Engagement with Commissioner Mairead McGuinness on priorities for her term of office and EU Commission matters

I wish to remind members that those in the precincts of Leinster House have privilege and those who are joining remotely do not. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. The Commissioner is available up to 3 p.m. Her opening remarks will be followed by questions. I welcome her and invite her to make her opening statement.

Ms Mairead McGuinness

I thank the Chairman and the committee for the opportunity to have an exchange with members. I am two months into my role as Commissioner for Financial Services, Financial Stability and Capital Market Union. To some extent my mandate has been set out in the letter the President of the Commission, Ursula von der Leyen, sent to me on my appointment. There are a few specific areas that colleagues might like to come back on but generally, it refers to progressing banking union, capital markets union, dealing with green finance and a strategy on how we move towards a more sustainable and a more digital economy. It looks at a fintech strategy because technological solutions are coming at an advanced speed, particularly given the Covid-19 crisis.

One of the other issues we are considering in detail concerns our review of the non-financial reporting directive, whereby companies have to report not just on profit but also on how they have an impact on society, the environment, human rights, etc. We want to make sure that in future, financial and non-financial information will be equal when it comes to accounts. That is quite a leap. We already have some standards but this will be a leap forward. While Europe is doing its own thing, it is very much considering the global work on this. It is fair to say the EU is likely to move further and faster than the rest of the world when it comes to asking corporations to account for non-financial matters. It is therefore required that we scrutinise the relevant information. One point of feedback we get from investors is that they find it difficult to obtain sufficient information to compare companies. There is now much greater emphasis on this, even among asset managers and individual investors, who want to be able to say they are investing in sustainable projects. This will intensify. In the early part of next year, I will be introducing a sustainable finance strategy. There will be a very interesting debate on that. In other words, all our activities within the Commission are focused on our reorienting the European economy to make it more sustainable.

In tandem — we have seen this already because of Covid-19 — we are moving towards a more digitalised economy. That is the strategy. In the financial sector, in particular, we are aware that cash is still used but because of Covid, there is much more use of cards and instant-payment transactions without cash. That is something we are watching. We do not want to diminish the role of cash but we must make sure the solutions that are provided are regulated. While instant payment is really positive, there are clearly concerns over fraud and protecting consumers.

Another area of my work concerns anti-money laundering. Up to now, member states have had their own financial investigative units. There has been a variety of approaches among member states and no genuine European co-ordination. There is now political consensus among the member states that we need European co-ordination so a European agency to co-ordinate what is happening at member state level is required. There is support for that. We will work to make sure the financial investigative units within the member states network better and also network effectively with Europol. Therefore, there are many aspects of the work I am charged with.

One of the most far-reaching aspects of my work concerns sustainable finance. We have to try to encourage the move away from investment in projects or sectors that do harm to the climate, environment and biodiversity. The major question, which may arise in our conversation, concerns how we accommodate the transition for sectors that want to be sustainable, considering that we know, through our taxonomy, what the best is. This is quite a difficult area.

I shall mention two other issues on which questions may arise. One is the multi-annual financial framework, MFF, the future budget. As members know, there are important negotiations continuing on that. In addition, there is work on the next-generation EU fund, which involves a significant proposal regarding a very significant amount of money to help the EU to recover from the Covid crisis.

Last, I will mention Brexit. Members know the state of play. I share the pessimism of the Taoiseach when he spoke in the Dáil yesterday. In the Commission, we have particular concerns about making sure any state with access to the Single Market — in this case, the UK — plays by the rules of that market. Other issues arise, including governance and the fishing sector. Today, we are preparing contingency plans. They are very specific and very narrowly focused to make sure that in the event of no deal, which we hope will not be the outcome, specific plans will be put in place to maintain connectivity for those sectors that are vulnerable, such as transport and aviation.

While we are looking forward to the meeting that will take place between the UK Prime Minister and the President of the Commission, I am not very confident about it considering the speech made by the Prime Minister in the House of Commons today, or at least the excerpts I have read. There is a failure to understand that membership of the EU means something, that if a state is part of the EU, it is in the Single Market and customs union, and that member states make rules together. Perhaps this was a failure of Brexit at the very outset. If, as has happened, a state chooses to leave, there are consequences for it, particularly where it wants to stay part of the Single Market. The EU is doing no more than it would in any other case. What it is doing is protecting the Single Market of the EU 27, which has been built up over decades with the UK. There is a failure in the UK to understand that. This has not just arisen in recent days; it has featured from the very outset of the Brexit process.

