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Tuesday, 16 Apr 2013

Written Answers Nos. 231-255

Property Taxation Collection

Questions (231)

Michael McGrath

Question:

231. Deputy Michael McGrath asked the Minister for Finance if he will confirm the details that must be supplied to the Revenue under Section 6 of the Finance (Local Property Tax) (Amendment) Bill 2013 in order for a person to avail of the reduction in the valuation of the property arising from an adaptation of the property to enable its use by disabled persons; if he will confirm if the full medical file is required by the Revenue; and if he will make a statement on the matter. [16212/13]

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Written answers

The enactment of the Finance (Local Property Tax) (Amendment) Act 2013 on 13 March introduced a number of amendments to the original Act, which includes relief for properties adapted for use by disabled persons. I would like to clarify that this relief only applies where the adaptation work increases the market value of the property. Section 15A of the Finance (Local Property Tax) Act 2012 (as amended) provides for a reduction in the market value of a residential property that has been adapted for occupation by a disabled person where the adaptation has been grant-aided or approved for grant aid, by a local authority. The person with the disability must occupy the property as his or her sole or main residence after the adaptation is completed. The reduction in value is limited to the lesser of the chargeable value attributable to the adaptation work carried out on the property and the maximum grant payable under the relevant local authority scheme. The relief ends on the sale or transfer of a property that has been adapted, unless the person with the disability continues to reside in the property.

I am advised by the Revenue Commissioners that where adaptation work has increased the chargeable value of a property, as LPT is a self-assessed tax, the liable person him or herself determines the reduction in the chargeable value of the property and calculate the revised chargeable value and decides which value band is relevant to the property. In common with all other liable persons, he or she should then include the appropriate valuation band on their LPT Return, select a payment preference, and submit the return to Revenue, online or in paper.

I am advised by Revenue that because LPT is a self assessed tax, the liable person does not need to submit any supporting documentation to Revenue when filing their LPT Return. All relevant supporting documentation to support the reduction in the property’s chargeable value should, however, be retained by the liable person in the event that Revenue decides to check the validity of the claim at a later stage as part of its normal compliance programme.

In that regard, I am further advised that supporting documentation would not include medical details of the disabled person but would include, for example, evidence of:

- Receipt of local authority grant or approval for grant

- Scheme under which grant received

- Carrying out of adaptation work

- Details of work carried out

- Cost of adaptation work.

Property Taxation Collection

Questions (232)

Michael McGrath

Question:

232. Deputy Michael McGrath asked the Minister for Finance if, in relation to the definition of the chargeable value of a property in the Finance (Local Property Tax) Act 2012, in arriving at a valuation, any consideration can be given to an encumbrance on the property, for example. if persond other than the property owner have a legal right of residence for the remainder of their life; and if he will make a statement on the matter. [16213/13]

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Written answers

The Finance (Local Property Tax) Act 2012 (as amended) sets out how the tax is to be administered and how a residential property is to be valued for Local Property Tax (LPT) purposes. I am informed by the Revenue Commissioners that LPT is a self-assessed tax so in the first instance it is a matter for the property owner to calculate the tax due based on his or her assessment of the chargeable value of the property. The chargeable value is defined in the 2012 Act and means the price that the unencumbered fee simple of a residential property might be expected to fetch on a sale on the open market were that property to be sold on the valuation date of 1 May 2013, in a manner that would secure the best possible price for the property. Therefore, in assessing the market value of a residential property no account may be taken of any encumbrance on the property.

The 2012 Act also provides that a liability for LPT will arise where a person owns a residential property on the liability date which will be 1 May 2013 for the year 2013 and for subsequent years, 1 November in the preceding year. I would like to clarify that where an individual has a long-term right of residence (for life or for 20 years or more) that entitles him or her to exclude any other person from the property, he or she would be considered to be the liable person in respect of the property. Consequently, in the example you have provided, it would appear that the person with the right of residence for the remainder of his or her life may be the liable person for the residential property in question.

