Martin Ferris
Question:16. Deputy Martin Ferris asked the Minister for Finance if has considered the impact of Irish Banking Federation’s protocol of 31 January 2013 on the credit union movement. [10569/13]
View answerThursday, 28 February 2013
Questions (16, 49)
Martin Ferris
Question:49. Deputy Martin Ferris asked the Minister for Finance if he has had contact with the Governor of the Central Bank on the issue of the Irish Banking Federation’s protocol of 31January 2013; and his views on whether the protocol will contribute to the ending of the mortgage crisis. [10568/13]
View answerWritten answers
I propose to take Questions Nos. 16 and 49 together.
While I note the launch of an IBF protocol on unsecured debt, this was solely an initiative of the IBF and neither I nor my Department had an involvement in the initiative.
Initiatives such as the IBF protocol can assist in encouraging and facilitating creditors and debtors to engage with one another in an open, constructive manner to address debt arrears and genuine debt difficulty. This can resolve positions of over indebtedness in a way that is as fair as possible to both the debtor and creditors and could be a beneficial voluntary addition to the broader debt resolution framework.
The Deputy is aware of the mortgage arrears problem and he will also appreciate that the credit union sector is also under financial stress and continues to face significant business challenges. The level of arrears in the credit union sector is also significant. Average credit union sector arrears were reported at 20.1% as at 31 December 2012. The Central Bank has informed me that it believes that changes in the operating environment, including the personal insolvency regime, could have a significant impact on credit unions.
In view of this, the Central Bank has written to credit unions to ensure that they fully assess a member’s ability to service all debts before advancing any new credit or top up credit facilities, especially where the borrower is in arrears on their mortgage or is in a non-permanent forbearance arrangement. Additionally the Central Bank has also invited banking and credit union representatives to a meeting next week to discuss the creation of a workable burden sharing agreement between secured and unsecured lenders.
It is important, however, to point out that any voluntary initiative or bilateral approach can only be successful if all parties are in agreement. Where this does not arise, it is necessary to have an effective statutory insolvency process. Therefore voluntary initiatives, while welcome, do not remove the need for the insolvency reforms as provided for in the recent Personal Insolvency Act. As the Deputy is aware, under the legislation, insolvent debtors can, through the personal insolvency practitioner, formally make a Debt Settlement Arrangement or a Personal Insolvency Arrangement proposal to their creditors, which may include credit unions and mortgage lenders as appropriate. These arrangements represent an efficient framework whereby all the relevant creditors can engage with and consider a proposal from the debtor to deal with their insolvent circumstances short of the full judicial bankruptcy process.