On a slightly more optimistic note, I welcome the agreement on the implementation of the withdrawal agreement. I believed it very perverse that any country would use a statement in its Parliament that it would break international law as a threat in a negotiation. It was most unhelpful and unwelcome. The rowing back on that is welcome. It shows some understanding that it was never appropriate in the first place.

While we are hoping for a deal, we must also prepare for the possibility of there not being an agreement. We have said over weeks, months and years that time is running out. The prospect of the negotiation running into next week is really not realistic if a deal is to be ratified through the European Parliament and perhaps other parliaments. Therefore, we are running out of road. We are aware of that. In Europe, we are prepared and know what needs to be done. I hope the British Prime Minister will conclude when he comes to Brussels today that if he wants Britain to be part of the Single Market while remaining outside the European Union, it must meet the standards we have in place.

I thank the Commissioner.

Cuirim fáilte roimh an Choimisinéir. I have a number of questions on her remarks in her opening statement on non-performing loans, NPLs. We are aware that NPLs have featured quite significantly across the three State-owned banks and have reduced gradually over recent years. At the end of last year, the proportion was just below 5% but unfortunately it has increased since then, to just above 6% at the end of June. On 2 December, the Commissioner said that NPLs would receive her full attention and that we need to find a mechanism to unburden banks with NPLs. I am aware that the Directorate-General will introduce what is called a new comprehensive NPL strategy in the next two weeks. Can the Commissioner tell us what that strategy will involve?

Ms Mairead McGuinness

I thank the Deputy for the question. The strategy will be unveiled next week. It is a communication. I will explain why we are producing it this year. The Deputy rightly said there were problems with NPLs in the past in Ireland. There were also problems in other member states. Currently, because of the supports coming from member states, the policy of the European Central Bank, and various moratoria, we do not have a problem now. We do not want to have a problem. There are two aspects to this. First, borrowers and lenders should identify at this stage individuals or sectors in respect of which problems might arise and there might be an agreement on restructuring. However, there is a concern that as this crisis unfolds into next year, some sectors and enterprises will not be able to recover and, therefore, may not be able to repay loans.

The dilemma, which I referenced in my hearing, is that if we leave non-performing loans on-balance sheet in the banks, they then are impaired in terms of being able to lend to the real economy. The objective is to have the groundwork prepared if this occurs, and we do not know to what extent that it might. In the past, member states dealt with this in different ways, one way being as an asset management company, a securitisation where non-performing loans are moved off-balance sheet, purchased by risk-takers, and on which is put various names. That will frees up the balance sheets of banks.

It is hugely important that the protection of borrowers is foremost in our minds and we know of experiences in the past. Indeed, I was, and probably still am, an elected representative in that I would have dealt this year with individual constituents who had loans that were bought by so-called vulture funds but they could not make contact with them. I am well aware of what happened in the past. That is why in our work here with the Directorate-General, DG, we have been stressing, as it has in return, the importance of protecting borrowers who might find themselves in a position where they are unable to repay loans. It is a difficult balancing act. That is why I initially referenced the importance of now. I mean those who feel they will have a problem with not being able to meet their commitments and banks which see this problem to deal at the individual level first. In the strategy, the details of which will be unveiled next week, we will look at how we set forward a framework that member states can choose from to meet these challenges.

I appreciate the Commissioner's comments. The language that she used was about unburdening banks with non-performing loans so they can lend into the real economy. These loans are individuals, people and families. I happened to meet one of these families on my way in here about 20 minutes ago. They are a real family who have lost their home as they face into Christmas and they are part of the real economy.

The Commissioner said we need to learn from the past. What lessons have been learned? Does she believe that when a bank enters into a contract with an individual to provide lending but the individual falls on hard times, whether that is due to a pandemic or a recession, the bank has a responsibility that goes beyond, to use her language, "unburdening" that loan so it can lend to others who will continue to increase its profits and has a moral and financial obligation to the family to work through the loan?

