Sale of Permanent TSB Loan Book: Statements

I welcome the Minister of State, Deputy D'Arcy, to the House. I invite him to make his contribution.

Addressing high non-performing loan, NPL, ratios is one of the key priorities of the European regulator, the SSM. While great progress has been made in the Irish banks, the SSM has made it clear that further reductions need to be made. NPLs at the banks in which the State has invested have reduced by 60%, from €54 billion at their peak, to an estimated level of €22 billion-----

I am not good on acronyms. What is the SSM?

It is the Single Supervisory Mechanism. It is a part of the ECB and regulates the primary banks in the European regulatory structure. NPLs are non-performing loans.

I thank the Minister of State. I appreciate that.

I suggest that the Minister of State start again. It is only a line or two and we might as well start again.

I am sorry for interrupting the Minister of State. I thank him for his very helpful explanation.

Addressing high non-performing loan, NPL, ratios is one of the key priorities of the European regulator, the Single Supervisory Mechanism, SSM. While great progress has been made at the Irish banks, the SSM has made it clear that further reductions need to be made. NPLs at the banks in which the State has invested have reduced by 60%, from €54 billion at their peak, to an estimated level of €22 billion at the end of December 2017. Permanent TSB's latest published NPL ratio, of 28%, is one of the highest in the eurozone. It is five times higher than the European average. Therefore, Permanent TSB must deliver a significant reduction in its NPL ratio within a framework that meets the expectations of the SSM, the European regulator.

At the time the half 1 results for 2017 were announced, the bank stated it was targeting an accelerated reduction in NPLs, aimed at achieving a high single-digit ratio over the medium term. As part of the strategy for achieving this, the bank listed a number of actions, including the sale of loans. It is clear, given the volume of borrowers who have refused to engage with the bank to date and the number of cases where treatments have failed, that achieving an acceptable NPL ratio will not be possible without consideration of loan sales. In addition, given the scale of the reduction required to address the bank's NPL ratio, and given the high percentage that private dwelling homes represent of the bank's balance sheet loans, the bank has determined that these loans must be included in any loan sale.

In this regard, Permanent TSB announced on 13 February that it was commencing the process for the sale of a portfolio of NPLs referred to as "Project Glas". On 20 February, the bank gave details of the portfolio of loans that is under consideration for sale. I shall now outline the key details. In total, 18,000 properties are linked to loans that are within the scope of Project Glas. Some 14,000 of these are related to private dwelling homes, PDHs. The total value of loans included is €3.7 billion, including approximately €1 billion of buy-to-let loans. Of the remaining €2.7 billion in loans, just under €2 billion is accounted for by PDH loans which are typically owned by customers who have not engaged with the bank and whose mortgages are unsustainable, or who have been unable to meet the terms of various treatments put in place. Project Glas also includes some loans that are currently subject to agreed forbearance measures but which remain categorised as NPLs. Therefore, this needs to be addressed. I emphasis that no loan has been sold yet and that we will not know how many will be sold for a number of months. The Minister for Finance, however, wants and expects Permanent TSB to be transparent with its customers when it comes to the sale process, as it evolves.

Under the terms of the relationship framework, the execution of loan sales does not require the Minister for Finance's consent. This is a legally binding contract that cannot be changed unilaterally. It was put in place at the insistence of the European Commission to protect competition in the marketplace. The bank is required, however, to consult the Minister for Finance on any "material matter", and loan sales are regarded as such. Although the Minister has been briefed on the matter, the formal consultation has not yet taken place but will in due course. As part of this consultation, the Minister intends pressing upon Permanent TSB that it has an obligation to give the customers timely and complete information in the event of the sale of their loans, and he will remind it of its responsibilities and the responsibilities of any purchaser under the consumer protection Act 2015 and the code of conduct on mortgage arrears, CCMA. Senator Norris will know that acronym.

Yes. I thank the Minister of State.

The Minister will also convey to the bank the importance of removing those customers from the sale portfolio who may be suitable for mortgage-to-rent, and those who have potential to agree on sustainable restructuring in the coming months.

The recent announcement that the bank, in partnership with the Irish Mortgage Holders Organisation and iCare Housing, has launched a mortgage-to-rent housing programme is a very positive move in this regard. It is important to highlight that all mortgage holders receive their full contractual conduct rights, regardless of the owner of the loan.

The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 was enacted in July 2015 and is designed to protect relevant borrowers whose loans are sold on to unregulated entities. The Act introduced a regulatory regime for a new type of entity called a "credit servicing firm". This is a firm that manages or administers credit agreements, such as mortgages or other loans, on behalf of unregulated entities. Under the Act, purchasers of loan books must either be regulated by the Central Bank itself or else the loans must be serviced by a credit-servicing firm regulated by the Central Bank.

In addition, all protections enjoyed by borrowers under the CCMA will remain in place after any sale by the bank. The CCMA provides that a lender may commence legal proceedings for repossession of a borrower's primary residence only where the lender has made every reasonable effort under the CCMA to agree an alternative repayment arrangement with the borrower, and where the specific timeframes set out in the CCMA have been adhered to, or where the borrower has been classified as not co-operating and has been notified in accordance with the CCMA.