Property Taxation Exemptions

Questions (233)

Ciara Conway

Question:

233. Deputy Ciara Conway asked the Minister for Finance if he will examine the circumstances as outlined (details supplied) in County Waterford concerning a private estate whereby home owners pay an annual fee for maintenance of a communal water system, communal sewage system, street lighting, maintenance of open spaces, public liability insurance and road maintenance but are also obliged to pay a property tax; if there are any options regarding exemptions in view of these particular circumstances; and if he will make a statement on the matter. [16215/13]

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Written answers

The Government decided that a universal liability to the Local Property Tax (LPT) should apply to all owners of residential property with a limited number of exemptions. Limiting the exemptions available allows the rate to be kept low for those liable persons who do not qualify for an exemption. The Finance (Local Property Tax) Act 2012, as amended, provides for a number of specific exemptions from the charge as well as the possibility of deferring the charge in certain cases of hardship.

A requirement to pay management fees is not relevant in determining liability. Accordingly, whilst those who are liable for management fees to property management companies may be exempt from LPT for another reason, or may be entitled to avail of a deferral arrangement under the provisions contained in the legislation, there is no specific exemption for the payment of management fees. I have no plans to introduce such an exemption.

I am informed by the Revenue Commissioners that LPT is a self-assessment tax so in the first instance it is a matter for the property owner to calculate the tax due based on his or her assessment of the market value of the property. Liability to management fees and the scale of the fees due would be one of the factors that a property owner would take into account in valuing their property.

Revenue from the LPT will accrue to local authorities and will support the provision of local services. Local authorities provide a broad range of services in the public realm which benefit the wider community and the proper functioning of which are important for the wellbeing of every community and household. These include fire and emergency services; road maintenance and cleaning; street lighting; spatial and development planning and other similar services; regulatory and inspection functions and business support services, as well as libraries, parks, and other recreation and cultural public amenities.

Question No. 234 answered with Question No. 198.

Mortgage Debt

Questions (235)

Finian McGrath

Question:

235. Deputy Finian McGrath asked the Minister for Finance the position regarding arrears in respect of a person (details supplied) in Dublin 9. [16273/13]

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Written answers

The Bank has informed me that due to data protection rules, AIB is not in a position to discuss details of individual customer circumstances. However, AIB has confirmed that, through its subsidiary EBS, it has been engaging with the particular customer referenced in this Parliamentary Question. The bank’s policy in relation to the charging of interest is that surcharge interest is not currently charged on our mortgage loans and borrowers are charged interest on the total outstanding debt owing to the Bank.

Tax Code

Questions (236)

Colm Keaveney

Question:

236. Deputy Colm Keaveney asked the Minister for Finance in view of his decision to extend the fuel excise duty rebate to the passenger transport sector if he will now remove the disparity between the haulage and passenger transport sectors by permitting the latter to reclaim VAT on their input, noting, that coach operators in Northern Ireland are zero rated for VAT and can reclaim VAT on all inputs which is handing a competitive advantage to operators in Northern Ireland; if, as an alternative, given the current fiscal circumstances, to granting a zero rate to the passenger transport sector, he will move to extend the 9% rate, applicable to the tourism sector, to coach and bus operators; and if he will make a statement on the matter. [16277/13]

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Written answers

I am advised by the Revenue Commissioners that the transport of passengers and their accompanying baggage is exempt from VAT in Ireland under paragraph 14(3) of Schedule 1 to the VAT Consolidation Act 2010. In this respect, services provided by the coach and bus sector are exempt from VAT. This means that a person who provides a bus or coach service does not register for VAT and does not charge VAT on the supply of their services. This also includes the hiring of a bus or coach with a driver. Persons who are exempt from VAT cannot recover VAT incurred on goods and services incurred in relation to their business, such as fuel, tyres and mechanic charges, used for the purposes of the person’s coach and bus service. UK passenger transport operators who establish their businesses in Ireland are subject to the same VAT rules as Irish operators. They are exempt from VAT and not zero-rated, and as such not entitled to deductibility in respect of VAT incurred on items such as fuel. In addition, UK passenger transport operators who are not established in the State are not entitled to any refund of VAT incurred in this State for the purposes of carrying out passenger transport activities, whether that service takes place wholly or partially in the State or whether it takes place wholly outside the State. I, therefore, cannot agree that a significant competitive advantage is being handed to operators in Northern Ireland.

