Written Answers Nos. 94-99
94. Deputy Pearse Doherty asked the Minister for Finance if he has confirmed with the European Central Bank, that in view of the recent issuance of €5 billion of ten-year bonds to a wide range of investors, that Ireland now qualifies for access to the ECB’s outright monetary transaction scheme. [14574/13]
View answer95. Deputy Pearse Doherty asked the Minister for Finance his assessment on whether this State now meets the criteria for access to the ECB’s outright monetary transaction scheme, following the recent issuance of €5 billion of ten-year bonds to a wide range of investors. [14575/13]
View answerI propose to take Questions Nos. 94 and 95 together.
In my reply to the Deputy’s Question No. 211 of 12 February last, I set out the principal criteria for the ECB’s Outright Monetary Transactions (OMTs) as set out in its press statement of 6 September 2012. Those criteria have not changed. It is clear is that the ECB will decide on the application of OMTs in any particular circumstance to the extent that they are warranted from a monetary policy perspective as long as programme conditionality is fully respected, and terminate them once their objectives are achieved or when there is non-compliance with the macroeconomic adjustment or precautionary programme. It is also clear that the ECB's Governing Council will decide on the start, continuation and suspension of OMTs, following a thorough assessment, in full discretion and acting in accordance with its monetary policy mandate. I believe the ECB’s announcement regarding its OMT programme is a significant development and is viewed as such by the financial markets. We are in the final year of our EU-IMF programme. Our focus is firmly fixed on a successful and durable exit from the programme. The recent highly successful sale of long-term bonds by the NTMA is another very significant step in this process. We continue to assess a number of options in this regard. However, we must respect the fact that the decision on whether to grant OMTs or otherwise in any particular case is a matter for the ECB.
96. Deputy Pearse Doherty asked the Minister for Finance the amounts currently borrowed from the International Monetary Fund under the programme finance agreement; the annual rate of interest payable on these borrowings; and the dates by which the principals must be repaid. [14576/13]
View answerAt the end of February 2013, the nominal liability of loans from the IMF under the EU-IMF Programme amounted to €19.14 billion. The details of the individual IMF loan amounts are set out in table format below. The table also provides information on the IMF loan maturities. The Deputy should be aware that all of this information is available on the website of the National Treasury Management Agency. The interest rate on the IMF Extended Fund Facility is tied to the IMF's market-related interest rate, known as the basic rate of charge. As the IMF loan is provided in Special Drawing Rights, which comprise a basket of four currencies (USD, EUR, GBP, JPY), the interest rate is constructed from three-month Eurepo, US and UK Treasury Bills and Japanese Government Discount Notes rates, plus a margin of 100 basis points. Borrowings of up to three times a country's IMF quota are subject to the basic rate of charge. Borrowings above three times quota attract a surcharge of 200 basis points which is in addition to the 100 basis points margin which forms part of the basic rate of charge. This surcharge rises to 300 basis points three years after the loan size exceeds three times the quota. At the end of February 2013, the overall blended euro equivalent interest rate on Ireland’s IMF loans was 4.17%.
IMF Loan Maturities
|
Nominal Loan Amount (SDR = Special Drawing Rights) |
Date of Drawdown |
Maturity Date (Amortising) |
Term from Drawdown |
|
SDR 5.01 billion |
18 Jan 2011 |
18 Jul 2015 – 18 Jan 2021 |
4.5 – 10 years |
|
SDR 1.41 billion |
18 May 2011 |
18 Nov 2015 – 18 May 2021 |
|
|
SDR 1.32 billion |
7 Sep 2011 |
7 Mar 2016 – 7 Sep 2021 |
|
|
SDR 3.31 billion |
16 Dec 2011 |
16 Jun 2016 – 16 Dec 2021 |
|
|
SDR 2.79 billion |
29 Feb 2012 |
31 Aug 2016 – 28 Feb 2022 |
|
|
SDR 1.19 billion |
15 Jun 2012 |
15 Dec 2016 – 15 Jun 2022 |
|
|
SDR 0.76 billion |
28 Sep 2012 |
28 Mar 2017 – 28 Sep 2022 |
|
|
SDR 0.76 billion |
20 Dec 2012 |
20 Jun 2017 – 20 Dec 2022 |
The total loan amount, as measured in Special Drawing Rights, is 16.54 billion, the euro equivalent of which is €19.14 billion. The average weighted life of these loans is 7.5 years from the date of drawdown.
97. Deputy Pearse Doherty asked the Minister for Finance further to his announcement on 13 March 2013 on dealing with the mortgage arrears crisis, if he will explain what he means by sustainable mortgage solution; if he will specifically outline any metrics that will be used to judge sustainability; and if he will identify the persons that will determine if a mortgage solution is sustainable or not. [14577/13]
View answer98. Deputy Pearse Doherty asked the Minister for Finance further to his announcement on 13 March 2013 on dealing with the mortgage arrears crisis, the independent advice that will be made available to borrowers who are being forced to sacrifice their tracker mortgage benefits in return for agreeing to a restructuring. [14578/13]
View answerI propose to take Questions Nos. 97 and 98 together.