Where a loan is deemed to be unsustainable or where the borrower has refused to engage with his or her lender, cases may come into the legal system. Borrowers in this situation are strongly encouraged to seek independent financial advice from MABS and independent legal advice, if applicable. Engaging proactively and quickly gives borrowers the best chance of retaining their home. Notwithstanding the borrower protections that are currently in place, both the Taoiseach and Minister for Finance have stated they are open to considering any further measures that can be implemented in a sensible manner. While loan sales are regrettable, the Minister for Finance is conscious of the need for Permanent TSB to continue on its path to recovery. Permanent TSB plays a very important part in the Irish economy, both as a provider of retail banking services and as an employer. The bank has over 1 million customers, €21 billion of mortgage loans and €17 billion of customer deposits. In addition, the bank employs 2,500 staff.

Permanent TSB has made good progress in the past year in terms of trading and improving its financial position. This progress includes recording a profit in the first half of 2017, the first since the onset of the financial crisis. In its quarter 3 trading statement, the bank reported continued momentum in new lending, which increased by 64% year on year. This translated into an increase in the bank's residential mortgage share to 11.9% to the end of September 2017. This is up from a market share of just over 9% in the full year 2016.

Other key highlights in the bank's quarter 3 trading statement includes the opening of over 30,000 current accounts, an increase of 16% year on year, and an increase on capital ratios with a fully loaded common equity tier 1, CET 1 ratio of 15.3% compared with 14.9% at 31 December 2016. As the proposed transaction is commercially sensitive, and as the Minister for Finance must be conscious of Stock Exchange disclosure rules, it would be inappropriate to provide further commentary on the details of the transaction over and above what has been disclosed by the bank at this point.

I thank the Minister of State for his statement. I call on Senator Horkan and he has five minutes.

I thank the Minister of State for joining us today. Without any disrespect to him, it would have been nice to see the Minister for Finance here. I have no doubt that the Minister of State will very ably listen to us and convey our concerns to him.

To be fair to the Minister, he has just spent three and half hours attending a meeting of the Oireachtas Select Committee on Finance, Public Expenditure and Reform, and Taoiseach. He probably would have been here only for the committee met earlier today.

Fair enough. As Senators are not members of the select committee we could not attend that particular module.

As I said yesterday during the Order of Business, we need to consider this matter in a holistic and joined-up way. As the Minister of State has mentioned, there is the potential for PTSB to dispose of 14,000 home loans for private dwelling homes, PDHs, after the bank was unable to work through them and spent ten years ignoring them. If I owed money to somebody or somebody owed me money and I left it for ten years I would not expect to be able to collect the debt. What has Permanent TSB done for the past ten years with these people?

We must distinguish between the people who are genuinely doing their best and those who have not responded to any communications for five years. We need to see a breakdown of the 14,000 home loans. Are they people who have missed a payment or two? Have they experienced a little blip here or there due to a family crisis, emergency or something and were unable to make a particular payment? Have they just said "No, I am not paying" and decided to live the high life, go on holidays, buy new cars and not pay a mortgage? I do not know how many such cases there are but I would like to know before we start selling the loans to the funds.

Perhaps a vulture fund will not buy the loan book but I do not know who else would do so. It is not the objective of a vulture fund to carefully manage the homeowner back into a position where he or she can repay the debt over time. The vulture fund just wants to buy the asset at the greatest discount possible, get the person out of the house and flip the property. As property prices increase the houses become more attractive for that particular purpose. That might be the reason there were not many repossessions in 2011 and 2012 when the property market was on the floor. Now that property prices are rising quickly there is scope for people to flip properties.

We must remember that PTSB is still 75% owned by the State and the shareholder is the Minister for Finance, on behalf of the people. The board should reflect the shareholding but it is not the case at present. The board should reflect the ministerial appointees, as the shareholder, on the board of PTSB. They should make decisions in the interest of the country, although corporate governance is very important, and look after the entity. I acknowledge that 28% is a shockingly bad percentage of non-performing loans, NPLs, particularly when the eurozone average is about 4.5%.

There is potential for 14,000 homes to be repossessed but perhaps not all of them will be repossessed. If they are repossessed then 14,000 families looking for a house will appear at the constituency clinic of the Minister of State and those other people in this House and the Lower House. We already have a housing crisis without 14,000 more households looking for houses. If one divides 14,000 households by 40, the number of Dáil constituencies, then there will be about 350 households looking for housing in every single Dáil constituency. Other people have speculated that there could be 20,000 home loans so that would mean there would be 500 households per Dáil constituency seeking housing. Obviously the number would be higher in some constituencies. It is very important that we consider this matter from the State's point of view and not just from the viewpoint of PTSB.

I accept the point that the Minister of State made about the Single Supervisory Mechanism, SSM. Surely each homeowner should be written to and informed whether his or her loan is included in the package of home loans based on his or her performance, whether the bank will sell the €200,000 loan for €80,000 or whatever the discount will be, and if the homeowner comes up with the same money or finds a way to do so then the bank will give first refusal. Some people will be unable to come up with the money but other people might be able to do so. They might be able to secure a mortgage from a different institution for a longer period but at a smaller amount and pay off the original mortgage which would be far preferable to selling the loan at a huge discount.

I would prefer if everybody paid their mortgages. An awful lot of people have struggled and made huge sacrifices to pay their mortgage payments, particularly people who bought between 2004 and 2006 when house prices were at their peak. I know that we do not want moral hazard. However, we must acknowledge that these houses may go to a vulture fund or vulture funds and may be repossessed because of non-performance. I acknowledge that banks have not been that big into repossessions as much as some people thought they were. I contend that maybe we are in this situation because the banks have not been strong in terms of dealing with people. Dún Laoghaire-Rathdown County Council had to deal with waste charges. In the end people were told not to pay their waste charges, the debts built up and the county council ended up privatising the service due to the number of debts. I am not saying that people should not pay their loans. I am saying that we must realise that if we allow these homes to be sold and if PTSB decides, despite being 75% owned by the State, to sell all of these home loans then we will end up having to house 14,000 more families, potentially, than we do at the moment. The waiting lists for housing are long enough already.