VAT law in Ireland and the UK must comply with the EU VAT Directive. As passenger transport was exempt in Ireland on 1 January 1978, it is possible under the VAT Directive to continue to apply that exemption. As passenger transport services were charged at the zero rate in the UK on 1 January 1991, the UK are entitled to continue to apply a zero rate to passenger transport services. It is not possible under EU law for Ireland to apply a zero rate to such services as we did not apply a zero rate to them in 1991.

With regard to applying the 9% VAT rate to the supply of passenger transport services, I would point out that while it is possible under the EU VAT Directive to introduce a charge to VAT, at a reduced rate, on passenger transport services, Ireland has traditionally exempted such activity from VAT and this reduces the cost of those services for both the providers and the users of transport, including public transport. What must be remembered is that the cost of goods and services supplied by persons who are exempt from VAT is always lower than if those persons were subject to VAT, despite the fact that they cannot claim VAT on their inputs.

Property Taxation Collection

Questions (237)

Bernard Durkan

Question:

237. Deputy Bernard J. Durkan asked the Minister for Finance the procedure to be followed in the case of a person (details supplied) in County Kildare in respect of deferral of the local property tax; and if he will make a statement on the matter. [16278/13]

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Written answers

I am informed by the Revenue Commissioners that, based on the information supplied by the Deputy, it appears that the person in question qualifies for a full deferral of LPT. The person can claim full deferral by simply entering “1” in the Box under Option 6 on the back of the LPT 1 Return and sending the completed form to LPT Branch, PO Box 1, Limerick, or alternatively by submitting the Return on-line at www.revenue.ie. By doing so he/she is declaring that he/she satisfies the relevant conditions for deferral, as set out in Chapter 12 of Revenue’s booklet ‘Your Guide to Local Property Tax’, and is entitled to claim full deferral on that basis. The qualifying criteria for a full deferral of LPT, based on the circumstances outlined by the Deputy requires that the property must be the sole or main residence of the person and that his/her gross income does not exceed €15,000.

However, it should be noted that the deferred tax, including interest, will become a charge on the property until the payment is satisfied. If the property is sold or transferred any outstanding LPT charges would have to be satisfied at that point. The interest will be charged on the deferred amounts from the due date of payment until such time as it is paid, at a daily rate of 0.011%, which equates to 4% per annum.

Economic Growth Rate

Questions (238)

Pearse Doherty

Question:

238. Deputy Pearse Doherty asked the Minister for Finance if he will confirm that the economy is back in recession; and if he will make a statement on the matter. [16281/13]

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Written answers

The most recent data show that GDP contacted by -0.4 per cent quarter-on-quarter in the third quarter and by -0.0 per cent in the fourth quarter. In relation to the fourth quarter figure, the decline was very modest, and does not show up at the first decimal point. Importantly, the same statistical release shows that domestic demand stabilised in the second half of 2012, with growth in consumer spending for the first time since 2010. The data-flow in recent months have also been positive on the domestic front as core retail sales have now been in positive territory in year-on-year terms in each of the last seven months. In addition, labour market data show increases in employment in the second half of last year.

My Department forecast GDP growth of 1.5 per cent for 2013 at Budget time. The main downside risks to this forecast remain beyond our control and relate to the external environment as well as some sector specific issues. Since then, a second successive year of negative growth has been forecast in the euro area given the simultaneous deleveraging and consolidation under way in so many euro area countries. A more prolonged downturn in our key international markets would negatively impact upon our export performance. Such a prolonged downturn could arise from a more protracted period of deleveraging or from any re-ignition of the sovereign debt crisis in the euro area.

My Department will publish revised forecasts at the end of April, taking into account all available information.

