Written Answers Nos. 1-13
11. Deputy Patrick Nulty asked the Minister for Finance if Ireland will pay the promissory note payment due in relation to the Irish Bank Resolution Corporation, formerly Anglo Irish Bank, on 31 March 2013; and if he will make a statement on the matter. [2386/13]
View answerAs the Deputy is aware, earlier this month the liquidation of IBRC was agreed in the Houses of the Oireachtas and the IBRC Promissory Notes were replaced with longer-dated Irish Government Bonds. As a result of these actions, the issue of any Promissory Note payment in March of this year or any other year is removed. This Government has taken considerable steps to stabilise and restructure the banking sector. The Irish authorities had been in discussions with the European Central Bank for some time in relation to the replacement of the IBRC Promissory Notes with more sustainable, longer term debt.
The new arrangements go a long way towards addressing the systemic liquidity issue in the Irish banking system and substantially improve the debt position of the State, while materially improving our ability to regain access to the bond markets and exit the Troika programme.
The Promissory Notes were replaced with a portfolio of Irish Government bonds comprising:
- three tranches of €2 bn each maturing after 25, 28 and 30 years;
- three tranches of €3 bn each maturing after 32, 34 and 36 years;
- two tranches of €5 bn each maturing after 38 and 40 years.
The principal benefits from this arrangement are:
- The Promissory Notes are gone. They were exchanged for long term Government Bonds, with an average maturity of 34 to 35 years as opposed to the 7 to 8 year average maturity on the Promissory Notes.
- The maturity of the bonds have significant benefits from a market perspective as it ensures the liability to repay is beyond most credit investors’ time horizon.
- A reduction in the State’s General Government deficit of approximately €1 billion (0.6% of GDP) per annum over the coming years, which will bring us closer to attaining our 3% deficit target by 2015.
- A significant element of the interest payments on the Government bonds, which are held by the Irish Central Bank, will ultimately be returned to the Exchequer in the form of Central Bank dividends.
- The State will be borrowing €20 billion less cash over the next 10 years due to the cashflow benefit of this arrangement. Next year the cash flow benefit will be €2.3 billion (excluding initial transaction costs).
- The arrangement will lead to a substantial improvement in the State’s debt position over time.
- The housing of all the ‘wind down assets’ in one entity (NAMA) will result in just one wind-down vehicle.
The substantial benefits of this arrangement flow from the exchange of the Promissory Notes for far more efficient financing from the State’s perspective.
This Government is aware that this solution does not address other challenges in the Irish banking system. However it was an important step in restoring the health of the Irish banking sector and confidence in the Irish economy. We have been seeking and will continue to seek a comprehensive solution to the remaining structural and funding issues in our banking sector, in conjunction with our European partners. We will continue to participate in the development of the ESM and the structuring of the Single Supervisory Mechanism to ensure that Ireland will benefit, on similar terms to other member states, from developments in this regard.
12. Deputy Mary Lou McDonald asked the Minister for Finance his plans to tackle the one in four in mortgage distress here above and beyond what has already been announced. [10565/13]
View answer36. Deputy John Halligan asked the Minister for Finance the further measures, if any, he proposes to take to force banks in which the Government owns shares to restructure or write down distressed mortgages; and if he will make a statement on the matter. [10632/13]
View answerI propose to take Questions Nos. 12 and 36 together.
I have spoken previously about the range of measures the Government has adopted to assist people who are experiencing mortgage difficulty. These measures include
- The Personal Insolvency Act which is now in place. The Minister for Justice and Equality is urgently putting in place the infrastructure to make the provisions of the Act operational shortly.
- The Minister for Housing and Planning has formally launched the “mortgage to rent” scheme on a nationwide basis. This is a social housing response to the problem of mortgage distress.
- An extensive independent mortgage advice framework has now been put in place by the Minister of Social Protection comprising (i) an enhanced website - www.keepingyourhome.ie (ii) a Mortgage Arrears information helpline, and (iii) the provision of free independent ‘one-to-one’ professional financial advice to borrowers when considering a long term forbearance/resolution offer from their lender. The list of accountants providing this service is located on the www.keepingyourhome.ie website.