Various people have commented over the past few days. Edmund Honohan referred to the Taoiseach's letter to a homeowner as a joke and said that there was no use in these people contacting the organisation called Abhaile because it merely provides €250 worth of legal advice. That solution will not solve the problem for somebody. Mr. Lorcan O'Connor from the Insolvency Service of Ireland said that people should be allowed to work through their loans if they are sustainable and many of them may be sustainable.

The Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach has invited PTSB to attend a meeting next week. I do not know whether the bank will take up the offer. I would like to see the bank's proposal. I want to know how bad the non-performing loans are. The easiest thing in the world is to just take the hit. Let us remember that we will take 75% of the hit whatever discount is given to the vulture fund and, ultimately, the State will lose. We need to examine the matter in a forensic manner. I asked that the Order of Business be changed to reflect reality and that we would have statements on the proposed sale of the loan book because the sale has not happened yet. As a State we need to appreciate that if the sale goes ahead houses will be repossessed and we will have to rehouse those households at a huge cost to the State. Let us think about this matter in a holistic way before proceeding with the sale.

I welcome the Minister of State and I shall first discuss some elements of his speech. He said the Single Supervisory Mechanism has determined that Permanent TSB is carrying too many non-performing loans. That is an outrage. The Single Supervisory Mechanism is an arm of the European Central Bank, which is largely responsible for the mess this country is in, and they are unelected and unaccountable. This is a democracy. One of the problems with the European Community is the fact that there is less and less democracy. These people need to be told to go to hell. They should have no control in this country. I object strenuously, as a citizen of Ireland, to their malign influence. All one needs to do is recall Mr. Trichet's illegal threat that a bomb would go off if the Irish Government did the right and decent thing, and forced us to buy up bonds following an enormous increase in their value.

Second, the Minister of State said: "It is clear, given the volume of borrowers who have refused to engage with the bank to date". How does he know that? We have no information on this matter. PTSB has not given us a breakdown. One of the real problems of this situation is that PTSB has given no information whatever. Let us have this matter out in the open. Let us have the number of people who have non-performing loans, the number of people who have refused to engage, and how much of a discount will be given to the vulture funds. Let us also have an answer to the following two questions. Why did the PTSB not engage with these people? Why did the PTSB not offer them the same discount it is giving to foreign mercenaries?

The Minister of State continued:

Under the terms of the relationship framework, the execution of loan sales does not require the Minister for Finance's consent. This is a legally binding contract that cannot be changed unilaterally. It was put in place at the insistence of the European Commission to protect competition in the marketplace.

This is further interference in the Irish situation. He further stated: "The CCMA provides that a lender may commence legal proceedings for repossession of a borrower's primary residence only where the lender has made every reasonable effort." We know bloody well the lender has not done so. We have hundreds of reports of people who have tried to contact the bank only to be met with a blank wall, and telephone calls and letters were not replied to. We know that the bank has not engaged with these people.

What proof would be given that they have engaged with them? While loan sales are regrettable, the Minister for Finance is also conscious of the need for Permanent TSB to continue on the path to recovery. That is the nub of it. Here we are again after the crisis moving to rescue financial institutions at the expense of the citizens of Ireland. The Minister speaks about Permanent TSB being on the way to recovery. It is already recovering very well. What is the need for this sudden demand for acceleration in its recovery? If it is recovering, that is excellent and let it go on and let it recover. Does Permanent TSB accept any responsibility for the grotesque and financially irresponsible loans it gave out? The head of Permanent TSB, an Englishman whose name I forget, was asked whether he thought the bank was acting responsibly when it gave a €600,000 loan to a person whose income before tax was €40,000 per annum. His response was that he did not discuss individual cases. He does not discuss anything. Permanent TSB is refusing to come before an Oireachtas joint committee. This is outrageous behaviour. Who the hell are these people? The Minister has control over them.

May I say to the Minister of State, Deputy D'Arcy, and I hope he will report it to the Minister for Finance, Deputy Paschal Donohoe, that the Minister can indicate very clearly that he is against the sale of these loans. That is enough to stop them in their tracks. If it does not stop them in their tracks, let him sack the board and introduce a new board, who will be more responsible.

I have already discussed the Single Supervisory Mechanism. The Minister has stated that he expects Permanent TSB to be transparent with the owners. Why would it not be transparent with the Parliament of Ireland? Why will Permanent TSB not answer any questions? I suggest that the Minister for Finance should make it very clear to the board of Permanent TSB that he does not want the sale of these assets and, second, that he demands answers and puts them on the public record, as to how many people and the circumstances in which they have refused to engage with the bank. I do not believe that. How many people would refuse to engage? They say there is a court system, they are in the court system and the courts are very lenient. Have they forgotten that these are real flesh and blood human beings? Just imagine the stress of being in court, possibly not represented, and facing the massed legal brains on hire to the forces that are against them in Europe. Let us remind ourselves that vulture funds are exactly that. They are not in it for the long haul. They will not provide easy arrangements. The Minister says that people have the same rights, but how could they have the same rights against an unregulated body? The Minister has already said that the vulture funds are unregulated bodies. Whereas a theoretical case might be made on paper that they have the same rights, in practice they simply do not have the same rights.