On 13 March 2013 the Central Bank announced new measures to address mortgage arrears, including the publication of performance targets for the main mortgage banks and a consultation process on changes to the Code of Conduct on Mortgage Arrears (CCMA). The new approach is aimed at ensuring banks offer and conclude sustainable solutions for their customers in arrears by setting specific performance targets and proposing revisions to provisioning standards. The Central Bank is proposing to update the CCMA so it continues to provide protection to customers who co-operate with their banks while facilitating and promoting the resolution of arrears cases. The CCMA prevents a lender from requiring a principal private residence borrower in mortgage arrears to change from an existing tracker to another rate as part of any alternative repayment arrangement offered. However, as part of the Central Bank’s review of the CCMA, it is considering whether there is merit in allowing a lender to move a borrower in arrears off a tracker rate, where the lender has offered an alternative arrangement which is advantageous to the borrower in the long term. The purpose of the consultation process that is under way is to gather views on such a proposal to determine if a change is required and warranted. On the issue of advice more generally, as the Deputy is aware as part of the Government’s mortgage advisory service which has been developed under the guidance of the Department of Social Protection, mortgage holders who have been presented with long-term mortgage resolution proposals by lenders can avail of independent one-to-one advice on those proposals. This advice is provided by a panel of accountants drawn from members of the main accountancy institutes in Ireland. I encourage borrowers who have been offered long-term forbearance options by their lender to avail of this free service.
The Central Bank has informed me that, in determining whether a proposal constitutes a sustainable solution, the lender needs to evaluate both actual and prospective affordability for the borrower and the capital implications for the credit institutions in terms of their prudential responsibility to minimise losses. While the Central Bank is not mandating any particular model of restructuring and while sustainable solutions will be arrived at on a case-by-case basis, some fundamental principles must be respected. For example, the affordability assessment of the borrower needs to be based on both their current and prospective future servicing capacity for all borrowings. Assumed prospective future increases in the debt servicing ability of the borrower must be credible and conservative. Lenders need to apply a realistic valuation of the borrower’s assets, in particular their property. This also applies to any assumption of potential asset price appreciation, as well as the estimated costs related to a potential foreclosure of property. Lenders need to use an appropriate interest rate when discounting future income flows, which should take account of the lender’s cost of funds. The Central Bank has advised that it will assess compliance with these principles in its supervisory audit of compliance with the targets, including through analysis of a sample of modifications.
99. Deputy Maureen O'Sullivan asked the Minister for Finance if he will consider Mandate's call for a deferral of the property tax in order to protect the retail industry, protect homeowners in distress, and consumer spending; if he will consider introducing alternative revenue raising measures that will be less damaging to the economy; and if he will make a statement on the matter. [14581/13]
View answerThe introduction of the Local Property Tax will deliver significant economic and fiscal reform by broadening the revenue base to pay for vital public services in a manner that does not directly impact on employment. In that way, it will contribute significantly to meeting the immediate financial requirement of the EU-IMF programme. It will be fair and progressive, with the owners of the most valuable properties paying the most property tax. It is part of a broader approach to the taxation of property, the aim being to replace some of the revenue from transaction based taxes, which have proven to be an unstable source of Government revenue, with an annual recurring property tax, which international experience has shown to be a stable source of funding. The key objective of the Government is to support the creation of jobs. This was evident in the supports included in the Budget and in the recent Finance Bill for small and medium sized enterprises.
As regards homeowners in distress, when introducing the Local Property Tax the Government had due regard to issues such as ability to pay. Owner occupiers whose income is below the applicable threshold – €15,000 for a single person and €25,000 for a couple – are eligible for a full deferral of their LPT liability. Those whose income is €10,000 above these thresholds are eligible for a partial deferral of their LPT liability. These thresholds can also be increased by 80% of any mortgage interest payable up to the end of 2017. Where a liable person no longer satisfies the necessary conditions, amounts deferred prior to the date on which eligibility ceased may continue to be deferred. In all cases, interest will be charged on LPT amounts deferred at a rate of 4% per annum. The deferred amount, including interest, will attach to the property and will have to be paid before the property is sold or transferred. New provisions in the Finance (Local Property Tax) (Amendment) Act 2013 provide that a person who has entered into an insolvency arrangement under the Personal Insolvency Act 2012 may apply for deferral of the LPT that is due during the period for which the insolvency arrangement is in effect. The 2013 Act also provides that a person who suffers an unexpected and unavoidable significant financial loss or expense, as a result of which he or she is unable to pay their LPT without causing financial hardship, may apply for full or partial deferral.
I am informed by the Revenue Commissioners that, for those who do not qualify for deferral of the tax, a number of different payment options have been put in place to assist people in meeting their Local Property Tax (LPT) obligations, including the facility to pay by cash. This will allow liable persons to pay their LPT liability in full or to pay the tax for 2013 in equal instalments over the period 1 July 2013 to the end of December 2013. Revenue's strategy in this regard is to ensure taxpayers have a choice of payment options available to them from which they can choose the method which is most suited to their individual circumstances. I am satisfied that the provisions in the legislation with regard to deferral of liability are suitably targeted at cases of need, and that the tax itself will neither adversely impact on employment nor hinder economic growth in the economy. Accordingly, I am not considering a postponement of the introduction of the tax at this time.