In addition, the Central Bank has over the past year had intensive engagement with all regulated mortgage lenders on the development of mortgage arrears resolution strategies. The Central Bank has informed me that in 2013, the Bank is focusing on the implementation of MARS by lenders and is specifically looking at the operational capability of lenders.
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, in particular, now that the process has reached implementation and roll out phase.
The Deputy will also be aware that the Governor of the Central Bank recently stated that the banks are now much better staffed and organised to deal with mortgage arrears and that the Central Bank, as regulator, will now be setting targets for the effectiveness of achieving lasting solutions. However, it will need to be demonstrated to the Central Bank that restructures put in place by all the mortgage lenders will be durable over the medium to longer term. I expect the lenders, many of which now have also had significant leadership change, to respond to the challenge made by the Governor 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. Resolving unsustainable debt is in the best interests of both individuals and the wider economy. This now needs to be progressed quickly, and the recent statement of the AIB CEO that his bank is dealing with 2,000 distressed mortgages a month, and will address the bulk of the whole arrears book by the end of the year, is welcome.
The Code of Conduct on Mortgage Arrears also remains a very important framework governing the relationship between mortgage borrowers and mortgage lenders and provides a number of important protections for a co-operating borrower who is in arrears or who is at risk of going into arrears on the mortgage secured on a primary home. However, the Central Bank is currently conducting a review of the Code to take account of recent developments in the mortgage arrears landscape, the review will ensure that the Code continues to provide these protections and also facilitates effective communication and engagement regarding situations of mortgage difficulty.
With regard to the covered institutions, as Minister for Finance I must ensure that the bank is run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State, as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. Relationship Frameworks have been put in place to govern the relationship between me, as Minister, and the banks in which I have a shareholding interest. The Relationship Frameworks provide that the Boards and management of the covered banks have the responsibility for the operation and day to day decision making of the banks. This includes decisions they make on individual loans, as well as decisions on the management and resolution of loans in arrears, all of which are commercial matters for the individual banks.
Nevertheless, I can assure the Deputy that from an overall policy and financial stability perspective, my Department and the Central Bank are prioritising the mortgage arrears problem. The Government is proceeding on the basis of the recommendations of the ‘Keane Report’ committed to building on the progress made we are further intensifying its efforts to address the mortgage arrears problem.
13. Deputy Caoimhghín Ó Caoláin asked the Minister for Finance his views on the role that the public interest directors in the pillar banks serve; and if so the purpose they serve. [10579/13]
View answerAs I have stated many times before, the primary duty and responsibility of the public interest directors as well as all the other directors is to ensure that the institution on whose board they serve is run properly and appropriately. They serve on many Bank committees as well as the Boards themselves and their breath of experience brings a deeper and wider knowledge base and understanding to all the Banks which they serve.
Our stated policy is get the Banks fully functioning and run on a commercial, cost effective and independent basis to ensure the value of the banks as an asset to the State. The public interest directors have an essential role to play in assisting our aims.
Of course, the legal position is that any director appointed to the board of the covered institutions whether under the Credit Institutions (Financial Support) Scheme 2008 or otherwise is subject to the requirements of company law in relation to the discharge of their responsibilities as a company director. As such, the director is legally bound to act in what he or she believes are the interests of the separate legal entity that is the institution itself. These are the directors so called fiduciary responsibilities. To address the scope for actual and perceived conflicts between the fiduciary duties of the directors of financial institutions under company law and the wider public interest in circumstances where those institutions have received huge financial support from the State, legal clarity, not just to the role of the public interest director but to that of the entire boards of those institutions, was provided under Section 48 of the Credit Institutions (Stabilisation) Act 2010. It provides that the overriding duty of directors of the covered institutions relates to the public interest as set out in the Act.
This recognises the fundamental role that all public interest directors serve.