Will the Chair indicate when there is one minute remaining.

I welcome the Minister of State, Deputy Michael D'Arcy, to the House. I expect Permanent TSB to come before the finance committee next week.

We have asked it to come in and I expect it to come in. Its representatives were in with us a little over two weeks ago and to be honest their answers were not up to par. We as a committee, a body representing the ordinary people, need to get answers. We need answers around a couple of areas.

We need a proper functioning banking system. We need proper competition in the banking system. We need Permanent TSB to be an active bank. The problem at present is that its balance sheet is in major trouble. That is a basic fact. Nearly one third of the loan book is non-performing. Permanent TSB's loan book is €21 billion but a third are non-performing loans. That is five or six times higher than the average. That is too high and must be addressed. That should have been addressed by the bank in the past ten years.

Real people are involved in these non-performing loans. Of the 18,000 mortgages on the books, some 14,000 are homes and the other 4,000 are buy-to-let properties. Most of the buy-to-let properties will have families living in them. They are an issue already. I very much welcome that the Minister of State said in his speech that the Minister will also convey to the bank the importance of removing those customers from the sale and that they may be suitable for mortgage-to-rent and those who have the potential to agree a sustainable restructuring in the coming months. I hope that the other mainstream banks such as AIB and Bank of Ireland are looking to purchase some of these mortgages as well.

The key point is that we have a bank that has major problems financially, completely absorbed in a high level of non-performing loans, while side by side, are real human beings with 18,000 non-performing mortgages. Some 14,000 homes are owner occupied. The remaining 4,000 mortgages are for buy-to-let properties, probably with families living in them. They are entitled to proper due process and rights. Our biggest problem for the public is the lack of absolute transparency and lack of information around this process. In how many cases are the clients not engaging with the bank? In how many cases have they split mortgages, warehousing, but they are deemed not to be fulfilling the criteria?

We need Permanent TSB to come before the finance committee and deal with the facts. I feel very strongly about that. There are new circumstances in the public domain relative to a number of years ago, when some of these loans were sold to the so-called vulture funds. That has to be reflected in the legislation. The vulture funds who buy loans can only operate in Ireland through an agent. That agent is regulated under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015. When the Central Bank of Ireland came before the finance committee last week, I asked a specific question about the regulation of these particular agents. I do not believe they are being properly regulated. What I was told is that the mainstream banks, such as AIB, Bank of Ireland or Permanent TSB, are heavily regulated by the Central Bank of Ireland. The personnel from the Central Bank of Ireland are out in their premises and doing audits. If I had a loan that was sold to a fund, the agent that operates that fund in Ireland would only have to undergo a desktop audit, because the personnel from the Central Bank do not physically go out to the premises. I think we need to ensure that the regulation should follow the loan, not the institution. If I had a mortgage with AIB and it goes to a fund, it should be the exact same form of regulation as if it had stayed in AIB and that would provide fairness in that area.

I welcome the fact that the Minister for Finance, Deputy Donohoe, is engaging and looking at how the regulation of credit services is working in practice. We cannot ignore the fact that Permanent TSB as an institution is in serious financial trouble. We cannot get over the fact that we must have competition and a third force in the market. However, people are entitled to fairness. We must ensure that the rights of the mortgage holder, and the obligations of the institution from whom they got their mortgage before it was sold on, continue. In my view the Central Bank of Ireland is not enforcing the level of regulation it has over financial institutions that act as agents for vulture funds.

We are being told it regards them as not being as material in this context as the mainstream banks. Regulation should follow the mortgage holder. We must ensure we keep people in their homes and rented properties and that we get absolute fairness. What is required is that we all work together to find a measure that will look after these 18,000 mortgage holders in Permanent TSB. There is a wider context to this with respect to the other funds. We need to ensure regulation moves with the times to ensure there is consistency in the way people's loans on their homes, and many people have loans on their businesses and farms with Ulster Bank and other banks, are regulated before they are sold on, and that the regulation follows the loan.

I call Senator Rose Conway-Walsh and she has five minutes.

I thank the Minister of State for being in the House. It is good to see the sudden clamour around the issue of the sale of mortgages but one has to ask where were people for the past seven years with respect to what was being done. This is not new.

I was around; I was coming in here all the time-----

I ask Senator Norris to let me speak.

When the Senator makes contentious comments she can expect a response.

Allow Senator Conway-Walsh to continue without interruption.

This is an enormously serious problem that has not been tackled. We know that and, above all, the people in the Central Bank know it as they have had to deal with vulture funds and the banks. We talk as if everything is perfect when it concerns the banks but when it concerns the vulture funds that is when people get into trouble. However, the banks have not behaved in the way that they are supposed to behave and the Central Bank has not ensured they have behaved. That is an ongoing problem and challenge for us. If we think back to the Irish Bank Resolution Corporation, IBRC, mortgage holders and the campaign they ran to bring attention to this issue, we had all the same material that is being talked about now. Representatives of Permanent TSB will appear before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach next Tuesday. The bank has confirmed that, and so it should.

