Written Answers Nos. 48-50
48. Deputy Michael McGrath asked the Minister for Finance the discussions he has had with banks to address the comments of the Central Bank director of credit institutions and insurance supervision that the banks lacked the appropriate culture and skill set to deal with the mortgage crisis; and if he will make a statement on the matter. [50481/12]
View answerMy Department maintains frequent contact with banks, in particular the covered institutions, on a wide range of issues, including the issue of mortgage arrears. However, the Central Bank, in the exercise of its statutory role as independent regulator and supervisor of credit institutions, has continuous involvement with all the banks from both prudential and consumer protection perspectives. In that context, the points made by the Central Bank Director of Credit Institutions and Insurance Supervision in her speech at the Irish Banking Federation 2012 National Conference warrant particular attention. In particular, she noted shortcomings on the part of banks in their capacity, and to some extent willingness, to fully address the mortgage arrears problem, although it should also be noted that she also indicated certain areas of progress. The Central Bank has over the past year had intensive engagement with all mortgage lenders on the development of mortgage arrears resolution strategies. As indicated by the Director, the Central Bank has led on this issue and I support the Bank in this leadership role as it continues to actively engage with banks on this process and in particular now that the process has reached implementation and roll out phase. This has inevitably involved the upskilling of staff to deal with the mortgage arrears issue and this area will, I expect, continue to attract close scrutiny from the Central Bank.
I also expect lenders, many of which now have also had significant leadership change, to respond to the challenge made by the Director and to work with the Central Bank in the roll out of measures to assist their customers who are experiencing genuine and real mortgage distress.
49. Deputy Sean Fleming asked the Minister for Finance the progress made to date on implementing the compact for growth agreed at EU level; and if he will make a statement on the matter. [43412/12]
View answerHeads of State or Government in the EU agreed on a compact for growth and jobs at the European Council on 28th and 29th June. This involves action by Member States and at EU level in order to boost growth, investment and employment. The compact rests on three pillars. First, sustainable growth depends on sound public finances. Second, sustainable growth requires a stable financial system that allows for financing of valuable economic activity. Finally, the dedication of EU funds for investment purposes complements the growth potential-enhancing structural reforms. In ensuring progress, measures continue to be taken at European and Member State levels.
Therefore, measures to be implemented at the national level include the full implementation of the country-specific recommendations from the European Semester as well as pursuing differentiated and growth-heeding fiscal consolidation. From an Irish point of view, I want to assure the Deputy that Ireland’s fiscal consolidation strategy is on track and fully appreciative of the need for growth. At the euro area level, important institutional innovations in support of Member States undertaking adjustment strategies have been implemented, notably the establishment of the European Stability Mechanism or the ECB’s announcement of Outright Monetary Transactions, which can complement ESM assistance.
Further, important progress has been made at both Member State and European levels to ensure financial stability. Scrutiny of EU financial institutions has been enhanced and they continue to increase their capital ratios in line with the European Banking Authority’s capital requirement. Member States have also contributed to bolstering the capital position of banks. The ECB’s refinancing stance also has been supportive in this process. Ireland’s progress in regard to financial stability initiatives is well-documented.
Aside from growth potential enhancing structural measures, a number of initiatives are to be implemented at EU level in order to boost growth. I believe the cumulative impact of all of these measures will have a positive impact in terms of supporting economic activity in the EU at this difficult juncture. This, in turn, can be expected to benefit Ireland, including given the importance of the EU as a trading partner.
Initiatives announced at EU level also include a deepening of the Single Market and reducing the regulatory burden. Another important measure is the mobilisation of EUR120 billion - about 1 per cent of EU gross national income - to boost European growth. These funds will be made available via EU structural funds, European Investment Bank lending, and the 2020 Project Bonds initiative, which entered its pilot phase this November. Constituting part of these efforts is a EUR10 billion paid-in capital increase for the EIB, a substantial boost to its lending capacity.
From a national perspective, we continue to make progress in terms of maximising the amount of funding that can be made available to Ireland in these regards. For instance, the EIB is an important source of funding to Ireland. Funds have amounted to an average of EUR500 million per annum covering commercial semi-states, local authorities, public private partnerships, and loans to banks for on-lending to SMEs. The Exchequer can also borrow directly from the EIB in respect of capital projects such as school-building. So far this year, the EIB has provided funding for a EUR100 million project for the purpose of building 550 classrooms across Ireland. The Bank also approved loan financing of EUR155 million for Bord Gais Energy. A further up to EUR200 million of part-financing of major Irish water supply and wastewater infrastructure investment for the period of 2012-15 was approved in late October and is due to be signed off on at the end of November. Projects currently under appraisal include EUR200 million for use in SME and mid-cap investment via AIB. On Friday 9 November the latest PPP project, Schools Bundle 3 was signed off on by all parties including the EIB which provided around EUR45 million loan funding for 8 new schools.
The Taoiseach, Ministers Noonan and Howlin, and EIB President Hoyer agreed during the EIB’s official visit to Ireland on 6th July to set-up a joint High Level Working Group (HLWG). The HLWG will explore how to ensure an enhanced contribution from the Bank by identifying concrete and flexible mechanisms to enhance the Bank’s support for Ireland’s growth agenda. This joint commitment to collaboration and a structured dialogue builds on existing EIB activity in Ireland, while also recognising the opportunities presented by the forthcoming increase in the Bank’s capital resources of EUR10 bn.
These opportunities will be used to help Ireland move beyond the crisis management of recent years and to plan for the creation of growth in the economy through key strategic investments in infrastructure and growth-enhancing initiatives, specifically those covered in the Government’s Infrastructure Stimulus package which was launched last July.
