobile phones are switched off. It is important as it causes serious problems for broadcasting, editorial and sound staff. I ask members to switch to flight mode if possible.

Our first session will deal with matters relating to the banking sector in Ireland. The session will conclude at 4.45 p.m. I welcome Mr. Jeremy Masding, chief executive officer of Permanent TSB, Mr. Ger Mitchell, Mr. Stephen Groarke and Mr. Shane O'Sullivan. In advance of the meeting we collated questions from members of the committee and submitted them to Permanent TSB. I thank Mr. Masding and his staff for responding. The responses have been distributed to members.

Before we begin, I wish to advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are predictably up to privilege in respect of their evidence to this committee. If you are directed by the committee to cease giving evidence in relation to a particular matter and you continue so do, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given and you are asked to respect the parliamentary practice to the effect that, where possible, you should not criticise or make charges against any person or persons or entity by name or in such a way as to make him, her or it identifiable.

I now invite Mr. Masding to make some brief opening remarks.

Mr. Jeremy Masding

I thank the Chairman and members of the committee for inviting us here today. In my opening remarks, I would like to provide the committee with an update on Permanent TSB's current performances and the specific areas of new lending activity to retail mortgage customers and SMEs, retail mortgage lending rates, macro-prudential mortgage lending guidelines, how we are managing customers in arrears and the strength of our capital position.

The job I took on in 2012, namely, that of turning Permanent TSB into a best-in-class retail and SME bank with an exclusive focus on the Irish market, remains a work in progress and will do so for a few years to come. However, we have achieved much over the past four years and we are well placed to finish the job, to return capital to taxpayers and other shareholders and to create a well governed, competitive and profitable retail bank that works for the community, our customers and our shareholders.

When we announced our half-year results in July, we reached a major milestone in our turnaround story by returning to bottom line, pre-tax profitability for the first time since 2007. That progress may be temporarily interrupted for the full year as we will have to take account of the losses arising from the recent sale of our remaining CHL loan book and the completion of the group's deleveraging programme. The trajectory is clear and positive.

We have shown that, at an operating level, we are capable of generating capital organically after a lengthy period in which significant amounts of capital were depleted. As we agreed with the troika in 2012, the group's turnaround involves three phases, that is, rescuing, rebuilding and growing the group. By now we have completed the first two of these phases and, in doing so, have earned the right to embark on the third with confidence.

With our return to profitability, we have settled the argument about whether we can survive. Now we have to prove that we can thrive and build a compelling commercial and competitive business. Recent news that we have completed the sale of the final piece of the deleveraging target means we have delivered on all of the commitments we made to the authorities to support the recapitalisation by the State at the time of the financial collapse.

There are a couple of areas about which I would like to say a few words, starting with lending. I am happy to confirm that we are growing our new lending volumes. We recently announced that new mortgage lending drawdowns were 12% higher at the end of quarter 3 on a year-on-year basis. We plan to keep growing our new lending profitably on a responsible and sustainable basis, by developing competitive, consumer friendly propositions for new and existing customers.

Earlier this year, we launched a highly competitive variable rate mortgage product and a range of very competitive fixed rate mortgages which we believe are appropriate and offer good value to new customers given the current economic outlook. We are also making good progress with our consumer finance offerings, such as personal loans, car loans and credit cards. We are competing actively in this segment of the market.

In terms of our new SME offering, I have told the committee in the past that the owner managed enterprise sector is an area in which we are keen to grow our presence. It is a logical move for us, given our retail banking strengths.

Our initial entry into this market earlier this year has been well received. Although it is still early days, we are encouraged by our performance so far.

Turning to variable rate mortgage pricing, I am conscious that this remains an area of significant interest to the committee, particularly in light of recent initiatives to legislate for giving the Central Bank powers to regulate mortgage pricing. The challenge my team and I face every day is striking the right balance between being as competitive as we can be in what is already a highly competitive market and ensuring we lend in a responsible, sustainable manner. The price of any retail banking mortgage asset must reflect five key inputs: the cost of funds, the cost of operations, the cost of risk, the cost of capital and the portfolio mix. If we price our loans too aggressively, we will fail to manage these inputs and we could ultimately cost the State and our other shareholders money.

I will quickly go through each of those inputs in turn. It is correct to say that the group's cost of funds remains low in the present interest rate environment at approximately 0.73 basis points, but that is not the only input. The group's cost of operations has risen markedly since the advent of the Single Supervisory Mechanism, the design of a new pan-European deposit guarantee scheme and the extension of the bank levy. In simple terms, the group's cost base through these line items alone has risen by €60 million in 2016, and it is the customer who eventually pays.

The group's cost of risk on its most recent lending activity has stabilised since the nadir of the financial crisis. However, the scale of the crisis means we are not yet at a stage where we can claim the back book has been cleansed of all its problems. This, together with the ongoing difficulties faced by all lenders in realising collateral when customers fail to repay their loans, will continue to be felt in the level of ongoing provisions.

In terms of the cost of capital, the group, as well as other Irish banks, has to allocate far more capital relative to its mortgage book than its European peers due to the scale of the non-performing loan, NPL, challenge for Irish banks. In addition, the cost of that capital has risen as investors price the underlying risk of the Irish banking sector to reflect the scale of the NPL, stock, the length of time to realise capital and the possibility of political intervention in asset pricing.

The final input is the portfolio mix and particularly the impact of our relatively large exposure to tracker mortgages based on historic decisions. The level of tracker mortgages in our overall mortgage book means that the level of relative interest received from trackers generally is low. Therefore, the sum of all these inputs, together with the lack of an arrangement fee culture in Ireland of the type we see in other markets, means that relative variable rate mortgage prices are necessarily higher here than some of the rates we see elsewhere in Europe. That major European banks have not demonstrated an appetite to enter the Irish market with cheaper offerings tends to confirm that our pricing in this market is about right for our particular conditions.

In terms of what are the best counterbalancing forces, first, it is my job to minimise the input costs within my control and, second, the market exercises a controlling function. If we charge excessive prices on an ongoing basis, our lending volumes will suffer. Those are the most effective ways of protecting consumers from any bank seeking to apply excessive lending rates and protecting Ireland from a dangerously under-profitable banking system.

We have a track record of responding to those competitive dynamics. We have demonstrated our credentials as a strong competitor by effectively abolishing our standard variable rate, SVR, for any customer who wants to move to a lower rate from our managed variable rate, MVR, range. This move offered cuts of between 20 basis points and 80 basis points for every SVR customer, and approximately one in four of all our SVR home loan customers has taken it up so far. We use this as an example of a key principle whereby we and our competitors must do all we can to provide fair pricing in respect of both the front and the back book to customers in negative equity as well as those with positive equity. We have also demonstrated that we can compete strongly with our fixed rate offerings, aimed at customers who want certainty over their monthly repayments, and with innovative new products such as our Home Mover offering. Our rates are among the most competitive in the market and it is important to remember that when our cashback incentives are factored in, our overall offering is better value for customers than other banks with lower headline rates but no cashback.

Turning to our lending criteria, the amount that we can lend to any individual customer is limited by the Central Bank’s guidelines that place a ceiling on the maximum loan-to-value and loan-to-income ratios that we can offer. These guidelines are intended to prevent excessive borrowing by individual borrowers. As my management team and I are committed to responsible lending, that is an aim that we share. If the guidelines change as a result of the consultation process that the Central Bank is currently engaging in, then we will change our lending policy to reflect any such change. We are well placed to increase our lending volumes in the event of any change in the current guidelines, but without ever losing sight of our overarching requirement to ensure we continue to lend on a responsible, sustainable basis, and the customer’s ability to afford his or her repayments is always paramount.

Turning to the critical issue of customers who are in arrears with their repayments, we have witnessed encouraging trends over recent years. We have seen the benefits of engaging with customers. The bottom line is that engagement works for the bank and for the customer. We invested heavily in putting the right people and the right systems in place in our group to manage this engagement. This investment has allowed many thousands of people to stay in their homes. We have provided more than 24,000 sustainable long-term treatments to our customers since 2013. A very high percentage of these customers are meeting the terms of their restructuring agreements and we will continue to look for the best treatment for these customers. Our goal is to minimise the capital at risk for the bank and the taxpayer and to reduce the likelihood of, for example, a forced trade down for the customer at maturity of the treatment.

Deputy John McGuinness took the Chair.

Mr. Jeremy Masding

Repossession is always a last resort. The facts bear this out. Since the start of 2015, we have taken possession of 54 properties while customers have decided to voluntarily surrender properties in a further 204 cases in that period. That said, there is no easy solution. There is no way around the problem that does not involve intense engagement with customers and agreeing new arrangements such as split mortgages that reduce each customer’s monthly repayment to a level that he or she can afford. The number of customers in arrears on their primary dwelling home has fallen by around 50% from its peak in September 2013. It is an area that continues to require careful attention but one in which the group is making good progress.

I will conclude with some comments on our capital position and the Europe-wide stress tests. We showed with our first-half results that we are capable of generating capital organically. That is a key indicator of the group’s long-term viability. The members may recall that we successfully raised more than €500 million in private capital last year when we completed our initial public offering, IPO, on the Irish and London stock exchanges and enabled the State to get some of its money back and reduce its shareholding from 99% to 75%. Our capital position is strong and our business case is that it will improve further over time. The bottom line, and the most important test for me and my management team, is that we were not required to raise any further capital following the recent stress tests unlike in 2014, but our capital levels, like those of every other bank, are subject to intense scrutiny by our regulator and the wider investment community. We welcome the scrutiny of these tests as it offers us the opportunity to demonstrate that we are a solid, viable, competitive bank. In our recovery journey, we have met every challenge that has come before us and we are cautiously optimistic that we will continue to build on the enormous progress we have made.