Yes, indeed. There are many questions all of us will be putting to its representatives because we all know vulture funds are not the right solution to the non-performing loans. I understand the point regarding the stability of Permanent TSB or any other bank but this is not the way to do it. There are too many questions to be asked around it. The first question is why they cannot write-down the loans of homeowners. I come across many homeowners and people with properties who have, say, €60,000 outstanding - I have sat in some of the repossession court hearings - and they have offered the banks, say, €50,000 for the loan if they can borrow it from a family member or from some other source. Why can these amounts not be accepted? It seems to be a case of shutting the door completely on giving an opportunity to those who have been sold the property, and sometimes recklessly. Why can we not give the same write-downs to those people? We need to see a comparative analysis on this. For the bank that has the loan book and the bundles as they are, what would the difference be financially for it to give a write-down on those loans and allow some of the homeowners and business owners to buy out the loans instead of selling them off to foreign vulture funds, which operate in an abyss and certainly do not come under the remit of the regulations in this country?

As was said, and I agree with Senator Norris on this, the vulture funds do what it says on the tin. We cannot be giving out about them because that is exactly what they are - vultures. That is what they are set up to do, namely, to make as much as they possibly can in the shortest period. When we engaged with vulture funds in the first instance, and when the Government thought it was a great idea to have them as part of the solution for the banks and our financial system, it should have thought further down the road as to how exactly they were going to operate.

I want to know who makes the decision about what is a performing and a non-performing loan. What are the criteria used? Who makes it up? Is it approved by Government as to what a bank can consider to be a performing and a non-performing loan? We have never seen that. Hiding behind confidentiality, financial sensitivity and so on is nonsense, particularly in respect of some of these straightforward questions, such as whether a loan is considered to be non-performing if it is not paid back over a number of months or whatever. Within these bundles, there needs to be further analysis because I am aware that what I would consider to be perfectly performing loans have been bought by these funds and within two to three weeks the vulture funds appear to say, "No, we are closing you down". What is very serious is that this happens often in circumstances where the business being bought is in competition with a business the vulture funds already owns.

The Minister of State said that timely and complete information needs to be given to the borrowers. Does he mean timely in terms of before the loans are sold off? What are we saying about complete information? We need to know that also. All these vulture funds will say that they are adhering to the code of conduct and so on, but they need to be told exactly what to do, as do the banks. We know from the finance committee that the banks are trained within an inch of their lives to present and not to answer the questions to which people need answers.

Regarding the vulture funds being asked to come before the finance committee several times, we know they have worn a path in and out of the Department of Finance. They have access to key personnel within that Department. I want to know who was at those meetings, what was said at them, if records are being kept of them and so on. They do not have to appear before the finance committee because they have access through the back door. That must stop, but we have to be able to see the information on all of that.

My colleague, Deputy Pearse Doherty, tabled an amendment to the 2015 legislation, to which Minister of State referred, which would have regulated the actual holder of the credit and not the credit servicer, but the Fine Gael Party and the Labour Party refused to support it. That is what makes me very annoyed about what is happening today. Those parties refused to support it, and the Fianna Fáil members did not even turn up for the vote.

You were off robbing banks at the time.

They did not turn up for the vote.

How can the Senator come in here and say-----

That party's members cannot pretend to people that they care seven years later.

Order, please. The Senator's time is up.

When the solution was offered by Sinn Féin, the Fianna Fáil members did not even turn up to vote. I am glad they have turned up now and that they care, but let us get something done about this issue. Much of it is too late for the people who have been made homeless.

Get your own affairs in order.

In any event, I welcome Fianna Fáil's late conversion on the road to Damascus.

If we stopped scoring political points, we would all be a lot further along.

Colleagues, please. I call Senator Ó Domhnaill and he has five minutes.

We have to take our seats in Westminster-----

If there is to be a resolution to this issue, I can assure the previous speaker that it will not be found by political point-scoring. There is a need to deal with this issue urgently.

If we take the case of Permanent TSB, the State was a 99.2% shareholder. That was reduced in 2015 to 74.92%. The State is the substantial shareholder of the organisation but it finds itself with a conflict of interest. That must come into the equation because how can the shareholder who is seeking to advance the future of the company protect the consumer at the same time? The State has to make a decision and the Minister, who is vested on behalf of the people, needs to make a call. He either stands with the people or he stands with the bank, but he cannot dine à la carte on this one. He has to come off the fence. We either stand by the people or we do not.

In terms of the problem we face today, there has not been any burden sharing whatsoever. I will take the example of a person who took out a mortgage and is now in difficulty with Permanent TSB today - say, the person took out a €200,000 mortgage over 30 years at a rate of 4% which meant the bank stood to gain approximately €140,000 over the lifetime of the mortgage, in addition to getting back the €200,000.

It was gaining substantially from the mortgage on the day the agreement was signed. The persons stood to gain also but they took 100% of the risk and the bank took 0% of the risk. That is very wrong in a structural sense and it has not been addressed since the crash in 2008. There has been no sharing of the fall-out. In addition to a position where it took no risk, the bank has also obtained a taxpayer bailout, as 75% of Permanent TSB is owned by the taxpayer. That is unbelievable. One could not write this or make it up in fairyland. The financial wizards are riding roughshod over governments all over the world, including this one in Ireland. We are doing nothing about it.

We are probably too late in trying to solve this. There is the question of the 28% share of the €21 billion loan book in Permanent TSB, and it is in its current position because the bank chose not to engage with the personal insolvency mechanism of the State. It should have been dealt with in that process as the structures exist to do it. If a write-down could have been achieved, it should have been given to the borrower and not the vulture fund. We call these vulture funds but ultimately they are businesses serving shareholders and trying to make money. We cannot really blame them as these loans could have been bought by anybody in Ireland or abroad. The likelihood is the buyer will come from abroad.

