Dáil Éireann Debate, Tuesday - 20 November 2012
210. Deputy Stephen S. Donnelly asked the Minister for Finance the total amount of mortgage debt the Bank of Ireland has surrendered in the Republic of Ireland to date; and if he will make a statement on the matter. [51262/12]
View answerI would like to advise the Deputy that Bank of Ireland have supplied me with the following statement in response to your PQ. Included in the response is an additional disclosure to its Interim accounts, stating that the Group now advises that it recorded an accounting write off amounting to €2.3 million of its impairment provisions in respect of Residential Mortgages in the Republic of Ireland in the six months ended 30 June 2012.
Bank of Ireland Statement:
“The level of disclosure that Bank of Ireland gives on its Irish Residential Mortgage portfolio has been favourably commended by investors and market commentators.
Bank of Ireland gives significant and comprehensive disclosure on its provisioning policies per pages 124-126 of its Annual Report for the year to 31 December 2012. There have been no material changes to these policies since then. Bank of Ireland gives significant and comprehensive disclosure on its asset quality including in connection with Retail Ireland residential mortgages in pages 25-29 of its Interim Report for the 6 months to 30 June 2012 and gives further significant and comprehensive disclosure on its Retail Ireland Residential Mortgage portfolio in pages 107-117 of that Interim Report including that it had formally restructured or modified 15,861 mortgages at that date. The Bank also has a significant number of informal temporary arrangements with customers.
In its Interim Management Statement issued to the Stock Market on 13 November 2012 Bank of Ireland commented on its Irish Residential Mortgage book as follows:
“We continue to actively focus on credit quality and our exposures to the Irish SME sector and our Irish Mortgage book continue to be key priorities. With regard to our Irish Mortgage book, the pace of arrears formation has continued to reduce and we have continued to formally restructure and modify a significant number of customer mortgages on a sustainable basis. 86% of those customers whose mortgages are currently in formal restructure or modification are fully meeting their revised arrangements”.
Bank of Ireland is conscious that this question was also asked at Bank of Ireland’s appearance at the recent meeting of the Oireachtas Committee on Finance, Expenditure and Reform on 1 November 2012 and Bank of Ireland came in for some criticism in relation to its response to that question. Bank of Ireland wishes to put this matter into context.
In such public appearances the Bank wishes to be as open as possible with members of the Committee. It must also, however, be conscious of its responsibilities as a public company to adhere to the disclosure obligations of the various Stock Exchanges where the Bank is listed, including disclosure of matters the Bank considers to be commercially sensitive. On this occasion, as previously, Mr Boucher stressed this responsibility, for the information of Members, in his opening remarks:
“The Bank is a public company that is subject to the listing rules of the Irish, London and New York stock exchanges. The presentation is a public document and is presented under the rules of the aforementioned stock exchanges. All comments I make are governed by the stock exchange disclosure rules.”
The Bank’s appearance before the Committee on 1 November 2012 was prior to it giving a Trading Update to the Stock Exchanges which was released to the markets on 13 November 2012 and on 13 November 2012, in conjunction with its Trading Update, the Bank successfully launched the first public non-Government guaranteed bond issued by an Irish Bank since 2010 raising €1billion in the process. There would be very strict disclosure obligations prior to, at the time of and post events such as these.
Spokespersons for the Bank cannot make incremental accounting disclosures for prior accounting periods unless they are described as being such when being made and have been extensively verified before being made.
Consistent with its accounting policies, the Group only writes off debt once all avenues to recover the loans have been exhausted. In the case of Residential Mortgages in the Republic of Ireland, this happens after the property has been repossessed/sold and all other means of recovering any residual amount owing have been exhausted. As an additional disclosure to its Interim accounts, the Group now advises that it recorded an accounting write off amounting to €2.3 million of its impairment provisions in respect of Residential Mortgages in the Republic of Ireland in the six months ended 30 June 2012.
Bank of Ireland has made several appearances in front of Oireachtas Committees in recent years and has at all times, provided significant information and sought to be helpful and cooperative in such engagements. On the occasion of the previous appearance with the Committee on Finance, Expenditure and Reform in September 2011, members of the Committee were publicly complimentary on the openness and comprehensive nature of the contributions from the Bank.
On the most recent occasion the Bank, once again, welcomed the opportunity to update members of the Committee on progress made by Bank of Ireland on its strategic objectives and to provide as much detail as possible on the Group’s business. In this respect the Bank submitted, in advance, a detailed 31 slide presentation on its business and also responded to a lengthy questionnaire issued by the Committee.
Bank of Ireland is very much conscious of the support provided by the taxpayer, has always acknowledged this, and wished to provide an update on progress to a shareholder representing 15% of the Group’s stock. In his opening remarks Mr Boucher stressed this point at some length: with specific reference to slide 27 in the presentation he said:
“As investors and representatives of the taxpayer, we try to demonstrate [to you] what the taxpayer is getting out of its support for Bank of Ireland. Our first task is to reduce the risk to the taxpayer from support provided by the taxpayer. We believe the capital we have raised, the restructuring and deleveraging, the cost-reduction programmes we have undertaken, the agreement of our EU viability and restructuring plans, and the enhancement of our franchises – including the franchise in the UK, further protected by the extension of the Post Office contract – have been a very important part of reducing the risk to the taxpayer. The most significant contingent liability the taxpayer has is in respect of the eligible liabilities guarantee or ELG. Through a range of initiatives, particularly deleveraging and increasing our deposit franchises, we have reduced the liabilities under the ELG from €136 billion at their peak in September 2008 to €36 billion at the end of June. They will have reduced further since that date. Bank of Ireland notes that the ELG is due to expire on 31 December and we are prepared for that.
The State invested €4.8 billion in cash in Bank of Ireland in the period up to June 2012, and Bank of Ireland returned €2.5 billion in cash to the State in that period.”
The presentation also noted rules governing profit disclosure, forward guidance etc at Page 2.
The issues of disclosure and commercial sensitivity arose on a number of occasions during a lengthy hearing and Mr Boucher attempted to explain that, while wanting to be helpful, he was operating under disclosure obligations that inevitably constrained his ability to respond in full to some questions. At one point in the transcript during an exchange where Mr Boucher was explaining this point he said:
“I apologise if I sound pedantic but I operate under strict rules.”
The Bank understands the frustration expressed by some members of the Committee, in particular in relation to a perceived inconsistency with the position of other witnesses appearing before it. Bank of Ireland cannot speak for other institutions but stresses that it has always been and must continue to be entirely consistent on its obligations as a public company.
The Bank regrets the frustration expressed by members of the Committee in this respect but asks for the Committee’s understanding of the Bank’s public company obligations and the Bank again reiterates its willingness to participate in the public engagement process including with Oireachtas Committees.
The Bank would also ask that any consideration of this matter include a review of the Bank’s presentation and submission as well as the full transcript of a lengthy hearing where, the Bank believes, it attempted to put important and relevant information on the public record and to help the Committee’s deliberations.”