The Commission seems to be trying to make it easier for banks to sell loans to vulture funds. I ask the Commissioner to talk about the framework that would allow for the establishment of asset managed companies. It has been suggested that this would only apply to business loans. Does the Commissioner see this also applying to family homes? I mean where one could have a National Asset Management Agency-type entity that would take the loans off the balance sheets of the banks, and, therefore, doing as she has suggested, but not the likes of Cerberus, which is a complete and utter vulture that treated its customers with disdain. It is not just about being able to talk to somebody; it is how people are treated. The problem is that vulture funds, by their definition, do not have a long-term interest in the Irish economy. One cannot take a 30-year product or a 25-year mortgage and feel that it is secure in the hands of a vulture fund. I worry about the direction we are going in. If I were part of a young couple starting off and taking out a mortgage, I would worry about where the mortgage would end up if hard times occurred. Indeed, it does not have to be a case of non-performing loans because we have seen in the past that banks sold performing loans to vulture funds. Yes, these are regulated now but vulture funds, like any bank, can increase their variable interest rates to whatever level they want. The reason mainstream banks do not do that is because of competition. Vulture funds do not provide as much freedom or flexibility to manoeuvre.

Ms Mairead McGuinness

I do not think there is much that divides us Deputy. As I said in my remarks, I am as concerned as he is about those who find themselves in hard times. This time the crisis has not arisen due to past mistakes made by banks or people over borrowing. This time we have businesses and individuals, as he pointed out, who for no reason of their own find themselves in a very difficult place and I have a full understanding of that. In fact, in my conversations at the Commission, I speak to the specialist teams about the importance of protecting the individual and ensuring that if banks sell bundles of loans to another vehicle, the protection of the borrower is as strong in that move as it was with the original borrower. I think we have learned that lesson.

I used the word "unburden" in connection with balance sheets. We know that the current flow of credit from banks in this crisis have helped to keep the real economy afloat. What we do not want to see but must prepare for is a time when there might be a build up of non-performing loans. The Deputy referenced that in Ireland there has been a significant decrease in this, which is positive, but we need to prepare for what might happen.

The European Parliament is very concerned about citizens and individuals. This is a process that goes through the Parliament as well. I think we have learned that lesson. We need to understand the difficult challenge of maintaining a credit flow into the real economy if there is a build up of non-performing loans but we have the past to guide us. There are aspects of the past, which the Deputy referenced and which I understand, that I would not like to see happen again.

This morning I received an email from a constituent who has a very severe problem so, like the Deputy, I am in direct contact with the real world. I can assure him that everything we do here will be mindful of what happens in the real world and the emotional pain people experience when faced with a situation of not being able to repay loans. Parliaments must have wider discussions on how to move from this current phase towards a recovery. While at the moment there is a lot of money going out, member states' governments are supporting the real economy, the banks are there and the European Central Bank, ECB, is driving this policy, how and when that will change and how that will be managed. These are issues I am very mindful of as well because I, like the Deputy, have first-hand knowledge and experience of constituents who lived with and are still living with very difficult situations because of the last financial crisis.

I appreciate the comments made by the Commissioner. Perhaps she will talk to other parties here and ask them to support my No Consent, No Sale Bill that would prevent the sale of family homes to vultures. I would like to hear her view, as a Commissioner, on the Commission's decision on 25 September to appeal the Apple case. Does she support the stance of the Commission to lodge an apple in the courts?

Am I right to presume the Commissioner has responsibility for insurance issues as they are part of financial services? I am sure she is aware of a report by the European Insurance and Occupational Pensions Authority, EIOPA, as it is the regulator of the industry at a European level. What concerns, if any, does she have about the use of big data and big data analytics, BDA, tools by insurance companies as clearly shown in the EIOPA report? The report states, "Some insurance firms also track (public) social media posts for counter-fraud services", which I do not think anybody would have a major issue with. The report also states:

...provided either by specialist counter-fraud service or by specialised employees not necessarily with the use of BDA tools. Some firms also reportedly use the information provided by web analytics tools and social media listening tools for analysis of user behaviour and for pricing and underwriting purposes.

The report goes on to say that artificial intelligence and machine learning has been developed and is used by insurance companies to read information, pictures and videos from social media, which they use to price their insurance policies. This is part of dual pricing and of how insurance companies are using big data to push up premiums and charge the highest they can. What concern does the Commissioner have about the fact that anybody listening to this conversation is probably unaware that an image they post on their social media or a video of them on a family holiday may be used by some of the largest insurance companies in Ireland to determine how far they can push up their premium before they move or shop around? What action, if any, does she plan to take in relation to this?

Ms Mairead McGuinness

On the Apple decision, it is important that we have legal clarity. Of course I support, as a Commissioner, the decision of the college to support the Competition Commissioner in that regard. On the Deputy's second point, I will be general rather than specific. We are all concerned about how data, particularly private data, is used. One of the things we are looking at is how to maintain control of data, even in the use of data in the financial system. I will say no more than that because I have not, thus far, gone into the detail on the insurance sector. We are reviewing the Solvency II package, so this will get my attention in the new year.