The solution is for Permanent TSB not to sell its loan book but to contact each of these customers and ask them to engage with a personal insolvency practitioner. It should start a process of assessing each loan on an individual basis. The State could insist on that as a shareholder. It would also protect the rights of people living in the 4,000 buy-to-let properties as well. There is a mechanism to deal with this if we choose to do it. The danger is that this is a slippery slope; if Permanent TSB gets away with this, Bank of Ireland will do the same thing, along with KBC and the rest. They will sell residual debt as well as properties.

There is only one solution and the State and this Minister has the choice of standing with the customer. We are not in the business of running banks after all. We might have bailed them out to keep them afloat but we are not really a shareholder of that bank with the goal of making a huge profit. We are trying to hold it together because of all the people with mortgages, debt and savings in banks. We must look at this as something different from an economic equation. That is my tuppence ha'penny worth. The other Bill by Deputy John McGuinness is excellent and it was written by the Master of the High Court, Mr. Ed Honohan. It must be supported by Fianna Fáil and Fine Gael. This is urgent and there should be an alternative vehicle to vulture funds.

I welcome the Minister of State to the House. I listened very carefully to the contribution from Senator Kieran O'Donnell and there is clearly not enough information. This must be tackled. Working on the Permanent TSB figures, it seems that 6,500 of the loans are performing loans. The first fact we must establish is why performing loans are being sold.

There is a large job for the Government to do in engaging with the European Central Bank. We need to change the definition of non-performing loans, as the vast majority of loans in the bank are performing. For example, split mortgages are performing loans. Interest-only mortgages must be renegotiated but they are performing. People have signed up to agreements of warehousing portions and paying other portions, and in my mind, all such loans are performing loans. The bank must do the hard work of engaging and assisting people through their difficulties. I do not stand over people wilfully refusing to repay their mortgages but they are tiny in number. They do not make up a large proportion of those 20,000 loans.

Since 2008 the banking sector has dominated debate in this country. Whether it was Fianna Fáil, Fine Gael or the Labour Party, we sought to re-establish a functioning banking sector. In their own minds, the people in these banks see the sector as functioning now but the customer has been forgotten. One can consider a small business trying to start in Ireland and the differential between interest rates being charged on loans compared with a similar company trying to start on the Continent. There is a 3% to 4% differential in interest rates. If young families are trying to get into the housing market and buy a family home, we can see a 3% to 4% differential between mortgage repayments and interest rates charged. The banks are taking for granted the support of the Government and political parties in refinancing banks. They are refinancing themselves by overcharging on interest rates and trying to throw families to the sharks when they do not sit down and go through the hard yards, helping people negotiate and work their way from debt and non-performing loans. I support Senator Kieran O'Donnell completely in that regard. This process must be delayed, if not stopped. Permanent TSB has a responsibility to the State and its citizens, who bailed out all these banks. It should work with the individuals and help them out of debt. If there are to be write-downs, allow the families that have warehoused their loan, split their mortgage or gone interest only the opportunity to get the benefits.

We are not in the midst of a financial crisis and the State is adequately funded. As we are constantly being told, our banking systems are in recovery. The banks now have a debt to this State that must be repaid. It is a very minor part of this debt to sit down with the families involved in this case. We have heard people say these are real people and family homes. The buy-to-let properties are family homes as well. They may have two functions, as they might be a pension for a small businessman as well. Nobody is sitting down, talking and engaging on this.

Let us take today's comments from Fine Gael. The loans should not be sold until we know the information. If everybody in the House is proven wrong, I will hold up my hands and say the 20,000 people involved were trying to pull the wool over our eyes. I can guarantee we will not be proven wrong and there will not be 20,000 families trying to pull the wool over our eyes.

I give credit where it is due. For the past number of years, Senator Norris has argued for mortgage holders in difficulty, and so too did Lord Churchtown and the Independent Alliance. Lord Churchtown would have been taking his glasses off and spitting blood and thunder about how bad things really were and about how bad the banks really were and he would be demanding of the Government to take out the Permanent TSB bankers and hang them and flog them. I am asking Lord Churchtown-----

I was trying to show respect. He is the former Lord Churchtown. While he is sitting at the Cabinet table-----

Senator Humphreys was a Minister of State once and may be again in the distant future. I am sure he would like to be shown due deference and respect in the House.

The Minister, Deputy Ross, should exercise his powers as Minister and stop sitting on the fence and commentating as he used to in the Sunday Independent by telling us how everything should be fixed. He can fix this one. He could ask his colleague, the Minister, Deputy Donohoe, to tell the bank the Government is a major shareholder and that it should not sell until proper and adequate information is provided to the finance committee and both Houses.

I left the Seanad this morning to attend another meeting and did not think I could be here today. I was told I could not speak on the Order of Business about vulture funds with regard to a house that had been bought in my area. That is very disrespectful. On the Order of Business I should be allowed-----

No. I felt the Deputy Leader, Senator Noone, should not have said that. We all have meetings. She knows that. I want it clarified and I want it recorded in the Official Report.

For clarification, the Leas-Chathaoirleach ruled on the issue Senator Murnane-O'Connor attempted to raise this morning. The Leas-Chathaoirleach had discretion to do so. I ask the Senator to respect that decision.

Absolutely not. It was totally uncalled for.