IMF Loan Issues

Questions (239)

Pearse Doherty

Question:

239. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 96 of 21 March 2013, if he will confirm that the State is paying a higher rate of interest on its borrowings from the International Monetary Fund than the rate of interest nationally applying to similarly-dated sovereign bonds; and the consideration that has been given by his Department and the National Treasury Management Agency to the early repayment of IMF loans through the issuance of sovereign debt. [16282/13]

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Written answers

IMF funding forms part of our EU/IMF programme, and as such cannot be separated out from the funding received from our other programme partners. The possibility of early repayment of IMF loans has not been pursued as an early repayment of IMF funds would trigger automatic mandatory proportional repayments to the EFSF, EFSM, United Kingdom, Kingdom of Sweden and Kingdom of Denmark. In addition the debt market does not contemplate a scenario whereby the entire IMF debt stock would be replaced by government bonds in addition to the amounts already signalled to fund the Exchequer deficit and to replace existing redemptions. Such a prospect would be likely to cause significant upward movement in yields or fail to find sufficient investors to absorb such large concentrated debt issuance.

The question of early repayment of any one lender cannot be treated in isolation from other lenders and market expectations, and therefore does not arise as a realistic prospect.

State Banking Sector

Questions (240)

Pearse Doherty

Question:

240. Deputy Pearse Doherty asked the Minister for Finance if he will confirm the stake held in Bank of Ireland by the American group of investors (details supplied); the consideration paid for that stake; the stake held by the State in Bank of Ireland; and the consideration paid for that stake. [16283/13]

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Written answers

The actual amount sold by the NPRF to the American group of investors was 10.5 billion Bank of Ireland (BOI) shares at a price of 10c per share. The disposal of these shares took place in two tranches. The first disposal for €0.24 billion settled on 2 August 2011 with the second, and final, tranche for €0.81 billion settling on 17 October 2011. This stake represents a shareholding of approx. 35% of the equity in BOI. As a consequence of this disposal, the State’s gross investment in BOI peaked at €4.7bn which was €1.0bn lower than it otherwise would have been. From a net investment point of view, the State received circa €0.5bn for its warrants in 2010 which were originally attached to our preference shares, and in January 2013 the State also successfully disposed of the €1.0 billion Contingent Capital instruments in Bank of Ireland for a profit of €10m. These two “capital” transactions reduced our net investment position to circa. €3.2bn which now takes the form of our remaining 15% equity stake and preference shares with a nominal value of €1.8bn.

However the State has also received significant income from the bank in the form of coupons and dividends on its investments as well as ELG fees. Taking all these into account to calculate what could be called a net cash position with the bank, the figure is nearer €1.1bn and I am confident that Bank of Ireland will ultimately repay this remaining amount to the taxpayer.

Banks Recapitalisation

Questions (241)

Pearse Doherty

Question:

241. Deputy Pearse Doherty asked the Minister for Finance if he will estimate the additional provision that will need to be made in the accounts of Bank of Ireland; if that bank has to write down the value of non-performing loans to the value of the underlying security; and if he will confirm that such a write-down will result in demands to the State to provide additional capital. [16284/13]

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Written answers

The Deputy may be aware that the rules relating to the correct level of provisioning are determined by the relevant accounting standards. It is the responsibility of the Bank’s Board of Directors to ensure that these rules, including the correct value of the underlying security for provisioning purposes, have been properly applied and that this is subject to independent external audit review. Nothing has been brought to my attention to suggest the Bank has not applied the rules correctly and accordingly I am not aware of any requirement for the State to provide additional capital.

Banking Sector

Questions (242)

Pearse Doherty

Question:

242. Deputy Pearse Doherty asked the Minister for Finance if he is concerned that following the recent sale by KBC and Banco Santander of their 21.4% share in the Polish bank, Bank Zachodni WBK, for €1.2bn, that Allied Irish Banks in which he holds 99.8% of the shares, sold its 70% share in the same bank for €2.94bn in 2010. [16285/13]

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Written answers

As the Deputy will be aware the sale of Bank Zachodni WBK in 2010 reduced the capital injected by the State into AIB. It is unfortunate that the bank was required to sell the asset in 2010, however given the scale of losses incurred by AIB in recent years, the bank was required to generate capital in any way that it could in order to reduce the burden on the State.