I thank the Commissioner for her presentation and I congratulate her belatedly on her appointment. I will stress two areas. First, I will pick up on the Commissioner's closing remarks in her intervention on Brexit. I do not want to get into specifics of negotiations or anything that is going on. As it pertains to her portfolio, what may come about after 31 December in terms of the strategy for European Union financial services, given the opportunities and challenges that Brexit presents? Where can EU member states fill the gap or begin to compete with the City of London? I will come back to the second question.

Ms Mairead McGuinness

I thank the Deputy for the question and his kind words. On the general Brexit point, much of the focus is on the trade agreement and the withdrawal agreement. Of course, there is an impact on the financial sector. At the moment and when the UK was part of the EU, London was our financial centre and a very large one. There were other centres but London was a major one.

In the process of Brexit, we have looked at areas where there were risks to financial stability that might impact us. We have made decisions in a limited number of areas to protect financial stability. This is done through equivalence decisions. We give equivalence, so in other words, what is happening in the UK is equivalent to the EU in areas of significance to us in the European Union.

The Deputy points to a wider question. Come 1 January, when the UK is a third country, London will still be a major financial centre. There is then a question for us to look at in greater detail for the future. Is it appropriate that the European Union would be reliant on a major financial centre in a third country which we are not the regulator of? Already there is some movement of businesses and assets from London because of this, although not to a significant extent yet. There might have been an expectation that things would work out. We have asked the United Kingdom in a range of areas to provide answers to particular questions relating to making decisions about where they intend to be in the future and how that will sit with our rule book around financial services. We continue to look for that information. As of now, the passporting which UK firms could, because they were part of the European Union, operate across borders in the EU will go. There will be significant change.

On the specifics of the Deputy's question about opportunities, that has to be answered by the member states looking at what they want in terms of financial stability for the European Union. Some believe we need one centre within the European Union. Perhaps that is not necessary in a more digital world. There may be room for other centres, but we have to ask ourselves a question about whether we want to be overly reliant on the City of London when it comes to the entire financial sector. There are potentially opportunities there. There are many who want to hold everything within the City of London. Perhaps it goes back to the general point I made that a member state is part of everything that goes with being a member state. If a state opts out, there are consequences to that. There are consequences for the City of London which players and stakeholders there are well aware of.

There will be an issue if there is no deal. Tensions arise when negotiations take place. Trust can be strained. If there is no deal, it makes life that little bit more difficult in terms of the relationships we would have, at least in the short term. The issue of the financial services coming from the City of London will come home to us to be dealt with in greater detail from 1 January onwards. We have taken decisions where it was necessary and we are watching other areas. The committee will be aware that the UK has granted a number of equivalents to the European Union in areas that it felt were important, but we have not reciprocated because they are not areas of significance from an EU perspective. It is an area with potential opportunities and challenges and we need to be aware of both.

I agree with the Commissioner. For the member state she knows best, there is a great role for the complementary approach to the City of London as opposed to the competitive. My second area is tentatively related but the Commissioner referred to it in her remarks on money laundering and combating the efforts of organised crime and dissident terrorists when it comes to cryptocurrencies and other areas. Will she touch on the legislative responsibilities of member states? This State has had difficulty in transposing directives into domestic legislation. We had a debate in the Dáil before the summer recess in this area. There is scope for co-operation and co-ordination, not just between member states, but by increasing the EU approach. The Commissioner mentioned Europol. Brexit will present a challenge in this area. I know we are starting to move away from her direct responsibility into the area of justice and home affairs when it comes to transferring of assets, cash and cryptocurrencies around the EU between nefarious organisations. We saw an impressively large money fraud operation operating from Romania broken up in Donegal a matter of weeks ago through co-operation of An Garda Síochána with all the agencies of the EU and member states. It is a great challenge but the EU needs an enhanced role. Does the Commissioner have any thoughts on that?

Ms Mairead McGuinness

Work is going on in this area in terms of our own stability and, equally, related to the use or abuse of cryptocurrencies in fraud and terrorism. Deputies might remind me to speak about a digital euro, which is also being discussed. Work is under way to stop the issues the Deputy referenced occurring. It goes back to the point I made about the evolution of the digital era in finance, which has been accelerated by Covid-19. There are many innovative fintech companies starting up, which is positive. Equally, with the speed at which this has happened and cryptocurrencies have been established, we have to regulate stronger and better to avoid such issues. We are well aware of that.