I ask the Senator to respect that-----

Absolutely not. I spoke on the Order of Business-----

-----and to respect the House.

-----as I was entitled to. I am very disappointed.

Another disappointment is we do not have the Minister, Deputy Donohoe, here today. This is one of the most serious issues facing us. We are already in a housing crisis. The Government is inviting a whole lot of trouble if it allows Permanent TSB to go ahead with its proposals to sell 20,000 mortgages to unregulated vulture funds. This cannot happen for a variety of reasons. It is unfair for people who have restructured their mortgages and tried to pay what they owe to be put at the mercy of a fund that could decide to evict them. We are not living in reality here. Who is running the country? Is it the banks or the Government? These families will be left powerless and at the mercy of court proceedings because proposals to regulate vulture funds were shot down. If these vulture funds swoop in on these families, they can sell those houses and put the families onto the street. As the Minister of State knows, we have a housing crisis. Vulture funds are investment companies that pick the bones of the living. Vulture funds need to be regulated the same way as the banks. They need the same standards and transparency and most importantly to pay taxes on their huge profits. I have a massive issue with that. It is something the Minister of State needs to address.

Vulture fund companies need to allow county councils and other Government agencies access to information on properties purchased through stressed loan acquisitions. I will refer to the property I spoke about this morning. I am aware of a property in Carlow which was purchased as part of a portfolio. The property was sold by Permanent TSB to a vulture fund. The property was wanted by a Carlow resident who grew up in the property. When he finally tracked down the last owner he was told that Permanent TSB sold all the loans to a vulture fund. He approached Permanent TSB and stated his interest in the property and asked for a name and contact number for the company. The reply was they do not give out that information. As a result, there is a derelict house.

This is a recent example although I have more. It is causing huge anti-social behaviour and problems. It is now damaged beyond repair. The council had to secure the house to prevent any more damage and stop anti-social behaviour. I do not know if the council is insured to go into a vulture fund house and board it up but that is what is happening.

The Government is not seeing the reality on the ground. The sad part is that if the prospective buyer had been given information on the vulture fund that purchased the property, all of this could have been avoided and the property could have changed hands before it was ruined and, more importantly, a family could be living in a home today. That is what we need. I believe this story happens in every county.

I can give the Minister of State six or seven cases in my county. It is happening all over Ireland. Without the information from the vulture funds we will never know the true extent of the number of houses in the ownership of these vulture companies. I call on the Minister of State to establish the number of properties that vulture funds have taken over in Ireland. There seems to be no rules for how these vulture companies do their business. They are allowed to trade unregulated. They have no concern for the lives they destroy.

I ask the Minister to stop it and to regulate and tax these companies. Most of all, I ask him to make them furnish a list of all properties acquired by them to each local authority so if we want information we can go and find out how to sort out this problem. Permanent TSB has a duty to look after these mortgage holders. Many have tried but they get no feedback. They make phone calls and Permanent TSB does not want to listen to them or deal with them. The Minister of State has a duty to sort it out.

I am content that the Minister of State is here. It is not personal but I called for the amendment to the Order of Business and I am glad it has been facilitated to respect the House. It is not my area of expertise; I am spokesperson on health, well-being and social protection issues. This issue has touched every corner of the country and all our communities. A vulture is a bird of prey that follows and feeds on carrion. It gathers with the others and hovers around in anticipation of the death of a sick or injured animal or, in this case, a person. It eats the flesh of the dying. It is a worldwide phenomenon and they seem to usurp the power of democratic societies and elected governments. Private equity funds get upset and become outraged when they are called vulture funds. They are pretty sensitive about that. That is tough. Pity on them - if the cap fits they should wear it.

Recently, they have bought up hundreds of millions of euro of distressed assets from the banks and NAMA at heavy discounts. They have no interest in developing relationships with borrowers. They are only interested in seeing a quick return. This is a result of the lack of regulation in the banking sector. They act with virtual impunity when dealing with borrowers and politicians. They are quite dismissive.

There were changes last July but we still have today's scandal of the Permanent TSB sale which is in 75% public ownership. It is a bitter pill to swallow when one goes to the courts with one's friends or people from one's community or neighbourhood and watches the power play in court. It is a David and Goliath situation. People who cannot afford it hope that I, who have no knowledge of the law and little knowledge of court, can be of some benefit to them. All I can do is tell them to keep saying "No" and plead with the judge. I have watched that power play. It is astounding.

I do not know how many people in the country have been to the courts to deal with repossession matters. It is a useful way to experience the lack of empathy and duty of care that the country and we, as politicians, have displayed - perhaps not meaning to - to our fellow citizens and communities. Tranches of houses are gone in the flick of a switch. People are distressed and do not have the money to invest in trying to turn it around because they are up against massive investment by vulture funds.

I am glad to hear from my colleague, Senator Conway-Walsh, that the bank will appear before the finance committee next week. I hope its representatives will explain themselves and say the sale will stop. I hope they will be reprimanded severely. We need to then consider regulation and get rid of them from the country in whatever way we can.

I will try to go through the questions as best I can. I do not know if representatives of Permanent TSB will appear before the committee. If the Senator's information is that they will appear, I am pleased with that. The Minister, Deputy Donohoe, was asked his view this morning about whether they should attend or not.

He said they should attend and should give as much information as members of the committee requested. I understand the Senator is a member.

I can clarify that they are coming.