Banking Sector

Questions (243)

Pearse Doherty

Question:

243. Deputy Pearse Doherty asked the Minister for Finance if he will confirm the current deficit in the pension scheme of Bank of Ireland, in which he owns 15% of the shares and in which he owns a substantial preference shareholding; and if addressing the deficit may result in demands to the State to provide additional capital. [16286/13]

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Written answers

According to the 2012 Annual Report of Bank of Ireland which was published last month, the pension deficit at 31 December 2012 was €1.2bn, an increase of €0.8bn from 2011. The primary driver of this increase was a reduction in discount rates due to the significant fall in yields on high-quality corporate bonds rather than the underlying scheme assets which actually appreciated in value. It is my understanding that the Chief Executive Officer of the bank is currently in discussions with his staff and the pension trustees regarding options to address the pension deficit. I will await the outcome of these discussions, however, I do not envisage the State having to inject more capital into the bank as a result.

Banking Sector Remuneration

Questions (244)

Pearse Doherty

Question:

244. Deputy Pearse Doherty asked the Minister for Finance further to the recent publication of the report and accounts for Bank of Ireland for 2012, in which the Chief Executive Officer confirmed that he had waived €67,000 of his remuneration, if he has sought waivers of salary at Bank of Ireland; and if he will make a statement on the matter. [16287/13]

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Written answers

As reported in Bank of Ireland’s Annual Reports since 2009 the Chief Executive Officer of Bank of Ireland has waived his remuneration each year by €67,000. Each year, since 2009, all Non-Executive Directors have also reduced their fees by 25%. In 2012 the total director’s remuneration at Bank of Ireland fell to €2,564K from €3,351K in 2011 – a reduction of 23%. I, and the Government, acknowledge that sacrifices and changes have been made to date by bank employees at all levels. Much has been achieved.

However, when publishing the Review of Remuneration Practices and Frameworks at the Covered Institutions, on 12 March 2013, I indicated that the Government had formed the view that with the remaining covered institutions still incurring losses it was an inescapable conclusion that the cost base of the institutions needs to be reduced further. This is essential if they are to return to profitability and to be in a position to support the economy.

Therefore, on behalf of the Government, I have now directed the banks, including Bank of Ireland, to come up with plans as to how they intend to address this issue in a manner that can help meet the State’s objectives. I expect the value of those plans to mean a saving of 6% - 10% of total remuneration costs, through reductions in payroll and pension benefits, new working arrangements and structures that deliver efficiency gains.

Banks Recapitalisation

Questions (245)

Pearse Doherty

Question:

245. Deputy Pearse Doherty asked the Minister for Finance his position regarding the provision of additional capital to Bank of Ireland, should that bank decide to pursue a new rights issue. [16288/13]

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Written answers

Bank of Ireland has not indicated to the market or my Department that it has any intention to raise more capital from shareholders at this time. I can, however, confirm for the Deputy that, should Bank of Ireland decide to do so at some point in the future, I would naturally consider the options open to the State in this regard at that time. If the mechanism chosen was a rights issue, any decision in relation to exercise of rights attaching to our current holding would be made having assessed the best interests of the State.

Savings Clubs

Questions (246)

Alan Farrell

Question:

246. Deputy Alan Farrell asked the Minister for Finance if he has any remit to protect consumers who contribute to savings clubs over a period of 12 months in cases where the company may go into liquidation; and if he will make a statement on the matter. [16300/13]

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Written answers

Neither I nor the Central Bank have any role in relation to the supervision of savings clubs. However, I urge consumers to exercise caution when contributing to such clubs over a yearly period. The Deputy may wish to draw his concerns to the attention of the National Consumer Agency. The Agency has responsibility in the area of consumer education.