Before I conclude, I should introduce my colleagues. I am joined by Mr. Shane O'Sullivan, the managing director of our asset management unit, Mr. Ger Mitchell, the director of our group product review group, and Mr. Stephen Groarke, the group's chief risk officer. My colleagues and I will be happy to answer the members' questions.

I thank Mr. Masding for his opening remarks. I call Deputy McGrath.

Mr. Masding and his colleagues are welcome to the committee. I thank them for providing us with so much information in advance by way of the questionnaire. Do I have a ten-minute time slot?

I will keep my contribution as interactive as I can. On the issue of the standard variable rate and the managed variable rate, which Mr. Masding introduced, he said that one in four of his variable rate customer base has moved across to the managed variable rate.

According to the answer provided to question No. 9, a total of 49,000 residential mortgage customers remain on the SVR. Is that correct?

Mr. Jeremy Masding

That is correct, yes.

They are on a rate of 4.5%.

Mr. Jeremy Masding

That is correct.

Every one of them could gain something if they moved to a managed variable rate immediately.

Mr. Jeremy Masding

A significant amount. The important point of principle is that we continue a regular communications exercise. Obviously, we cannot unilaterally move people from an SVR to an MVR but the important point is that we continue to communicate with customers to encourage them to do so. Indeed, we pay for that valuation and it is something we would encourage people to do.

What was the logic of introducing the MVR method as opposed to reducing the SVR? Why did the bank do it that way?

Mr. Jeremy Masding

I have said previously to the committee that I believe that one of the underlying principles of banking should be rate for risk. I believe, therefore, that the bank should examine a customer's individual circumstances and depending on their risk profile, given them an appropriate rate. The core principle is rate for risk.

A total of 49,000 residential mortgage customers still pay an SVR of 4.5%, which equates to approximately one third of the bank's residential mortgage book. I assume many of those customers have a low LTV and could save up to 0.8%. What efforts has the bank made? How many times have they been written to?

Mr. Jeremy Masding

On a regular basis.

What has been the level of interaction?

Mr. Jeremy Masding

Mr. Mitchell will explain how we thought about it.

Mr. Ger Mitchell

In May 2013, we led the market with the introduction of the MVR product, which was effectively a fundamental shift in treating all customers the same. We retired the one-size-fits-all SVR product and went to the MVR option. In September 2015, part of our policy was to offer new and existing customers the same price, or fair pricing to answer the exam question about bringing fairness to variable rate mortgage pricing. We launched that product in September 2015 and within the pack that went to customers was a simple application form, a voucher to get their valuation paid and an immediate conversion to the MVR option inside 14 days of receipt. To date, approximately 24,000 customers have moved on to that. A customer in negative equity will get a reduction of 20 basis points and a customer in positive equity under 50% LTV can benefit with a reduction of 80 basis points from the SVR.

Has the bank conducted a profile of the remaining 49,000 customers on an SVR of 4.5%, for example, in respect of their LTV?

Mr. Ger Mitchell

Yes, we are familiar with the profile, broadly, if we use the HPI directionally. It should be borne in mind that we have written to all customers in the past two months to remind them of the option to move across to get better value in their variable rate pricing. We continue to pay for their valuation as they come across. The stratification is a matter for where the HPI is across the country and there is no one common version of that.

What is the average amount outstanding on a variable rate mortgage?

Mr. Stephen Groarke

There is a book of €7 billion. A little under €90,000 is the average size.

Why do the witnesses think that many customers who could make an immediate saving have not done so? Some could gain a 0.7% or 0.8% cut immediately in their interest rate, which could make a significant difference to their monthly mortgage repayment. Why are they not doing so? Has the bank surveyed that? Has it any feedback? Is it just inertia on the part of customers?

Mr. Jeremy Masding

We changed the nature of the communication. Every time we learn stuff. I am very nervous around the word "inertia" because that implies the bank is sat on its hands trying to maximise the interest it makes by not doing something. I am conscious of the fact that we need to keep communicating with customers to avoid any accusations of us preying on inertia and we are definitely not doing that. We have a regular communications cycle. We iterate those communications as we go along and, at the end of the day, I use even events like this to encourage customers to take advantage of what is a compelling offer for them.

How many of the 49,000 mortgages have an LTV of less than 50%? Would a good proportion of them be old mortgages with a low LTV?

Mr. Jeremy Masding

I do not have that data to hand. I am happy to give that to the Deputy separately. Let us assume there would be a significant number who can have a material reduction in their-----

The major reform on mortgage pricing was the introduction of the MVR. Why is there not a fixed rate option for existing customers?

Mr. Jeremy Masding

That is a good question. In our organisation, as with any business, we have to prioritise the allocation of resources and we prioritised our resources in respect of the variable rate challenge we had. First, there was the MVR product and the opening of the back book. We then prioritised fixed rate products for our new customers and they are now on the shelf in terms of a competitive rate. The last time I was here I was asked why we did not have fixed rates and the reason was to do a fixed rate mortgage, one has to find some equal and opposite funding at the right price and at that time, our franchise was perceived as weak by the market. We could have put fixed rates on the products but they would have been very expensive. The good news for Ireland is that since then, as the business has improved and we have continued to compete and show we are an important contributor to the financial services landscape in Ireland, depositors and funders have been prepared to give us resources at the right price. The next stage for us is to move that offer to our existing customers. It is just a question of priorities and choices. We will offer fixed rate products at competitive prices to our back book customers as soon as we can in 2017.

I welcome that because it is unfair that this option is being denied to the existing customer base. For example, somebody with an LTV of less than 80% can move to an MVR of 4% but cannot avail of a fixed rate of 3.2%, which is available to a new customer. The bank is making a different offering and is discriminating between existing and new customers in respect of their treatment on fixed rates.

Mr. Jeremy Masding

The Deputy would expect me to say this but there is a difference between conscious discrimination and having to make a trade-off as a businessman. I absolutely accept the challenge that we should have fair fixed rates for our existing customers. I absolutely take that on the chin. In any organisation, choices have to be made about where resources are allocated. We are moving on to it and the Deputy has my commitment that we will do competitive fixed rates in 2017 for our back book customers.

When that is done, is the bank likely to enable customers to access the same fixed rates or will there be a different tier?

Mr. Jeremy Masding

It all depends on the matching funding I can find at that point in time. The Deputy can rest assured that we are not in the business anymore to be uncompetitive. We need to compete now.

With regard to the issue of the tracker redress programme, the bank had identified 1,372 mortgage holders who had to have their tracker rate restored. At what rate was their tracker restored ultimately?

Mr. Jeremy Masding

Mr. Mitchell will give a view on the rates and then I will comment.

Mr. Ger Mitchell

There are two types of tracker mortgage product. There is a price promise product and a non-price promise product. We sought in the mortgage redress programmes to ensure every customer's contractual right to a price promise was delivered and then on non-price promise trackers, it was as per the contract that people rolled off to bearing in mind the time they would have matured from their fixed rate. I do not have the exact data points in front of me but approximately 60% of our customers had a price promise and they got that price promise which was between 1% and 2% on average and those on the non-price promise got between 2% and 3%.

I take it that the bank is part of the ongoing Central Bank review of tracker mortgages.

Can Mr. Masding give us an update on that? How many mortgage holders might be affected by that review or does Mr. Masding think the bank had identified them all through the bank's internal tracker review programme? When does he expect it to be completed and what if any is the likely financial consequence?

Mr. Jeremy Masding

As the Deputy says, we were the pathfinder in respect of the original enforcement action and the Central Bank of Ireland, CBI, tracker review. In September 2015, we also announced that unilaterally we would undertake a full review of our mortgage book and Mr. Mitchell was appointed to do that. Subsequently that was rolled into the CBI tracker review which was launched in December 2015. We continued to work with the Central Bank, as with the rest of the industry because let us not forget it is an industry review, not a Permanent TSB review. It would be inappropriate for me to speculate on the outcome of the review at this stage because it is still quite early. There are several principles we apply, one of the most important being that as soon as we find a cohort of customers to which we have caused detriment, we move as quickly as we can to redress and compensation. My guess is that, like the other banks, we will find detriment in some issues. The important principle for me is transparency, redress and compensation.

I think we have put aside the right level of capital to pay for the harm that we caused. Mr. Mitchell runs the programme so he will give an update on that.

Mr. Ger Mitchell

The mortgage product review group began in September 2015 which put us three months ahead of the curve. I do not think we have gathered everything as part of the mortgage redress programme because it was a very specific task to identify customers who had broken early from a fixed rate contract and lost their right to a tracker. We were guilty of an information deficit. We did not communicate sufficiently with customers about the potential loss of a right down the line.

The CBI review, however, is very broad. It attempts to check for the contractual entitlement, to view it through a regulatory lens in terms of adherence to regulatory policy. The third element pertains to the reasonableness or conduct of the organisation during that period. We have taken every tracker mortgage customer going back 12 years. This is business live in our systems today - business we have sold, business that has been redeemed - and we have recommissioned legacy systems to make sure we get all the data. We are working hand in glove with the Central Bank to make sure everybody potentially affected is assessed, reviewed, and where we find a failing, that they are remediated properly.

There are six steps in the remediation policy: put the customers on the right rate to stop the harm; refund any overcharge of interest; allow a time value of money; a separate payment of €400 to allow them get independent advice; pay 10% or €1,000 minimum in compensation; and two appeal panels depending on what cohort the customers fall into, those who have not lost their homes and those who have. Beyond that, everything is open to the customer including the Financial Services Ombudsman, FSO, thereafter. There are four stages in the Central Bank review. We have just completed phase two and are moving into the full assessment of our book and expect to go through phases three and four in the first half of next year.