It is a matter for the committee but the Minister for Finance, Deputy Donohoe, said they should show up and answer questions from committee members. I will give Senators the information which I know to be correct. There are 11,300 private dwelling homes in the ownership of vulture funds, down from 12,500 in the past 12 months and representing about 1.5% of the overall market, there being some 740,000 mortgages in the overall market.

Section 110 was never meant to be used for property and somebody was way too clever in applying that section of the tax code to property. When it was exposed, it was closed down as quickly as possible. Section 110 is a legitimate piece of tax legislation that was used over decades in an appropriate manner but was not appropriate to property.

Local authorities have the power to go into any derelict building and board it up and even have the authority to demolish a building if it is unsafe.

The ECB and the SSM have emerged as a theme in the debate. As a former member of the banking inquiry, I saw what light-touch regulation leads to. That era is over and rightly so, and the regulation is now independent of eurozone governments. If we allow governments to influence the ECB or the SSM some countries might take the opportunity to advantage themselves, putting their economies at risk. The SSM has said that non-performing loans have to be reduced. PTSB has 28% of such loans, which is five times the average, and the average in SSM requests is at 5%. One can ask if the SSM is right or wrong or if it is right for PTSB to have 28% of its loans non-performing. It is a question that is very easy to answer. A bank loan book should not have 28% of its loans which are not performing so PTSB has to do something about it and this is part of that.

We have very few repossessions in this country, with 400 in quarter 3. It is 400 too many but in every property market around the world, if people stop paying their property is repossessed. What has been done in our jurisdiction is quite remarkable. There was a code of conduct for mortgage arrears in 2009, which was revised in 2010. The mortgage arrears and personal debt expert group report, the Cooney report, was published in 2010 and the Law Reform Commission report on personal debt management and enforcement was published in 2010. There was a further CCMA review in 2011 and an interdepartmental mortgage arrears working group report, the Keane report, was published in 2011.

The mortgage-to-rent scheme was introduced following this in 2012, and there was a Personal Insolvency Act in 2012. The Central Bank mortgage arrears resolution targets required regulated lenders to propose and conclude sustainable solutions with borrowers in mortgage arrears. There was a further review of the CCMA in 2012 and the Insolvency Service of Ireland was established following the Insolvency Act 2012.

There was the Land and Conveyancing Law Reform Act 2013 and a Central Bank framework for a pilot approach to a co-ordinated resolution of multiple debts owed by a distressed borrower was published in 2013. The report of the expert group on repossessions came out in 2013, there was the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 and the Personal Insolvency (Amendment) Act 2015. The Action Plan for Housing and Homelessness implemented the scheme known as Abhaile and in 2016 the Department of Finance produced a detailed report on mortgage arrears. An incredible amount has been done to keep people in homes. Our jurisdiction has among the lowest level of repossessions in the world and that is a good thing because nobody wants people to be put out on the street.

This is not the choice of the Minister, Deputy Donohoe. The State owns 75% of the bank and the board of directors must act in the interests of the company. If we fire directors, whoever replaces them must also act in the interests of the company. The Minister can keep hiring and firing members of the board but they must act in the interests of the company. It is not a matter for the Minister.

I found what Senator O'Donnell said a bit disturbing. If I understand him correctly he said that credit servicing firms are regulated in a different way from any other institution which holds a loan book.

Can I make a point of order?

The Senator may clarify the point for the Minister. The Minister only has three minutes remaining so may not have time to go through everyone's contribution.

In the limited time I had with the Central Bank I asked what was the form of regulation over the loan book administered by the agent. It was based on risk analysis and I asked if the bank went to the premises to carry out audits, to which the reply was that it did not. The level of regulation is more light touch than heavy prudential, as in the other institutions.

I will write to the Central Bank to try to find out if that is the case. It should not be the case and credit servicing firms should be regulated in exactly the same way as every other institution which is in possession of a loan book.

I have touched on the independence of the regulator, the ECB and the SSM. It is a matter for the PTSB to give the finance committee as much detail as it can. I would like to know the exact quantity and breakdown. I have no truck with people who choose not to pay their mortgage. If they try to get away with not paying it means somebody else is being charged a little bit extra, or a variable rate, and that is not right. We have hundreds of thousands of mortgages and loans. We have people getting up, going to work and doing their very best to make ends meet and pay their mortgage. They are the people to be supported. The people not to be supported are those who try it on and try to avoid paying. I do not know what the figures are but I have seen the press release from Permanent TSB stating that there are thousands of loans whose borrowers have not been in contact for an average of three and a half years. That is a remarkable figure and, while some people have accused the PTSB of not contacting them, I do not know if that is the case.

I do not know if there is no contact from either direction. It is for the bank to ensure that it contacts a person. If it has not seen or spoken to a person in three and a half years or if there is not a response, then it is difficult to know what is happening. It is up to Permanent TSB to try to ensure that information is given to the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. That is as much as I have. I believe this will take between three and six months. It will not be done in a few weeks, whatever the outcome is. I await the opportunity for Members of this House to probe Permanent TSB if it is coming in, although I am not sure if it is. However, it should come in and give information to the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. People will then be able to make a more informed decision on whether this is a good or a bad thing.

As always, the Minister of State, Deputy D'Arcy, is very welcome in this House. He is very straight-up and above board.

That concludes the statements on the sale of the Permanent TSB loan book. I thank colleagues for their contributions. When is it proposed to sit again?

At 2.30 p.m. next Tuesday.

The Seanad adjourned at 2.30 p.m. until 2.30 p.m. on Tuesday, 27 February 2018.