This speaks to the wider point I made about combating money laundering. Member states were doing their own thing and having some connections, one with the other. We intend to strengthen the co-ordination at EU level and with Europol so that when incidents happen in any member state, the information is shared and available.

There is a significant amount of work going on within the Commission around a guarantee, as well as protecting against the abuse of these currencies and their misuse in terms of fraudulent activity. We are considering the possibility of introducing a digital euro. Members will know that some of the major digital companies are considering launching a digital coin or currency. That perhaps puts more emphasis at EU level on investigating what a digital euro might look like and what its impact would be. The current timetable is for the ECB to come to, at least, an initial decision by the summer of next year because other major players globally are doing work on digital currencies. I cannot see it happening for a couple of years, but it is something that we need to be on top of. There is a working group within the Commission that works with the ECB on this topic. I am sure it will be on the radar of the committee, as it is on mine, in the weeks and months to come.

I refer to the issue of bank dividends. Like all companies, banks have been affected by Covid, but the situation needs to be put in a certain context. For the decade running up to the Covid situation, bank profits were rising. There were significant bank profits year on year for a decade. For example, in 2019, nearly 15% of all dividends paid out by European companies were paid out by banks. Covid affected them earlier this year but, from what I can see, they have been making a good recovery since then. For example, in the third quarter of this year, BNP Paribas made net quarterly profits of €1.9 billion. On the other hand, the situation for bank workers has not been as good. Some 60,000 jobs were lost in 2019 and 50,000 branches were shut in the decade from 2008 to 2018. That has been reflected in Ireland. Members of the committee met representatives of the bank workers' trade union recently and were given information about the situation in Ulster Bank. Some €3.5 billion in dividends has been paid from Ulster Bank to NatWest since 2016, but now 3,000 jobs and 88 branches - the entire network - are on the line as a result of the NatWest review. In the Irish banking sector as a whole, there are 6,000 jobs on the line. I believe the profits that have been made or are being made by banks should be invested back into jobs, services and a better society. There has been a ban on the payment of dividends since March, but that ban is due to end in January, as I understand it. Does the Commissioner support and intend to extend that ban on bank dividends or is it intended to lift the ban in January?

Ms Mairead McGuinness

I thank the Deputy for his question. He covered a significant amount of ground. I will deal with his specific question at the end of my response. Financial institutions were not exactly banned from giving out dividends. Strict guidelines stating it would not be appropriate in the context of the Covid-19 crisis were put in place. As I stated in response to another member, we do not know how this crisis will evolve. We are concerned that if, for example, there is an increase in infections and perhaps further restrictions after Christmas, that will have a further dampening effect on economic activity and more guidance may well be issued. What will happen is not fixed in stone. We know that banks were asked to abide by the guidance. They have stuck with the guidance and advice not to pay dividends.

The Deputy's second specific question relates to Ulster Bank, etc. I am aware of that issue. I have been contacted by the unions involved and I will be meeting them for a full briefing on this issue. The issue of bank closures is ongoing and long-standing. It is, perhaps, partly due to the reality of the situation. I am not sure if any of my adult children ever go to a bank branch. I think there is a generational issue. I was very familiar with bank branches when I was younger, but many people today use their phone or whatever to make transactions. I acknowledge that it has been difficult for workers in the banking sector. If the future evolves in such a way that we all use fewer physical infrastructures such as bank branches and instead use more technologically driven structures, that will have consequences for the workers or the number employed in banks. The Deputy can rest assured that I will be listening directly to the trade unions concerned which will provide me with the full information. Obviously, the Commission cannot interfere in a decision by a bank to do what it wishes to do. I am not yet clear from the information I currently have whether a decision has been taken to sell off or close down. I am not clear in that regard from what I have read thus far. If the Deputy has any clarification, I would be interested to hear it. I am aware of the situation.

The initial issue I wish to raise with the Commissioner is that of corporation tax and plans at a Commission level. In July, her colleague, Commissioner Gentiloni, stated that the Commission wanted to pressure capitals to root out what he referred to as "structures that facilitate aggressive tax planning" as part of upcoming reforms. As Commissioner McGuinness is aware, the Commission previously identified Ireland as one of the member states with tax rules that are used by companies to engage in aggressive tax planning. In July, Commissioner Gentiloni proposed using Article 116 of the EU treaty for tax policy purposes. The article allows the Commission to move against member states that distort market competition. What are the views of Commissioner McGuinness in that regard?