There are some specific questions on the buy-to-let, BTL, field, including No. 6, which is about the short-term solutions being provided, and No. 7 which is about the long-term solutions being provided. First, however, I want to deal with question No. 2, which asked the number of BTL mortgages reported as in arrears greater than 90 days as of 30 June. Since 2013, when the bank cited a figure of 5,000, it now has 2,112 BTL mortgages more than 90 days in arrears. What was the mechanism by which the bank arrived at that number?

Mr. Shane O'Sullivan

We were very keen at the outset of tackling the arrears problem to understand things from the BTL perspective. We felt that working through the problems and restructuring accounts would be the most effective solution. As we did with the home loan book, we set about meeting each of our BTL customers and assessed the situation on the basis of affordability and sustainability. Once we could find a path that gave us confidence that capital could be repaid at the end of the term or an extended term and there was affordability between here and there, we were happy to restructure the account. Our large scale restructuring approach is different from that of most banks. It has worked to date. Our performance on the buy-to-let is arguably better than on home loan although the numbers are smaller. That is substantiated by the reduction from 5,000 to 2,000. Most of those restructures are working. Approximately 92% of them have remained performing. Time has been good to landlords and owners of buy-to-let property in terms of price appreciation and rental income. That causes other difficulties in society but through the narrow lens of buy-to-let landlords, it puts them in a position to repay their mortgages now in a way that they were not previously.

When considering the BTL long-term solutions, Mr. O'Sullivan referred specifically to the reduced payment greater than the interest rate. In fairness to the bank, it has provided all the numbers comprehensively for us, which is to be welcomed. The figure of 1,351 is quoted. If there are 1,351 mortgage holders paying a reduced payment that is greater than the interest rate, wherein lies the risk? This committee is mindful of the tenants of those properties because of the problem of homelessness and if there is 92% performance on the loans, I wonder how those 1,351 will play out. Is there security of tenure? While the bank's first duty is to the mortgage holder, does it feel a social obligation to ensure there are tenants and that they have some security of tenure where those mortgages fail to perform?

Mr. Shane O'Sullivan

I will take that as two questions and will start with the one about the borrower. We have a responsibility as bankers to ensure that the capital that is effectively at risk, the amount that needs to be repaid at the end of a restructure, is payable. Across the system there is a legitimate treatment, interest only, in buy-to-let. It is our second most popular restructure at 30%. We offer it when we are satisfied that the capital at the end of the re-term can be repaid through the sale of that property. We are also mindful of risk. Our preference is that if landlords can repay the interest plus a portion of the capital, that is a better position for the landlord and the bank. There is less capital at risk and a stronger plan for the repayment of capital at the end of the term. That opens up options for the borrower who may not need to sell the property at the end of the term.

This is the thinking behind the restructures we put in place for buy-to-lets. We fully respect the issue raised with regard to tenants. For us, it is important there are tenants in the property at all times. We do not have a fixed asset agreement, term or condition in our contracts. We do not have the authority if we wanted it, which we do not as it turns out, to repossess properties swiftly, exit the tenants and sell the property. Our buy-to-lets are treated very much like our home loan contracts. It is in our interests that there are tenants in place. The only time we will appoint a rent receiver is where there are tenants in place and they are paying rent but the rent is not being paid to the bank to pay for the mortgage. In a situation like this we will appoint a rent receiver to look after the interests of the borrower and the tenants.

Specifically on buy-to-let, Mr. O'Sullivan quoted the figure of 423 as the sum total of rent receivers the bank has in place.

Mr. Shane O'Sullivan

That is correct. They are almost exclusively on buy-to-let properties. The reason we put in a rent receiver is as I said. They are appointed by the bank. They are an agent of the borrower. They are there to gather the rent and pay it to the bank. They are also there to make sure the property is kept up to a reasonable standard in order that the tenants can live in the standard for which they are paying.

I would like to get a sense from the witnesses of the fallout from Springboard Mortgages. A total of 1,372 customers of the bank were in line for substantial refunds. I know this was last year, but I would like to get a sense of whether the issue has resolved itself and whether the bank is giving due recognition to its own failings in regard to Springboard, where people lost properties as a result of the issue.

Mr. Jeremy Masding

The enforcement action to which the Deputy refers covered Permanent TSB and Springboard. I will ask Mr. Mitchell to answer the question on Springboard and I am sure he will answer it to the Deputy's satisfaction.

To give a context, it is just the learnings from it to ensure non-repetition of such incidents in the banking sector.

Mr. Jeremy Masding

I take every opportunity I can in a public forum to apologise, and I must do that in front of the committee. It is a chapter of the bank's history we must never repeat. Therefore, I can categorically assure the committee there have been many learnings. We have the Central Bank's tracker review with regard to ensuring the provision of information, because this was what it was about. There was no wilful misrepresentation as it was about the provision of information. We need to ensure the buyer of a banking product absolutely has the right information.

Mr. Ger Mitchell

To give Deputy Sherlock a summary, as he pointed out, there were 1,372 cases, of which 220 were Springboard and the balance of 1,152 were Permanent TSB. At this point, 91% of these customers have been fully redressed, which includes putting the account back in the position it would have been in, rebuilding the account, providing advice fee, providing compensation and, as I mentioned earlier, opening up the appeals panel. Approximately 14% of the total have appealed and approximately one in four people have got slightly additional terms on foot of going through those appeals.

On the point on lessons learned, to build on what Mr. Masding has said, our objective is to rebuild trust and faith in Permanent TSB, which is why in September 2015 we established the mortgage product review group. Our core objective is to ensure our behaviour and the contractual obligations to customers are adhered to and delivered upon. As part of this programme, we have sought to find any failings, be they system or operational, fix them and future proof such that it does not happen again.

Does Mr. Mitchell agree a certain number of these people fell into arrears and lost their homes and were subsequently compensated? How is the bank dealing with these people? Does it have a protocol in place to recognise their loss as a result?

Mr. Ger Mitchell

The number who lost their homes was 58, 42 of whom were in Permanent TSB and 16 in Springboard. To date, 52 of the 58 customers have been fully redressed and compensated. We make every effort to help these people, in so far as financial means can help these customers rebuild their lives. We are in active engagement with-----

What does that mean? It sounds wonderful but what does it mean in real terms, if I may ask?

Mr. Ger Mitchell

What it means in real terms for home owners is that there is a €50,000 compensation payment immediately. Then there is a key account person, a senior person who is mapped to look after each and every customer to help them. There are many ways in which we can help them. For very many customers we have approved full mortgage facilities at tracker rates to help them buy a new property.

They have not actually been rehoused in some instances as of yet. They have not benefited from-----

Mr. Ger Mitchell

I do not have the exact breakdown of those who have and those who have not, but there are those who have, there are those in the process and there are those with whom we are working to get them approved to get them back into family homes on the terms that were agreed when they initially took out the mortgage. There is a separate appeals panel to help them deal with this.

Mr. Jeremy Masding

Perhaps I might have the last word. The danger is we might believe this is a Permanent TSB-only problem, which it was, and the questions we are answering are in the Permanent TSB domain and I hope we are doing the best we can to be transparent, but we must not forget this is now an industry-wide review and the dimensions of detriment, redress, compensation and loss of ownership, sadly, will apply to the entire industry. I am sure the committee would expect me to do what I can to protect the brand of the people who work in Permanent TSB, and forgive me if this sounds rather defensive, but I want to get it across that we should not forget this is an industry review.

I would have closed it out at Mr. Mitchell's last intervention, but Mr. Masding has come back in. To be quite frank about it, I know he must defend his own realm but a great injury was inflicted upon people by the entity before us which we are questioning today. I asked what were the lessons learned in order that we can move on.

Many of the questions I wanted to ask have been asked and answered. We have been told that Permanent TSB is over the worst. I welcome this confidence and hope it is well placed. However, we must bear in mind that the bank failed the ECB stress test not 1 million years ago. Only six months ago in a trading statement, Permanent TSB stated it may not generate the return on equity of approximately 10% by 2018. It had flagged investors just a year ago, citing increased external risks. The share price fell 10% on the back of this statement. A note of caution is very much required. At any point in recent years, did the bank, as a serious option, look at the possibility of a merger with another bank or being subsumed into another bank?

Mr. Jeremy Masding

I should go right back in history. In early 2012, I was asked to review Permanent TSB. As I mentioned when before the committee previously, with the troika and the Government we looked at all the alternatives for Permanent TSB. These alternatives included resolution of the organisation, or wind-up as committee members might know it. We looked very seriously at a merger with another Irish financial services business. We also looked at trying to create a focused Irish domestic retail bank.

Each of those alternatives was examined through a quantitative and qualitative lens to a level of detail which I think would pass any due diligence. It was decided that the most value-creating alternative was to allow Permanent TSB to compete in the Irish market. Since then, we have done all we can. The team has done a great job and created an organisation that is now alive and vibrant. We were profitable for the first time in ten years. We have now deleveraged all of our non-core business and we are competing hard in the market. At this point there are no conversations taking place around merger-acquisition. To be frank, they would be a diversion. What we need to do now for the benefit of the Irish consumer and the Irish taxpayer is grow this bank profitably, and we are confident that we can do so.

In regard to some of the hiccups that arose along the way, the return on equity, ROE, was a benchmark target against other peer banks in 2014. Since then, the industry has suffered from a combination of factors, including low interest rates, a high regulatory cost burden and some geopolitical risk, all of which come through into our business. In regard to the 10% ROE, I imagine that the ROE that we are targeting now is well within the peer group range. I am confident that investors are comfortable with where we are going. In regard to the share price, it is true that it deteriorated but that happened because of many factors which were outside of our control. In recent times, following reporting of profitability, deleveraging of CHL and showing the market that we are confident about the future of this organisation the share price has rebounded strongly.