Fuel Rebate Scheme

Questions (247)

Michael Healy-Rae

Question:

247. Deputy Michael Healy-Rae asked the Minister for Finance if he will clarify the newly announced fuel rebate for coach operators; if this will apply and be allowed to operators of school transport; and if he will make a statement on the matter. [16345/13]

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Written answers

The commercial diesel excise relief that I announced in the Budget was extended in the Finance Bill to cover all licensed passenger transport. Any school bus with a national road passenger transport licence granted under Section 2 of the Road Traffic and Transport Act 2006 will qualify for the relief.

Question No. 248 answered with Question No. 224.

IBRC Liquidation

Questions (249)

Maureen O'Sullivan

Question:

249. Deputy Maureen O'Sullivan asked the Minister for Finance further to a Parliamentary response in relation to the liquidation of the Irish Bank Resolution Corporation in which he states the following (details supplied), his views on the concerns regarding several law firms and IT suppliers that were paid apparently because they had threatened they would withdraw their services; if this is the case, the way in which it was justified that assets be moved from the employees to the creditors; and if he will make a statement on the matter. [16360/13]

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Written answers

I have been advised by the Special Liquidators that, in an insolvency situation, duress payments to unsecured creditors are often required to be made to ensure the on-going provision of services. Such payments are a matter for the Special Liquidators and I have no role in the initiation or authorisation of these payments. As the Deputy is aware, the legislation surrounding liquidation ranks employees as preferential creditors in respect of certain amounts owing to them on a winding up, including accrued wages and salaries, holiday pay, sick pay, statutory redundancy, pensions contributions and claims for damages arising from accidents. Any claims over and above that described above will rank as an unsecured claim in the liquidation process.

There are standard rules which apply to the distribution of the assets of companies in liquidation and it would not be appropriate for me to interfere with these rules by way of the use of Section 9 of the Irish Bank Resolution Corporation Act 2013 or otherwise. Such interference could have the impact of diverting the assets of IBRC from one category of creditor to another outside the normal Companies Acts priorities. Any such interference would be open to challenges in the Irish Courts by unsecured creditors.

The Special Liquidators have advised that there is on-going interaction between the IBOA and the Special Liquidators. The Special Liquidators have indicated that they are highly cognisant of the issues that the IBOA have been highlighting and that significant steps have already been taken to address those concerns including the announcement on Tuesday 19 March by the Special Liquidators that contracts of staff would be extended out to 7 August with one month’s notice thereafter. This should provide some reassurance to IBRC staff relative to the common position in liquidations where staff contracts are terminated.

Question No. 250 answered with Question No. 219.

Banking Sector

Questions (251)

Pearse Doherty

Question:

251. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 193 of 26 March 2013, the way advertised threat of forcing banks to write down the value of problem loans to the value of the underlying security is any different to pre-existing requirements under International Financial Reporting Standards and particularly International Accounting Standard 39. [16362/13]

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Written answers

The Central Bank has informed me that it is minded to require credit institutions to set the present value of future cash flows at zero other than those arising from disposing collateral for the purpose of calculating the amount of the impairment provision required. This applies without exception, to all loans in arrears greater than 90 days which have not been subjected to restructured arrangements on a sustainable basis at the time of assessment. This will force credit institutions to value assets on their books which are 90 plus days in arrears and not sustainably restructured based on the expected net proceeds of collateral disposal only. Credit institutions would not be allowed to incorporate assumed or expected future cash flows from other sources into these valuations as may be the case currently.