On the issue of fiscal rules, does the Commissioner believe the Commission will consider an overhaul of fiscal rules? As we come out of the current crisis, all present are aware that member states will have large deficits as a result of Covid-19. Does she think it will go back to business as usual or will there be an overhaul?

Ms Mairead McGuinness

On the question around taxation, it is my colleague, Commissioner Gentiloni, who deals with that issue. On the global level, we are working with the OECD on the general issue of payment of taxes and the levels perhaps not paid by some large corporates that can operate across borders. What Commissioner Gentiloni stated and I support is that if there cannot be a global agreement, the Commission will come forward with proposals. This comes from a sense within society that very large corporates have the capacity to move in order to benefit from various tax regimes. We have to watch what happens at the global level and then see where the Commission will move.

On the issue of fiscal rules, the Deputy asked whether we will go back to where we were or back to normal. I am not sure of the exact term she used. I do not think that post Covid we will go back to the way we were. The pandemic has had significant impacts across society and not just in terms of the economy. There is no plan as to when and how this current situation will unravel towards going back to any particular rule book, but we know that something will have to be done regarding what fiscal supports are made available and how long that can continue. I do not have a blueprint or a clear answer on that issue.

When the crisis hit the Commission rightly provided as much flexibility as possible within the existing framework to allow member states to support businesses, individuals and employees so that the worst impacts would not hit. We all know that without those supports across the member states we would be in a more difficult situation. The President of the European Central Bank, Christine Lagarde, has said very clearly on several occasions that member states should not unravel the supports sharply and that it needs to be done over time and very carefully. I do not think there is a clear answer to that in terms of a timetable. I refer to my point about non-performing loans. We know that things will evolve. We are hoping to manage the most difficult aspects of this, taking into account the reason behind the current pandemic, and to do it in a way that is appropriate. We do have a framework which is more flexible now because of the pandemic but there is not a decision taken already that in six months we will go back to the way we were. It will take a longer timeframe and greater analysis as to how we do return to some form of normality. I reiterate that this pandemic has had a quite a profound affect not just on economies but on societies. There will be a requirement to understand how communities are and how people have been affected. Apart from the terrible tragedies of the numbers that have died across the European Union and in Ireland and the families that are grieving there are those other impacts we have already discussed here. There is no clear deadline as to what and when things might happen.

I thank the Commissioner for making herself available to the committee. I have only a limited amount of time because Deputy Durkan has to come in after me. My question is in regard to mortgage interest rates. Currently, inter-bank interest rates are at an all time low yet mortgagors in Ireland are exposed to the third highest mortgage interest rate in the euro region. What can the Commissioner's division within the Commission do to increase competition so that mortgagors in Ireland can get access to lower interest rates?

Ms Mairead McGuinness

I can be very swift on this question. Completing banking union should help to provide more competition and to provide better mortgage rates for mortgage holders. We do not set those interest rates. There are different rates across Europe. As the Deputy said, Ireland's is the third highest so there are two countries above us. The mandate I have been given and that I am working on is to try to move forward banking union in order that we can have a sector that is cross-border. It is impossible or really difficult to get a loan for something in one member state financed by a bank in another. These are barriers to the free movement of capital and banking services. It will take some time to crack the idea of a banking union. That is where we will see, I would hope, movement on this particular issue around mortgage interest rates.

One of the Deputies referenced bank profitability. Currently, interest rates are really low and there has been a very high increase in deposits because those who are in employment and continue to be paid are not spending due to the fact that shops were not open but equally because of uncertainty. In some cases, negative interest rates are being paid on what they have in banks. There is also a link to the wider remit of the capital markets union. It would be preferable if we could have an investor confidence that savers would put money into enterprises and plan for their own future. We do not have those flexibilities now.

In terms of my mandate from the President of the Commission my work and banking union and capital markets union should help us move in the direction of banking services being available across borders. Currently, we have a very nationalised banking system. It is extraordinary that despite the crisis we went through it is perhaps more nationalised now than we thought it would be following that particular crisis. There is a lot of work to be done.

Like other speakers, I congratulate the Commissioner on acquiring a portfolio that is very important and one that will grow in importance as time goes by. I want to raise a couple of issues that are of particular interest, some of which have been already referred to by other speakers to some extent.