It should not be forgotten that Permanent TSB is the only nationalised bank to undertake an IPO. We did that in nine months. We crossed the globe and presented our value story to investors and we were massively over-subscribed such that confidence in Ireland and Permanent TSB was strong then and remains strong now. Last week, I was in US for a meeting with our American investors. The feeling is one of optimism, particularly now that we have deleveraged CHL. The investors now believe that this management team is ready to deliver on the promise it made to them about a profitable Irish domestic retail and SME bank. Therefore, I remain confident to today. Any discussions about an inorganic transaction would be an absolute distraction that I do not think is required at this point in time.

Mr. Masding has painted a rosy picture. In regard to his statement that the bank is now ready to move on to phase three - growing the group - what does that mean for competition in the Irish banking sector and physically in terms of the bank infrastructure? Can we look forward to the opening of more branches, a better geographical spread of same and more jobs? Will Mr. Masding confirm that at least there will be no more closures or mergers of the banks? I note Permanent TSB currently has nine fewer branches than it had in 2012. In regard to staff, perhaps Mr. Masding would explain how it is that there are 273 more staff in the organisation but fewer branches.

Mr. Jeremy Masding

In regard to the bank, we have now reached a place where we have to compete in the markets on which we are focused. To compete, one has to invest. I will give an example. In regard to the channels mentioned, we participate in five channels, including via branches, online, mobile, telephony and brokers. We continue to invest in all of those channels. In regard to branches, we believe that these remain an important part of the Irish banking landscape. We have 77 branches, none of which at this point we have any intention of closing. Obviously, demographics and behaviour change over time and, therefore, we have to keep the facts base alive and monitor the situation, but as of today I have no intention of closing any branches. Our branches fit into two categories. Some of them are old and, in many cases, decrepit and in need of investment. At this point, 30 branches have been fully refurbished. I would encourage the Senator or any of her colleagues to visit one of the refurbished branches. I can guarantee they will walk out confident that Permanent TSB is an organisation that is investing in its people and its technology.

The Senator is correct that we need to invest further but we can only spend what we earn and so we need to make some money first. Broadly speaking, we know the channels we are in and we know where we need to invest. The branches in Dundrum and Malahide are just two of the branches recently refurbished. We are big fans of the branch network.

I presume that transposes to the branches across rural Ireland?

Mr. Jeremy Masding

Yes, the 77 branches are spread throughout the country. For an expatriate, my knowledge of Ireland is pretty good. I visit every branch every year.

Why are there 273 more staff in the organisation?

Mr. Jeremy Masding

The increase in staff is linked predominantly to two issues. First, the cost of regulation of all banks across Europe, including Permanent TSB, has increased materially. It is important that the standards of banking continue to rise and for that reason we have had to invest in our risk governance and control infrastructure. That involves people processing technology. In the area in respect of which Mr. O'Sullivan has responsibility, which is asset management, we have to continue to invest in arrears management because we need to do the right thing for Ireland. As stated earlier by Mr. O'Sullivan, we are trying to avoid repossessions and to provide customers with long-term solutions. The main reasons for the increase in headcount are risk governance and control and continued investment in the arrears management unit, all of which, I suspect, are a good thing.

To what degree are Mr. Masding's growth plans predicated on the future sale of State shares or on further capital injections to reduce the State's share? Has the bank postponed or slowed down on any initiatives due to Brexit or any other concerns?

Mr. Jeremy Masding

In regard to the shareholding of the organisation, I remind the Senator that we were tasked with reducing the State's shareholding from 100% to 75% and we did that. As such, we have a 25% private shareholder base. In regard to the 75%, what happens in that regard is a matter for the relevant Minister. The Minister is on record that over time he wishes to reduce the stakes of the Government in the banks and that is something which I would welcome. At the end of the day, that is a matter for decision by the Minister.

In regard to Brexit, in a short-term perspective Brexit somewhat bizarrely helped Permanent TSB in that it increased the probability of deleveraging the CHL business. A very short-term upside for us of Brexit was that it accelerated the full deleveraging of our non-core portfolio. For us, there was a short-term tick in the box from Brexit. In the longer term we are the only Irish bank that does not have a mainland British operating business and, therefore, we are less exposed than others. Like everybody in this room, we remain cautious of the impact of Brexit on the island of Ireland.

I thank Mr. Masding for his presentation. Question No. 3 on page 15 relates to the €4 billion bailout for PTSB.

The question is about how much has been repaid and how much will be repaid. When one adds everything together, which includes the deposit guarantee scheme, effectively the witness is saying the bank has repaid €2.6 billion of the €4 billion bailout. However, question No. 17 on page 18 deals with the amount of the money that has gone from the State to Permanent TSB in that period of time via the redemption of National Asset Management Agency, NAMA, bonds and interest. The total is €2.548 billion, plus €200 million interest. When one balances them out over that period of time there has been a further net payment from the State of €148 million, via NAMA, to the bank, rather than money coming back the other way.

Mr. Stephen Groarke

I will take that question. The Deputy is right that there is a €4 billion investment in the Permanent TSB group and we have repaid €2.6 billion. That is made up of €1.3 billion from the sale of Irish Life, €0.5 billion from redemption of contingency capital and a further €0.8 billion from fees and interest. The answer to question No. 17 is not like for like. We acquired those NAMA bonds in association with a deposit book which we took on. In taking on those assets, the NAMA bonds, we also took on liabilities. That is not a net investment from the State, and it is not appropriate to add that to the other investment. Effectively, the State gave us an amount of NAMA bonds and almost exactly bonds to date with deposits from another institution that was being wound up at the time. I would not add the numbers in question No. 17 to the earlier numbers.

In terms of repayment to the State, the additional piece is that the State also owns 75% of the group. At this morning's share price of €2.66, that is worth €900 million to €1 billion. That is a further potential contribution to the repayment of the State's investment. As Mr. Masding said, it is at the Minister's discretion as to when he wishes to do that.

Mr. Jeremy Masding

The other issue is that we wish to be able to demonstrate in a rational way that we as a management team repaid to the best of our ability as near to €4 billion as we possibly could. That is one of our over-riding goals.

The fundamental point is whether it was good use of the public's money to spend more than €4 billion to keep Permanent TSB alive, as opposed to saving depositors and using those resources for society. Given the witnesses' position, they will have only one answer to that and I will not bother seeking it.

Mr. Jeremy Masding

I can give one.

Mr. Jeremy Masding

It was absolutely the right decision.

I will return to the questions Deputy Sherlock asked about buy-to-let repossession. Permanent TSB has 672 voluntary surrenders and 56 repossessions of buy-to-let properties, which is a total of 728. How many of those cases involved the eviction of the tenants to achieve vacant possession?

Mr. Shane O'Sullivan

None that I can think of.

Does the bank keep statistics on that?

Mr. Shane O'Sullivan

We do. I am open to correction but there are no situations where I can recall that we obliged the eviction of tenants. It goes against the repayment of the capital that is due, so there would not be a good reason for the bank to wish to evict the tenants and sell the property. Our intention is to work with the borrower to keep the tenants in the property.

Mr. Jeremy Masding

We have appeared before the committee on a number of occasions. We will check that but, to the best of our knowledge, it is zero. However, I would not wish to be accused of giving the Deputy the wrong data so we will check it and refer back to the committee.

The State owns 75% of the bank. Has there been a requirement from the Minister for Finance or any representations from the State regarding policies relating to eviction of tenants in the context of buy-to-let repossessions?

Mr. Jeremy Masding

No.

Mr. Shane O'Sullivan

No. We commend the code of conduct on mortgage arrears, CCMA. It is a fine piece of work and it guides banks such as ours on how we work with customers who are in distress, both to find treatments and on how we manage cases where affordability or sustainability does not exist.

Mr. Jeremy Masding

The question was around the Minister versus the regulator. I give the committee my word that the answer is "No" to that.

That means, hopefully, no direct evictions. The number of owner-occupier mortgages in arrears is down 50% since September 2013. Part of that is the selling of approximately 5,500 mortgages to vulture funds. Do the witnesses have any idea what happened there? Is the question of whether they will evict tenants something the witnesses take into account when they are choosing to whom they will sell the mortgage books?

Mr. Jeremy Masding

There is a context answer that I wish to place on the record and then Shane O'Sullivan can answer the specific question. In each of the cases the Deputy referenced, the disposal of those portfolios was linked to our restructuring plan. The property numbers one sees, therefore, probably would be called connected mortgages as against being the principal mortgage. Essentially, we were obliged to sell some non-core portfolios. Many of those non-core portfolios were in a commercial real estate space or in the professional buy-to-let space, and many of the principal dwelling houses, PDHs, that came with them were connected to that main mortgage. I would not want the Deputy to think there was a proactive vulture fund strategy, as he calls it, vis-à-vis those portfolios. We were obliged to sell those portfolios as part of our restructuring plan, because the primary obligation was linked to a non-core label. That is where we are at in terms of those disposals.

Mr. Shane O'Sullivan

To add to that, these figures are for Permanent TSB only and for the portfolios we have had and not sold. The 50% reduction in questions Nos. 1 and 2 relates to Permanent TSB loans that we have worked through with our borrowers. It is not reduced by the 5,000. As Jeremy Masding says, that is a separate portfolio or portfolios that were in our non-core division that were sold.

Have the witnesses any idea what happened to those that were sold? They are implying that a bunch of them would be commercial property and so forth, but some of them could be connected residential.