Mortgage Resolution Processes

Questions (252)

Pearse Doherty

Question:

252. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 194 of 26 March 2013, in which he stated that banks have been given targets of proposing sustainable mortgage solutions to 20% of mortgage loans that are 90 days in arrears by 30 June 2013, and that this would equate to 20% of 94,488 PDH and 28,421 BTL loans by reference to arrears at 31 December 2012, his views on whether it is feasible that banks can propose solutions to 25,000 mortgage accounts in the forthcoming three months, equivalent to 2,000 per week or 400 per working day; and if the Central Bank of Ireland will be monitoring progress on reaching targets on an ongoing basis. [16363/13]

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Written answers

The Deputy refers to the targets set by the Central Bank which require the main lenders to systematically work through their mortgage book to offer durable solutions to mortgage holders covering arrears cases that are 90 days or more overdue. The Public Targets will have the following elements:

- Quarterly targets will be set in relation to the number of sustainable solutions proposed to customers. These will become progressively more demanding over time. The application of targets will commence at the end of Q2

2013, and will be enhanced in subsequent quarters, with 2014 targets to be set in due course;

- Progressively more demanding quarterly targets will be set for the conclusion of sustainable solutions. These will apply from the end of Q4 2013 onwards; and

- Targets regarding subsequent performance of these solutions will be set.

The Central Bank has informed me that, while demanding, the level of the targets have been calibrated taking account of the current operational capability of the banks’ arrears management. The banks will be required to publish their performance against the targets and make quarterly reports to the Central Bank. The Central Bank will consider each bank’s performance against the targets, including assessing whether the modifications provided are in fact sustainable solutions.

Banks Recapitalisation

Questions (253)

Pearse Doherty

Question:

253. Deputy Pearse Doherty asked the Minister for Finance if he shares the view of the European Commission, from a statement by its spokesperson on 26 March 2013, that the European Stability Mechanism, to which he has already contributed €509m, will not be used to recapitalise banks. [16364/13]

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Written answers

As the Deputy will be aware, the European Council in October 2012 reaffirmed that “the Eurogroup will draw up the exact operational criteria that will guide direct bank recapitalisations by the European Stability Mechanism (ESM), in full respect of the 29 June 2012 euro area Summit statement. It is imperative to break the vicious circle between banks and sovereigns.” The Taoiseach and Chancellor Merkel spoke together following the October 2012 European Council and discussed the unique circumstances behind Ireland’s banking and sovereign debt crisis, and Ireland’s plans for a full return to the markets. They reaffirmed the commitment from June 29th to task the Eurogroup to examine the situation of the Irish financial sector with a view to further improving the sustainability of the well performing adjustment programme. They recognised, in this context, that Ireland is a special case, and that the Eurogroup will take that into account.

The Government is still heavily involved in drawing up the operational criteria that will guide direct bank recapitalisations by the European Stability Mechanism (ESM), in full respect of the 29 June 2012 euro area Summit statement. Ireland continues to be fully engaged in this process within the Eurogroup and among Heads of State or Government. Furthermore, officials from my Department and the NTMA also attend technical meetings with the ESM and other member states. Discussions remain on-going in relation to this issue and no conclusion has been reached. Notwithstanding these discussions, the Government will also continue to explore any market opportunities for our remaining banking assets, to get a return of any of the sums used to bail out the banks.

Despite recent media reports, the Government’s policy and view in relation to ESM has not changed and we will continue to engage with other Member States to design the ESM Direct Bank Recap facility, in order to have a sufficient instrument operating with the capability of breaking the vicious circle between banks and sovereigns.

NAMA Property Sales

Questions (254)

Pearse Doherty

Question:

254. Deputy Pearse Doherty asked the Minister for Finance the procedure adopted by the National Asset Management Agency when a substantial multi million euro offer is made to the Agency for a property on its foreclosure list which is not presently listed for sale. [16365/13]