The first is the issue raised by Deputy O'Callaghan in regard to high mortgage interest rates. As the Commissioner will know, in the past anybody who borrowed in this country and throughout the European Union and did not keep up to date with their payments had penal interest rates imposed on them. This meant they had no chance whatsoever of recovering or competing in the market in which they were operating. They were condemned before they started and then they were blamed for what happened.

I have previously discussed the following issue with the Commissioner. We are still recovering from the ripples of the financial crash in this country and we are still being punished for it, which I understand. However, there is one thing that needs to be borne in mind. Deputy Doherty mentioned the activities of vulture funds. It is very seldom I agree with him, but I would agree with him on the points he made in that regard. I have dealt with many of the vulture funds across the table in individual cases and I have been shocked. Not all of them are the same. I have been shocked at the way they treat people. In many cases, when partners in a household were crying their eyes out in front of such people they got no response other than a glazed look at the middle distance, which clearly showed that they had no intention of even conceding.

The primary lending institutions and the secondary lending institutions are applying current standards to a situation that they previously applied different standards to eight or ten years ago. They are taking the view that the right way to do this is A, B and C. They did not say that when they were lending to the people concerned. In fact, they said the reverse. A number of bankers from outside of this jurisdiction visited here to our cost because the undermined the stability of the market, all in pursuit of market share, as the Commissioner will know. The result of that has been the withdrawal of many banks and the insurance companies as well. They withdrew to their homelands and walked away with no responsibility good, bad or indifferent. I blame the Central Bank of Ireland for allowing these things to happen, as I have done before and will do again. I blame the European Central Bank, ECB, on which there was Irish representation from the Central Bank of Ireland for allowing these things to happen in this country and across Europe.

I know that the Commissioner's heart is in the right place and that there are other hearts in different locations across Europe. My final point is in regard to the Apple case. I profoundly disagree with Deputy Doherty's remarks in that regard. I do not accept the case he put forward. I had occasion to dispute this issue with a former Commissioner for Competition in this House a couple of years ago. I believe there was an intention to discourage foreign direct investment in this country. The way in which we were portrayed internationally has been very unhelpful, in pursuit of the single objective of winning the argument. The depiction of the poor unfortunate donkey having a carrot dangled on a fishing rod in front of it comes to mind. I was embarrassed to see the way that particular argument was emerging. That is how it was. Suffice it to say, we are responsible for taxation and manufacturing in our own country. That should continue. We should not under any circumstances allow a situation to develop whereby we are seen as a second, third, fourth or fifth option location for foreign direct investment in order to appease those who feel the investment should go to them.

Ms Mairead McGuinness

I will not respond to the Deputy's comments on the Apple case. I think it has been well argued on both sides. I have made my intervention on that already. To some extent, perhaps it needs to go to the final stage so that there is legal clarity.

On the second point in regard to the treatment of borrowers that run into difficulty, we have had a good exchange about that. There is nobody in the room, online or physically, who does not have huge concerns about what happened in the past because we all know people who experienced difficulties.

I will make two points about this time. One is that, where there are problems, there is an onus on both banks and borrowers to sit down together early and find solutions. That would help alleviate an over-accumulation of non-performing loans. When people are in financial distress they tend not to be able to cope. It is a terrible place to be and I have dealt with many constituents in that position. If there are situations where people know that their business is in a difficult place because of a public health crisis, my plea is that the banks and the borrower get together now.

On the wider issue, we have not heard and I would be interested if there can be a response. The proposals and communication we will come forward with next week on non-performing loans have a twofold objective. Primarily, it is to ensure we can continue the flow of credit into the economy from banks, which is essential, while also managing loans that are not being repaid and protecting the borrower. We have learned lessons from the past. I have referred to this and it is clear. Deputy Durkan made the observation, and I hope I picked it up correctly, that sometimes people when they borrow are not aware of all the details of the loan, interest rates and so forth. That allows me to refer to an issue on which I hope all members of the committee will support me. It is backed up by research. It is that when it comes to financial literacy, many of us do not understand the basic concepts in the financial world, even though we will deal with it on many occasions throughout our lives. It is also true that one third of European households are financially fragile. That means that where they face an unexpected crisis in their finances, they cannot cope with it. There is a very vulnerable sector of our society that needs support on financial issues and financial literacy. We are moving into a more digital world in which everything is instant and immediate. Those of us who had a cheque book and a pen used to have to think, at least, because one was signing the cheque. There is now a generation that does not even know what a cheque book is. We now need to understand that we make more rapid financial decisions. We make them instantly and we need to have knowledge in order that we have the power to make the right decisions.