Mr. Shane O'Sullivan

There was a mix. The bias was very much in the commercial real estate, CRE, space. There were some residential loans, both home loans and buy-to-let loans, sold as well. Once that sale takes place and once the economic and legal ownership is with another entity, from a data protection point of view and business point of view we would not see transactions on those accounts from that point.

Another question relates to where the bank has repossessed properties. A common complaint many of us encounter is that when people see boarded-up houses they presume they are owned by the council, but often they are not owned by the council but by banks. Non-governmental organisations, NGOs, have said there is a process of repossessed houses lying empty for a period of time. Threshold told the Committee on Housing and Homelessness that there is clear evidence available that when vacant possession is obtained for sales purposes properties are left unoccupied for a considerable time. What type of turnaround would Permanent TSB have on properties of which it takes vacant possession?

Mr. Shane O'Sullivan

We have approximately 440 properties in our stock. We recently appointed a new asset manager and the idea behind that relates to the Deputy's point, to appoint and work with a partner who can sell these properties once they come into our possession on a scale basis and more quickly than heretofore. In recent times that turnaround has quickened. Over the last number of years it has been an elongated process, because in the early days of the crisis access to mortgages was not available. However, time has passed and we are all aware that there are issues with supply. Demand far exceeds supply. The turnaround time, therefore, is getting quicker. I admit that we were slow this year because while we were appointing and tendering for the new asset manager we held our properties until that appointment was made.

I estimate that at this stage it takes about six months to sell a property.

From reading the figures it would seem that a lot of buy-to-lets are on tracker mortgages - that a disproportionate number of buy-to-let properties are on tracker mortgages versus owner occupiers. Is that accurate?

Mr. Stephen Groarke

Yes.

What if ECB interest rates rise, which they will do at some point? It is just a question of time. Will that create a knock-on problem for tenants in terms of buy-to-let mortgages?

Mr. Stephen Groarke

There is a number of factors. There is no doubt that it is a risk, but when we do the underwriting associated with the restructure we do leave a small amount of money aside in terms of our assessments for issues like that to arise. It might not necessarily be an increase in ECB rates, it could be an increase in medical costs or other expenditure but we do not take the total net disposable income and assume that all of it is available to repay the mortgage, so that leaves some leeway for exceptional circumstances.

Richard Curran of the Irish Independent described it as the great unexploded financial time bomb ticking away in Ireland waiting to be detonated by rising EC interest rates. If there were to be a significant rise in interest rates would many people with buy-to-let mortgages get into difficulties?

Mr. Shane O'Sullivan

That would be a factor of rental incomes and supply and demand so without a doubt it is a risk. The alternative of course is not to provide a restructure and the consequence of that is repossession and that is not a route people want to take so, as bankers we have to assess the risk and we have to make decisions. We believe that our policy in terms of buy-to-let restructures is appropriate. It recognises that risk. It does not take all of the net disposable income into account as a consequence but, nonetheless, the risk exists.

I welcome the witnesses to the committee. When I listened to the comments earlier about tracker mortgages the rage inside me was growing stronger and stronger because it was being passed off as a case of the bank not communicating or performing and giving the information that was required and that this is an industry-wide issue.

Reference was made to the redress scheme, trying to right the wrongs and that the bank apologised again to its customers, but this was not just an information flaw. It is not connected but in response to our questions the salaries of the senior staff in Permanent TSB were provided. Some of them are earning up to €500,000. They watched these individuals lose their homes. The bank took the homes from some of those individuals. In my view that was daylight robbery by a financial institution which took money from its own customers. When that was pointed out by those very same customers, the bank denied it. When the Financial Services Ombudsman said that the bank was wrong and the customers were right, the bank fought the ombudsman. When the High Court told the bank that it was wrong and the customers were right, it fought the High Court and went all the way to the Supreme Court. Some of the customers who were robbed also had their houses taken off them as well. The bank then tried to pass it off as an information issue and said that it was an industry-wide issue. This was not just a small little error within the bank.

I met with one of those customers who had a letter saying that she should voluntarily surrender her family home, with arrears of just over €400. It was the first time ever she was in arrears. I looked at the contract and it was as plain as day that the individual was entitled to go back onto a tracker rate. That was one of the appeals that went to the Financial Services Ombudsman. If I did that - if I took €20,000 from an individual I would be locked up in Mountjoy, but unfortunately the history in this State is that bankers can rob their customers. I do not target this at individuals but I am talking about institutions that dressed it up as a redress scheme. The bank will give back the money and no heads will roll within the bank. That is how a lot of people feel and while I welcome the apology given by the witnesses, have they apologised for taking the Financial Services Ombudsman to the High Court? The Central Bank said it was not about the 80 cases before the FSO but in 1,300 cases the bank had taken money from customers and some of them were left so high and dry that their family home was taken from them. I want the witnesses to respond to that because that is how many people feel about what the bank has done.

The words that have echoed in this chamber about it being a question of information and an industry-wide issue are trying to deflect from the responsibility. Mr. Masding is the CEO who oversaw the appeal to the Supreme Court and who allowed those people to be overcharged by the bank. He oversaw a process whereby they were being fought tooth and nail through the courts. What the bank has done is appalling. I did not intend to take this line but the witnesses have enraged me in terms of the way they have presented the situation, which is inappropriate given the scale and the suffering involved. No redress scheme will ever be able to make right the difficulties some of those individuals, some of whom I know personally, went through. They had to make sacrifices and suffered stress and anguish and there were health implications of all of that because of what the bank did. To categorise it as not providing people with the proper information and to say it was an industry-wide problem is disrespectful. I am appalled that is the type of approach the witnesses took today.

Mr. Jeremy Masding

Let me respond to that. I think I was answering a different question, so if we go back to the point of principle, in June 2015 I announced the enforcement action and the redress and compensation scheme. I did that in a public way. I did not hide behind a press release. I did it in the boardroom of Permanent TSB in front of the Irish media. I then came to this House and answered questions, so in terms of the attitude and the remorse that the bank showed I hope that if Deputy Doherty looks back on the record for June 2015 he will see that I did not hide behind anything. I stood up there in front of the Irish media and apologised for the absolute distress that we caused to customers. I also was very clear that it would be irresponsible and completely without empathy if I tried to imply that the redress and compensation scheme would in all cases complete any remediation of any harm because obviously I do not know all the individual circumstances – Deputy Doherty might know better – but what we tried to do at the time was to design a scheme to the best of our ability to make sure that we did the right thing for customers, including those who suffered loss of ownership.

In terms of Deputy Doherty’s first point, I apologise if I gave the impression today that I was trying to deflect from what I did in 2015. I repeat my position to him that it was a sad episode in the history of the bank. We caused enormous detriment to a large number of customers. I apologised in person and we felt the scheme that we tried to design and build was the best scheme that we could do within the circumstances.

In terms of the second point about personal accountability, I repeat what I said at the time, namely, I have found no evidence to suggest that anyone within the group took a conscious decision to deprive customers of the trackers. If any such evidence emerges I will take the action that is appropriate.

I will give Mr. Masding some evidence. When the Financial Services Ombudsman said the bank was wrong, that was the evidence but obviously something happened at board level whereby the bank decided to appeal the case to the High Court. Whether there was a conscious or deliberate effort when the customers were not put back on the tracker rates, when the Financial Services Ombudsman found that the bank was in error the bank should have rectified the situation.

Afterwards when the High Court found that Permanent TSB was in error, the bank should have rectified the situation. In layman's terms, if this happened anywhere outside a financial institution people would be locked up in Mountjoy because individuals' money was stolen. It was stolen by a financial institution. The redress scheme, which was forced upon Permanent TSB, meant the bank had to rectify the situation. The Central Bank has made that clear. Permanent TSB did the right thing, but it had no option but to stand up and say it would make things right. What the bank is doing is returning the original money it took from them back to the customers with a little bit of top-up for the pain and suffering caused, which amounts to about 10%. That is the problem here. There was a conscious effort and a decision was taken. Maybe Mr. Masding can enlighten this committee as to whether he was part of the decision-making process that either appealed to the High Court - I am not sure if he was there at the time - or to the Supreme Court.

Mr. Jeremy Masding

The facts are those that I explained in 2015.

Is that a "yes" or a "no"?

Mr. Jeremy Masding

I can only answer the Deputy's question as follows, which is that in June 2015, I apologised on behalf of the organisation. We put this scheme in place. I apologise to the Deputy again this afternoon if he felt that the use of the term "industry-wide tracker review or information" was something to deflect from that. I give the Deputy my word that it was not. I was merely answering a different question.

Can I ask Mr. Masding to answer the question? Was he involved in the decision by his institution to appeal the High Court decision to the Supreme Court?

Mr. Jeremy Masding

I was involved in that decision.

Mr. Masding was involved in that decision knowing at that time that there were dozens of cases, probably 80, before the FSO. At least, therefore, Mr. Masding knew at that stage that there were 80 similar cases before the FSO about which the High Court had made a determination that the bank had erred in law. Mr. Masding decided to fight them. He decided to fight the FSO, which was acting on behalf of his customers.

Mr. Jeremy Masding

The case is more complex than that. The decision the board took at that time was a decision around a variety of different factors. In terms of the consequences for the tracker review, those facts are now in front of the committee. The Deputy has seen where we are at today. What we have to do now is to move forward on this case in terms of the tracker review, and to ensure that mistakes like this are not made again.