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Written answers

The Deputy will be aware that NAMA’s interest in property is, generally speaking, that of a lender holding security for its loans rather than that of an owner. Individuals who have an interest in a property that is related to a NAMA loan are encouraged therefore to make direct contact with the owner of the property or, in the case of property that is subject to enforcement, with the appointed receiver. NAMA advises that all enforced properties securing its loans are listed on its website, www.nama.ie, along with the details of the appointed receiver. Where interested parties contact NAMA directly, the Agency will work to facilitate engagement with the debtor or receiver. I am advised by NAMA that, in the case of enforced properties, it is a matter for the Receiver to assess any proposals made by prospective purchasers and to make recommendations to NAMA in relation to such proposals. NAMA advises that irrespective of whether a property is listed for sale or not, a Receiver will as a matter of course consider any approaches from interested parties and will assess all proposals on their merits. In many instances, after receiving such approaches, sales agents have been appointed to market the property and to deal with offers from the original bidder and other interested parties. This is in line with NAMA’s requirement that properties securing its loans should be, wherever feasible, openly marketed. Where it is decided however that the proposal is premature or unacceptable, the Receiver will advise the interested party of this and the status of the property in terms of readiness for sale. NAMA advises that there are myriad reasons why a property might not be available for sale at any point in time. For example, the Receiver may be working through outstanding title defect or ownership, planning and compliance issues or the commercial strategy may be to rent a property rather than to sell it now in order to maximise its long-term recoverable value. In all instances, the Receiver will take appropriate steps to maximise the value of the asset and the strategy in relation to the asset and the timing of any sale will be geared towards achieving this. NAMA have advised me that where a person makes an offer to a Receiver and they have not received an acknowledgement, they are welcome to submit such an offer to Head of Asset Recovery, NAMA who will discuss the matter with the Receiver.

State Banking Sector

Questions (255)

Pearse Doherty

Question:

255. Deputy Pearse Doherty asked the Minister for Finance if he will provide his assessment of the performance of Permanent TSB, in which he owns 99.5% of the shares, and which has just published its report and accounts for 2012. [16366/13]

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Written answers

As the Deputy will be aware Permanent TSB had a challenging year in 2012 and its results are a reminder of legacy issues in our banking system. The appointment of Jeremy Masding as CEO in February 2012 began an overdue process of fundamental restructuring in PTSB. Amongst many actions taken during 2012 the senior management team was restructured, an asset management unit was established, branches were closed, a voluntary redundancy scheme was completed and Irish Life and PTSB Finance were sold. During the same period PTSB agreed a strategic direction with the Troika and delivered on the restructuring actions required in its Restructuring Plan.

I will now comment on some elements of the financial accounts, which are laid out in significantly more detail in the recently published annual report for 2012.

While high deposit rates eroded net interest margin in 2012, I am satisfied that management took action to address this issue in the latter part of 2012 which should result in an improved net interest margin in 2013. Reduced deposit rates are required for a sustained profitable Irish banking system.

PTSB also reduced its homeloan Standard Variable Rate (SVR) to bring it in line with market rates for this type of product. As the Deputy will appreciate, this had a negative impact on net interest margin in 2012 but had a positive impact for SVR customers.

While operating costs were somewhat lower in 2012, restructuring actions taken in 2012 should have an additional positive impact in 2013. With regard to staff costs, which are a subset of operating costs, I have issued instructions to PTSB to develop a plan to deliver savings of 6-10% on its payroll and pension costs.

Provisions for impairments were high as mortgage arrears continued to rise, from already high levels, and resulting from an in-depth independent review of its Commercial Real Estate (“CRE”) loan book. Management took action early in 2012 to address the significant operational issues in its arrears management operations and I expect that these improvements will allow PTSB to significantly increase the volume of sustainable long term treatments offered to customers in 2013, as required by Government and the Central Bank. In addition PTSB outsourced the servicing of its CRE loan book to Certus, a contract which will significantly increase the resources and expertise allocated to this loan book.

On the balance sheet the funding position of PTSB improved during 2012 with Monetary Authority funding reduced by €3.3 billion including the elimination of ELA of €2.3 billion.

The Deputy will also be aware that included in the results are payments to the State. During 2012 PTSB accrued ELG costs of €165 million and paid interest of €40 million on the Convertible Contingent Capital Notes.

In summary the results highlight many of the issues in our banking system which require attention and while it will be challenging to achieve a full resolution of all legacy issues in PTSB, I am satisfied that the new management team have made progress in 2012, which combined with their ambitious restructuring plans for 2013, should deliver concrete results particularly regarding improved profitability and delivery of sustainable treatments for customers in mortgage distress. My officials will continue to monitor progress in PTSB closely.

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