It is one of my.priorities, a personal priority, to make the financial world more visible to the wider society and to develop a framework on financial literacy so member states can, if they choose, use this framework to make citizens more financially aware. Clearly, education is the remit of each member state but when it comes to finance, we could do a great deal to improve financial literacy to help all of us to make better financial decisions and, perhaps, avoid some of the worst impacts when financial decisions turn out to be difficult or go in the wrong direction. I would appreciate the committee's support for that.

I wish to add my voice to the voices of previous speakers when they spoke to the Commissioner about the activities of vulture funds in Ireland, and to underline the fact that they are causing devastation in society. Her last point relating to financial literacy is central to what is happening. The borrowers are now faced with dealing with a vulture fund and the language being used by the vulture funds is high-end financial language, which is poorly understood by those who are trying to engage in finding a solution to their problem with the vulture funds. In addition, the vulture funds, by and large, ignore the regulation regarding the loan they have just purchased. They put the borrower to great strain. They are breaking businesses and individuals and they are repossessing farms. We are losing a generation of entrepreneurs because of what they are doing. People end up on the Irish Credit Bureau list and their future is damaged beyond repair.

I ask the Commissioner, in 2021, to put individuals at the centre of what she is doing. They have suffered badly from the financial crash and from the ongoing financial difficulties they have experienced through the pandemic. They now need a break. It appears to me, from hearings at this committee over the past five years, that banks ignore them. They pay lip service to the regulation. I believe this country has a banking sector that is close to being out of control, and I do not say that lightly. The Commissioner is meeting the Irish Financial Services Union regarding Ulster Bank. It is shocking that 3,000 employees of that bank, through their representatives, cannot have a constructive meeting about the future of the bank and their jobs. The customers are also worried. It tells one a great deal about the attitude of banks, including the attitude of Ulster Bank to this Parliament, because its representatives will not turn up, and its attitude to trade unions, because it will not engage with them. In the course of next year we are faced with that problem in Ulster Bank, 1,500 jobs in doubt in AIB and a further number of that type in Bank of Ireland.

A great deal must be done by Europe to deal with financial literacy, on the one hand, and then to deal with the controls that are necessary on the mainstream banks to support those who are in mortgage difficulty and to provide mortgages, as Deputy O'Callaghan said, at a reasonable interest rate. The Sparkasse bank model is often discussed in this committee in terms of its interest rates and the community nature of that bank. I would love to see the Commission promoting the concept of community banking, to give people the opportunity to engage with that type of banking system. It is far more sensitive to their needs than the vulture funds and the other banks.

Ms Mairead McGuinness

I will respond briefly. What the Chairman has just said is what I have said several times since taking up this position. People have to be at the centre of what I do here. The banking system relies on people. The idea of financial literacy is something I personally intend to pursue. I am glad to have spoken to an Oireachtas committee so it is aware of my interest in this. We spoke earlier about the sensitivities at present and the trauma people suffered in the past and, potentially, will suffer again in this crisis. I am well aware of that, perhaps because I have come through elections and I understand people and their position. We also need to work towards solving some of these difficulties and helping people to get help early rather than let a problem build up, which is what often happens. All of us have a responsibility to communicate, which I will be doing more directly next week when we launch our communication on non-performing loans. We need a financial system that is competitive and meets the needs of citizens. It is evolving rapidly. The Chairman mentioned the threat to jobs in banks. I am aware of this as well.

This is our first opportunity to engage and I welcome the comments. I have taken note of them. I am not 100 days in the job - I believe it is 60 days - so it is not too bad to have absorbed quite a heavy workload that was already in place but needs to be propelled further. However, I live in a rural community and I understand the issues that affect people. I listen more than I speak when I am out and about, if we ever get back to a place without masks. I will understand and convey the sensitivities of not just Irish citizens but all European citizens when it comes to their dealings with the financial system.

Finally, we need a financial system that works. It is vital for business and individuals. It is my job to maintain that and to make it work better. I hope I will have the help and support of elected members of all parliaments across the European Union to do that.

We are facing challenging times with the pandemic and a potential no-deal Brexit. We need to help our citizens and businesses through this difficulty. These are not easy times but I think together we can be effective.

I again thank the Chairman and all his colleagues who engaged in the debate.

I thank the Commissioner and hope that we can engage again over the coming year. I wish her well with her objectives in the course of carrying out her work and wish her the best of luck.

The joint committee went into private session at 3.10 p.m. and resumed in public session at 3.17 p.m.