That is what Mr. Masding would like to do and it is what a lot of people have to do, but where is the accountability in all of this? This is a State-owned bank which robbed citizens of this country. When they were caught out by the High Court and the FSO, the people there decided to appeal that to the Supreme Court, which was within their rights. They made the wrong decision by taking that appeal to the Supreme Court but Mr. Masding has never apologised for it. Those decisions placed more hardship on these individuals. These individuals were sitting at home monitoring websites such as askaboutmoney.com and they saw what happened in the High Court. When the High Court made its decision, they thought that finally they would get their tracker rates back, keep their houses and put food on the table for their children. However, highly-paid executives within Permanent TSB, sitting around a board table, decided they were going to fight this. They took it to the Supreme Court, which took months before the decision was eventually taken to withdraw the appeal because the Central Bank review said Permanent TSB had to make right the wrongs it had done. That is the problem here. There is no accountability within the financial institution. Nobody will be held accountable for this. How can no one be held accountable for it? The bank robbed 1,372 of its customers. That is what happened here. The bank took their money. It is giving it back to them under the redress scheme but how come nobody will be held accountable for this within the financial institution or was held accountable when it became known that this was happening?

Mr. Jeremy Masding

The issue has been categorised by the Deputy and others as a lot of things. The fact is that it was a systems design failure on our part and a legacy issue before I started. The failure was a systems gap. It was an operational weakness and I have apologised to the Deputy and his colleagues in the past for this and the impact it had on the customers involved. I continue to apologise today. As I said when the issue arose last year we moved as quickly as we could to do the right thing. Sitting here this afternoon, I can only tell the committee that we are trying to rebuild trust. We are trying to rebuild Permanent TSB and we are trying to do the right thing. That is where I would leave it.

There is obviously no point in dealing with this issue much more because Mr. Masding has made his statement. He will continue to dress it up and present it in the way he has as a systems failure. It was not a systems failure. A systems failure is when a computer throws out an interest rate that is wrong. This was people at the end of a phone saying "You have put me on to the wrong rate. I want my tracker rate back". Decisions were taken by individuals within the bank to say "No, you're not entitled to that tracker rate back." That is not a systems failure. Decisions were taken within the bank at a high level that were being filtered down to staff who were answering phones.

Mr. Jeremy Masding

Let me answer that one. In terms of that particular dimension, since I became the leader of this organisation I have sought to ensure that the operational practices we have under my watch are to the highest standards so those issues do not happen again. I think I need to say that.

With respect, I need to say that Mr. Masding was part of the problem. He was part of the group of people who decided to appeal this to the Supreme Court. He oversaw this institution while this was happening. This did not come to light just last year. People have been bringing this to the attention of the Financial Services Ombudsman but, first and foremost, to the bank because one cannot go to the FSO before one has exhausted the appeal mechanisms within Permanent TSB. They have been doing that for years.

I have a connected question. I believe that €140 million was set aside for the redress scheme. How much of that has been paid out so far and how much is expected to be paid out when the scheme ends?

Mr. Ger Mitchell

To date, approximately €80 million has been paid out.

What is the expectation of pay-out?

Mr. Ger Mitchell

We have provided for €145 million. As I indicated to Deputies Michael McGrath and Sherlock earlier, we have just completed phase 2 of the Central Bank review. We have started the assessment, so until that assessment is completed we will not be in a position to quantify if or whether we will find any further issues. As it stands right now, however, we are comfortable with the provision that currently is there.

Of the €80 million paid out so far, how many of the bank's 1,372 customers who had money taken from them are in receipt of it?

Mr. Ger Mitchell

Approximately 1,200 customers, so 91% of customers affected have been fully redressed. Some 14% have decided to appeal further.

Are 172 appealing?

Mr. Ger Mitchell

It is 172, yes.

When they were restored onto their tracker rates, how many people appealed that the bank was restoring them onto the wrong rates and had a different rate put in place after appealing?

Mr. Ger Mitchell

I do not have that discrete detail with me.

Can Mr. Mitchell confirm that after the Central Bank found what Permanent TSB had done and the bank was obliged to put customers back onto the appropriate tracker rates, the bank put some customers onto a higher tracker rate than the rate to which they were entitled? Is that the case?

Mr. Ger Mitchell

No. We have not put customers back onto higher tracker rates than those to which they were entitled.

Has anybody who was restored onto a tracker rate and who made a case that the rate was wrong subsequently been put onto a lower tracker rate?

Mr. Ger Mitchell

I am familiar with the fact that customers have raised complaints with regard to the fact that their expectation was that they would go onto a lower tracker rate. I am familiar with the fact that some customers have taken an appeal in that regard. I do not have the exact detail with me but I will be happy to get it for the Deputy afterwards.

Has anybody won an appeal of that nature up to this point in time?

Mr. Ger Mitchell

Off the top of my head I am not aware that they have.

Maybe Mr. Mitchell will supply the committee with the information on that.

Mr. Ger Mitchell

I certainly will be happy to do so.

How many houses or homes does Permanent TSB have in its possession that have been vacantly surrendered to it or repossessed by it?

How many does the bank have in its possession at this point?

Mr. Shane O'Sullivan

The number is 441. Some 219 are home loans and 222 are buy-to-let loans.

These are vacant homes in the possession of the bank. Is that correct?

Mr. Shane O'Sullivan

That is correct.

On average, how long has the bank had these vacant properties in its possession?

Mr. Shane O'Sullivan

I explained earlier that it differs. In recent times, we have been able to sell properties in a six-month period. However, some of these properties took longer to sell. The cohort goes different ways. We have appointed a new asset manager who is working with us to sell these properties at scale.

Has that bank engaged with the State? I presume that many of these properties are located around Dublin. Permanent TSB is not unique. Bank of Ireland and AIB have properties as well. Indeed, the banks in which the State has substantial shareholdings have vacant properties and they are doing nothing with them. We have a homeless crisis and people are being accommodated in hotels by local authorities and so on. Has Permanent TSB engaged with the State to inform those responsible that the State owns the bank and the bank has 441 houses that are lying empty? Perhaps that could represent something of a solution to help to alleviate the homelessness and housing crisis in the capital. What has the response from the Department been if the bank has had such an engagement with it?

Mr. Shane O'Sullivan

We have not had that engagement with the Department. We have had informal discussions with the housing association, but our primary strategy is to sell those properties for the best possible price on the open market.

Is there anything stopping Permanent TSB from handing those properties over to the Minister with responsibility for housing in order that they could be allocated to deal with the housing and homelessness crisis?

Mr. Shane O'Sullivan

Not at a principle level, but we have an obligation to ensure that we achieve the highest amount or market value of the properties. That is our obligation to the borrower. To the extent that there is an excess due over and above that amount, the full amount is still owed by the borrower. Our obligation is to maximise the value of those properties. That is why we have appointed a new national asset sale manager.

I gave Deputy Pearse Doherty leeway on this because of the issue he was raising. It is something of which I have taken note and I had planned to raise it at the end of the meeting. Two questions arise for me. Reference was made to a systems gap. Who designed the system?

Mr. Jeremy Masding

It was an operational weakness. I was not the chief executive when the original issues occurred.

It was not a systems gap; it was an operational weakness. Is that correct?

Mr. Jeremy Masding

By "systems" I mean an operational system. It was an operational weakness.

Mr. Stephen Groarke

I may be able to help. From 2006, there was an obligation under the consumer protection code to provide customers with adequate information in respect of any decisions they made. There was an issue for Permanent TSB in this regard. Where our customers broke early from a fixed rate, they lost the contractual right to a tracker. However, the information pointing out to them that they were losing that contractual right was not provided. In describing it as a systems weakness, we are saying the group at the time did not put in place appropriate systems to implement the consumer protection code 2006.

It was not flagged for anyone. Is that correct?

Mr. Stephen Groarke

It was not flagged within the bank for anyone. That is correct.

How much did the legal challenges cost? How much did the court cases cost the bank? How much did it cost to fight the customers who were trying to get redress?

Mr. Jeremy Masding

I will have to come back to the Chairman with that information. I do not have the information to hand. I will come back to him.

Mr. Stephen Groarke

I wish to be clear - although this is somewhat beside the point - that the Financial Services Ombudsman was on the other side in that case. I would rather not portray the idea that we were engaged in an action against customers in a legal sense.

It affected 1,300 customers.

Mr. Stephen Groarke

They were certainly affected. We accept that absolutely and apologise for it. I will come back to the Chairman with the exact amount of the legal fees payable.

It was an action typical of, and one we would expect from, a bank. It showed the arrogance of attempting to ignore what the problem was, dress it up and then, hopefully, defeat the whole process through the courts. That is how it reads to me. I am quite shocked regarding the exchange with Deputy Pearse Doherty over the appeals. Given the wrong visited upon those customers, I would have thought the bank should have dealt with the matter in a far more proactive way and with some understanding of the difficulties experienced by the individuals involved. Why are the appeals dragging on?

Mr. Stephen Groarke

I will comment on the process for the mortgage redress scheme. We have tried to put in place a framework whereby customers have as much optionality as possible. We put in place a customer appeals panel and an independent review panel. They can be used depending on the circumstances. The panels are independent of the bank. Customers have an option to use those panels to have their compensation and circumstances reviewed. If they are still not satisfied, they have the option to go to the Financial Services Ombudsman. At that point, if they wish, they can also bring through legal action.

Mr. Jeremy Masding

It is a double-edged sword - that is the point we are making. We are trying to give customers sufficient space to work either by themselves or with an adviser to ensure that they have the time and space to provide the right depth of information to allow us to provide the right answer. There is no desire on our part to close these cases quickly per se. Our mindset is to close these cases correctly such that the customer has a voice and that we try to get to the right solution. That is the most important thing for us.

I would appreciate it if our guests could let us have the costs in due course.

I am keen to deal with one specific issue that is coming up with many constituents. It relates to the area of legal proceedings. I am keen to clarify one point. Let us suppose Permanent TSB initiates legal proceedings against a home owner. Who pays the legal fees?

Mr. Shane O'Sullivan

The legal fees are added to the account as an amount.

Does the bank believe that is unfair or unreasonable?

Mr. Shane O'Sullivan

It is industry practice. We do not set out to start a legal process or get into that position. We make every effort to engage with the borrower. If the borrower can engage with us, there is no need for legal action. Typically, legal action will occur where there is no engagement and where there is responsibility on the bank to ensure that the amount owed is returned or, at the least, that the reasons for not returning the amount are well understood.

Typically, how much do the legal fees amount to?

Mr. Shane O'Sullivan

Typically, it might be €7,000 or €8,000. It will vary, but they are typical amounts.

That is a significant amount on a mortgage valued at €200,000.

Mr. Shane O'Sullivan

It is. Again, it is not money we like to add to the account. It is not a process we like to get into. Often, it is not necessary if there is engagement.

I wish to go back to the information provided. I want to consider the whole area of voluntary and legal surrender for home owners and buy-to-let mortgages. Am I correct in saying that the figure is 3,698 in total, including assisted voluntary sales. When the voluntary surrender figure is added to legal proceedings, the total comes to 3,700 approximately. Is that correct?

Mr. Shane O'Sullivan

That is correct.

The figure for buy-to-let loans is approximately 1,355.

Mr. Shane O'Sullivan

That is correct.

There is a general view that the number of legal proceedings is increasing. The Permanent TSB officials have referred to letters advising of legal action. How many letters has the bank issued advising people of legal action?

Mr. Shane O'Sullivan

Let us consider the last three figures in question 5 in the document. All these cases have letters that are live at the moment. Those three figures come to a total of 2,758 for home owners. The equivalent figure for buy-to-let loans is 739.

Apart from those, have other legal letters been issued?

Mr. Shane O'Sullivan

No, there will be other letters from the bank demanding collection and so on. However, these are the legal letters.

Have other letters been issued advising of legal proceedings?

Mr. Shane O'Sullivan

Yes, there are other letters advising of the potential for legal proceedings.

How many letters would be out?

Mr. Shane O'Sullivan

I do not have the number. I would imagine it would be a couple of thousand letters advising customers that money is owed, setting out consequences, advising that engagement will help and advising of the consequences of not engaging.

What is the schedule for initiating legal proceedings over the coming months? Will the number increase?

Mr. Shane O'Sullivan

I think it will rise.

Mr. Shane O'Sullivan

Not significantly, but it certainly will rise. Approximately 50% of our customers who are deep in arrears are not engaging. This figure equates to approximately 4,000 customers who are deep in arrears and who are not paying-----

What does the bank regard as "deep in arrears"?

Mr. Shane O'Sullivan

Customers who have not paid anything for more than two years.

What percentage of the bank's loan book is deep in arrears?

Mr. Shane O'Sullivan

Approximately 4,000 customers are in arrears of more than two years and a significant proportion of those customers are not paying anything. Some of them are engaged and are completing forms that help us understand their positions. However, approximately 2,000 are not paying anything and are not engaged, and another 2,000 are paying very little and are either not engaged or have limited engagement. We are working with the second cohort of 2,000 and hoping we can find a solution with them over the first half of next year.

Does the 4,000 include buy to lets or just home loans?

Mr. Shane O'Sullivan

Just home loans. The buy to let numbers are smaller.

Of the 2,000 who are making some payment, is the bank looking to keep them in their homes?

Mr. Shane O'Sullivan

Yes. We make every effort to find a restructure. Once we can sit down and examine the income and expenditure, we make every effort to fund a restructure. This is the work we are doing now. Unfortunately, we do find it is necessary to commence legal proceedings to get engagement. After legal proceedings issuing, approximately 40% of our home loans customers and 30% of our buy to let customers engage. It is unfortunate that we must go through this commencement of legal proceedings to secure engagement that, ultimately, can help borrowers.

What is the fate of the 2,000 Permanent TSB borrowers who are in their homes but not paying their mortgages for various reasons, mainly financial?

Mr. Shane O'Sullivan

I would ask them to come and talk to us and let us understand the situation, how it has arrived and if it might change. I am mindful that, thankfully, the economy is turning. Today, we have seen very good new employment figures. We need to understand all these factors. In 90% of cases where customers complete a 15 page standard financial statement, we will find a solution. This has been our history throughout the crisis. The cases where we cannot find a solution and end up taking the legal route, is where there is no engagement. While I cannot promise an outcome that is good in all situations, customers should talk to us.

Has the bank initiated legal proceedings against all the 2,000 customers?

Mr. Shane O'Sullivan

Legal proceedings are live in 2,758 cases.

What bracket do the other 2,000 fall under?

Mr. Shane O'Sullivan

If they were in legal proceedings, they would be included in the 2,758. They have not had legal proceedings, however, as I mentioned, there are letters that issue in advance of legal proceedings. We have a campaign under way whereby we are proactively reaching out to customers to encourage them to come and talk to us. Based on the information we have, we believe there is a solution in many of the circumstances, but we need to verify and update the information. If there is a solution, we will provide it. If not, we will go down the legal route.

The most significant problem is that we are getting down to people who have been through the bones of six years of hell. Many of them have young children and are working in jobs that may not be paying that well. The question is about the moral versus the financial argument. Mr. O'Sullivan is probably well aware of the European directive on unfair terms in consumer contracts, which deals with elements of contracts which are unfair. Does this play into the bank's review of particular cases? Is the bank doing write-offs in respect of the 4,000 customers?

Mr. Shane O'Sullivan

Yes, ultimately. We have approximately 12,000 customers who are still greater than 90 days in arrears. This is down 50% from 26,000 customers.

Is that 12,000 home owners or buy to lets?

Mr. Jeremy Masding

To be clear, we will be doing debt write offs, not debt forgiveness. We have previously had a debate in the Chamber on the difference between the two. If we have found a solution, which, sadly, might involve an assisted voluntary sale, I would absolutely use the capital for the customers for whom it is right that we use the capital for the shortfall. We can control some aspects. We can do our best to engage with customers. We can have as professional a conversation as possible with customers through the standard financial statement, SFS, lens to try to find a solution. Our track record since 2012 and 2013, under Mr. O'Sullivan's leadership, has been that we have found many creative solutions for customers. We set off with a mindset that success for us was to find a long-term treatment. We cannot control those who, unfortunately, we are unable to help. This takes us through the legal process.

Does the bank make every effort to keep people in their homes?

Mr. Shane O'Sullivan

Yes.

Mr. Jeremy Masding

In what we can control, yes.

Mr. Shane O'Sullivan

We had 18 repossessions this year, and 36 last year. That is 54 in almost two years. This is a bank that has had 26,000 customers not repaying their mortgages. This figure of 54 in nearly two years from over 26,000 customers, or over our entire customer base of 155,000, says the bank is trying to do everything to find solutions. Compare the figure of 54 repossessions to the 24,000 restructures we have put in place. I hope it gives a sense that we come to work every day to find restructures. It is our priority, our mindset and our intention, although it is not always possible to do it, and this is what leads, inevitably, to the 54 repossessions we have, unfortunately, had to ensure happened during the past two years.

To follow on from Deputy Pearse Doherty, did the Department of Finance offer any view on the challenges Permanent TSB is taking to the High Court or the Supreme Court? Given that it is a State bank, I am sure the Department of Finance would have a say.

Mr. Jeremy Masding

Not to my knowledge at the time.

Where does the bank go from here? Is it good enough to be able to stand on its own two feet from here on in?

Mr. Jeremy Masding

Yes, we have had many obstacles to overcome over the past few years, many of which the members have mentioned today. In June, we were profitable for the first time in nearly ten years. Investors have invested in the franchise, so I think we can provide much needed competition to the pillar banks across Ireland. I am confident that we are at a stage when we can kick on and do good things for customers.

Has the Department of Finance offered a view on where the bank may go from here?

Mr. Jeremy Masding

The Department continues to be extremely supportive and, most important, believes we are an important cog in the competition wheel.

The bank said some time ago that it was going to sell off the commercial side of its business and that it would no longer be involved in that area. However, I note that Mr. Masding said in his presentation that the bank is very interested in the small business side of the market. Is that a change of policy?

Mr. Jeremy Masding

It was the commercial real estate part of the business that we were obliged to sell off under the restructuring plan. In my head I distinguish between property investment, speculation or development, which we no longer do, and the owner-managed enterprise sector in Ireland which, as the Senator knows, is a vibrant and important part of Ireland plc. We think we have an important role to play in that area.

I think it is important that there is competition for the other two banks, but has the bank changed its policy on the commercial sector?

Mr. Jeremy Masding

No, I am trying to distinguish between commercial real estate, which is very different in the context of a banking relationship from supporting local businesses.

The portfolios that the bank sold off were all commercial real estate portfolios. Is that correct?

Mr. Jeremy Masding

That is correct, yes.

It did not sell off any mortgages or small business loans. Is that right?

Mr. Jeremy Masding

As I explained before, mortgages might have been connected to the primary portfolio but in terms of a conscious choice to sell either SME businesses or primary dwelling homes, we have not done that.

Have those whose loans were sold off to vulture funds or to others been notified of that fact? Do those people know where their loans are?

Mr. Jeremy Masding

To the best of my knowledge, yes, they have been notified.

They have been notified by the bank.

Mr. Jeremy Masding

Yes, through the process.

Representatives of another bank who appeared before this committee said that they were promoting fixed rate mortgages. Does Permanent TSB favour that route?

Mr. Jeremy Masding

We think it is right for us, as a full service retail bank, to give customers choice. We provide both variable and fixed rate products to our new customers. We have explained what we do on variable mortgages in terms of the back book. As I have already explained to the committee, our next challenge is to provide fixed rate mortgages to our existing customers. I would guess that by the third quarter of next year both our new and existing customers will have access to a variable and fixed rate suite of mortgages at a competitive rate. That is an example of why Permanent TSB needs to be here. We need to be in business to give customers choice and to give the pillar banks some competition.

On the 1,372 redress tracker customers, reference was made to a time value of money aspect to the redress scheme. Was that part of the scheme?

Mr. Ger Mitchell

I do not have the granular detail in front of me but within the redress scheme, in terms of refunding interest to customers, a time value of money allowance was included. Separate to that, there was a compensation payment which was either 10% of the redress amount or €1,000, whichever was greater. In tandem with that-----

So the maximum was €1,000.

Mr. Ger Mitchell

No, the minimum payment was €1,000. It was either 10% or €1,000, whichever was the greater. Along with that an independent advice fee of €400 was given to customers to use as they saw fit. There was also an appeals process available to any customer who was unhappy.

The bank is doing well, from its own perspective and that of the State, which is important given the fact the State owns so much of the bank. However, its mortgage rates are around twice the average rate in the eurozone. Will the bank come under pressure through competition to reduce its rates or does it believe there will not be additional competition in the market and it can continue to charge those rates? Permanent TSB is charging a lot more for its products than other banks across Europe. If competition were to increase, does the bank fear-----

Mr. Jeremy Masding

I think about that the other way around. The first thing I ask my team to do is to demonstrate to me and assure me that we price our mortgages in a way that covers the five dimensions that I referred to in my speech, namely, the cost of funds, operating expenses, cost of risk, cost of capital and portfolio risk. If we cover those, then that is the right way to put mortgages into the Irish market. That no foreign banks have come into the Irish mortgage space at scale indicates that the pricing is probably right, considering that most other European banks would price mortgages in the same way.

Irish competition has increased in recent times. There are essentially five vibrant institutions in Ireland, namely, Bank of Ireland, Allied Irish Banks, KBC, Ulster Bank and Permanent TSB. Additionally, in certain niche areas, other competitors are coming in. Competition is alive and we price mortgage assets correctly. As the inputs change, prices will change.

For the benefit of the consumer, banks in other jurisdictions are charging lower rates because the five inputs they have are different.

Mr. Jeremy Masding

They will have the same five inputs but at different prices or costs.

Mr. Masding made reference to the fact that the bank's cost of operations increased by €60 million and also referred to an extension of the bank levy. What bank levy extension was he referring to?

Mr. Jeremy Masding

The original bank levy imposed by the Government was to run between 2012 and 2014. At the time, it was to be a two or three-year intervention, but that levy was extended through to 2020 in the previous budget.

That is part of the €60 million increase. How much is the bank levy?

Mr. Jeremy Masding

It is €23 million in our case.

Is the remaining increase of €37 million related to the pan-European deposit requirement under the Single Supervisory Mechanism, SSM?

Mr. Jeremy Masding

Yes, plus the cost of a Dublin regulator and a Frankfurt regulator.

The bank's branch network currently numbers 77 branches. Is Mr. Masding happy that the network will continue at that size into the future? We had a discussion with another bank last week during which we spoke about cashless branches and reducing the amount of human interaction. It was suggested that some branches will only be viable as machine operations as opposed to human interaction branches. Where does Mr. Masding see his network going in the next few years?

Mr. Jeremy Masding

There are two different dimensions to that. First, on numbers, as I have said to the committee we have no plans, based on the facts I have in front of me, to close any branches in the immediate future. Obviously, as I said already, that might change as demographics change. In terms of the branches themselves, I am very proud of the people working in our branches. The service they provide is first class. We provide service to all generations, as well as to both personal and business customers. The statistics I have seen show that the service provided to our customers is first class. Obviously we must keep investing in technology. I am sure there are services that can be taken out of the branches and put into machines, but that does not mean we are going to remove the human interaction which makes Permanent TSB special in the communities it serves.

Has Permanent TSB gone the way of other banks in terms of removing all tellers from branches?

Mr. Jeremy Masding

No.

Is it likely to do that in the future?

Mr. Jeremy Masding

As long as there is cash, we will have tellers.

Some banks have stopped dealing with cash, in the sense that they are not taking cash at their counters. They have lodgement and withdrawal machines and-----

Mr. Jeremy Masding

Yes and we will have all of those things but-----

Will it still have people in the branches who will-----

Mr. Jeremy Masding

-----we will still, for the immediate future, have tellers.

The bank has written back some of its provisions. Is that correct?

Mr. Jeremy Masding

Yes.

Mr. Masding referred to the fact the bank is not fully cleansed. I assume that the provision has been written back because it is excessive or is now unwarranted. There is still a provision there but the bank has written back some of it because it is not all required any more.

Mr. Jeremy Masding

At its simplest, most of the loans which are in arrears are supported by a property.

Therefore, we put a provision against those. As the value of those properties increase, at its most simplest, therefore one does not need that stock of provision. That is why we released them. It is not-----

Or the property value has risen so the loan book has improved.

Mr. Jeremy Masding

That is one of the dimensions.

I know the loan book improves because the property has risen. Is it not because the performance of the loans are being better paid off or the arrears are lessening? We have seen figures to suggest same.

Mr. Jeremy Masding

That is one of the dimensions. The second dimension, as the Senator has quite rightly said, is the performance of the book. If the performance improves then we would also write back provisions.

Part of it is the performance of the book. Part of the provisions are being written back purely because the property market is improving.

Mr. Jeremy Masding

Correct.

Mr. Stephen Groarke

To give the Senator a sense of scale, there is €2.4 billion of provisions on the balance sheet. What we continually do within the bank is we try to estimate how much we think we will recover ultimately. Clearly, one of the inputs to that is the price of the property. As Mr. O'Sullivan has outlined, our preference is not to realise the collateral, if we can at all, it is to give a forbearance treatment to the extent that the mix of treatments changes over time. For instance, if people, over time, are on a split mortgage but we manage to see their circumstances improve and they might move on to part capital and interest then we will re-estimate the provision that is required. As customers get into a better position over time that improves the potential cashflow for the bank and we can recognise that in provisions. It is not just about the price of property.

There is a perception that with the depth of the crisis the banks did not want to move people out of property and sell property because there was noone to buy it and the values were so low one would not want to. Clearly the bank's figures suggest that it is not out, as property values increase, to get people out of properties and to sell the properties either with vacant possession or with tenants in the case of buy-to-lets. It is fair to say that the bank is not doing this but there is a suggestion out there that that happens. With the bank's figures I do not think that such scenarios happen.

Mr. Stephen Groarke

It is very clear that the worst case outcome for the customer and the bank is if we have to go all of the way to the end of the process, as Mr. O'Sullivan has described, and go to repossession. For the bank that is a full realisation of any negative equity plus costs.

Effectively, there were 36 properties last year and 18 properties this year repossessed in terms of the bank's entire loan book.

Mr. Stephen Groarke

That is it exactly.

Mr. Jeremy Masding

I was part of the original troika discussions in 2012. At the time we made a strong case that the best solution for Ireland was long-term forbearance and we continue to hold that view. We do everything we possibly can to find a treatment for our customers.

The bank is like a long-term mini-NAMA in terms of realising the properties slowly over time but ideally keeping as many people in their properties as is possible.

Mr. Jeremy Masding

We are not a long-term NAMA. We are a long-term Permanent TSB.

In April 2015 the IPO value was €2 billion but it is now valued at somewhere between €1.1 billion and €1.2 billion per the questionnaire responses. To what does the delegation attribute the almost 50% drop in value?

Mr. Jeremy Masding

The share value for the IPO was issued at €4.50. Let us say today's price is €2.70. I have not looked at the figure since I have been in this meeting but a price of €2.70 would be quite a deterioration. Most of the decrease is due to factors that are outside our control. All bank stocks have fallen due to a combination of factors that I mentioned to the Senator's colleague earlier. There are sustainable long-term interest rates, regulatory intervention and geo-political volatility. Within what we can control one can note that the price has risen significantly in recent weeks. As we delivered a profit we have deleveraged CHL. I am confident that within what we can control, investors will continue to support us.

My final point is on the Central Bank's restrictions on property lending. The restrictions have been talked about a lot in terms of whether they should be relaxed. What does the delegation think about the restrictions, particularly in terms of the Dublin area because that is where they hit the hardest? An argument can be made that the restrictions have depressed or maintained property values as opposed to letting them run away with themselves as happened in the past. Has the delegation any thoughts on where they should go? Should they remain as they are? Should they be relaxed or strengthened?

Mr. Jeremy Masding

At a principle level, we believe the prudential limits have made the mortgage lending market more robust. We think the measures promote a degree of resilience to financial shock as experienced during the crisis. Therefore, at a principle level, we support the objectives of the rules such as increasing the resilience of the banking system, increasing the resilience of household sectors to financial shock and dampening the dynamics between property lending and house prices. At a principle level, we are advocates of the rules. At the outer margin, as we all learn, there can be changes to the rules to make them more effective. If those changes come in then we will respond accordingly in terms of our lending policy. In terms of the Senator's question on the principle of the macroprudential rules, then we are advocates of those rules.

That brings us to the end of the discussion. I thank the witnesses for attending here today.

Sitting suspended at 4.06 p.m. and resumed in private session at 8 p.m. The joint committee adjourned at 9.40 p.m. until 9.30 a.m. on Thursday, 24 November 2016.