Written Answers Nos. 210-228
211. Deputy Pearse Doherty asked the Minister for Finance if he will confirm the number of employment contracts at the Central Bank of Ireland that provide for termination bonuses, such as that recently reported in the case of the Financial Regulator. [18465/13]
View answerI am informed by the Central Bank that no other Central Bank employment contracts provide for termination bonus payments. For clarity, a total of 4 actuaries in the Central Bank have phased retention payments amounting to a potential maximum of approximately 14% of annualised salary for the period 2011 to end 2014 when the scheme ends. No other such payments are in place in the organisation.
212. Deputy Pearse Doherty asked the Minister for Finance if he will confirm the number of employment contracts at the National Treasury Management Agency that provide for termination bonuses, such as that recently reported in the case of the Financial Regulator. [18466/13]
View answerI am advised by the National Treasury Management Agency (NTMA) that it is not aware of the details of the specific payment or the nature of the contract referred to by the Deputy. In a very limited number of cases where it employs staff with very marketable skills on short fixed-term contracts, it includes contract completion payments as part of the contract as an incentive to the employee concerned to serve the full term of the contract. No member of the NTMA senior management team has such an arrangement in their contract. These fixed-term contracts should not be confused with the specified purpose contracts under which employees assigned to NAMA are employed and which do not include such contract completion payments.
213. Deputy Pearse Doherty asked the Minister for Finance if he will confirm the status of salary waivers in 2013 at the National Treasury Management Agency and National Asset Management Agency, and specifically if 15% waivers by staff earning more than €200,000 are continuing; and if he will confirm if the Croke Park 2 agreement will mean additional cuts to salaries on top of the waivers. [18467/13]
View answerOn 21 December 2011, I wrote to the Chief Executive of the National Treasury Management Agency (NTMA) requesting all NTMA employees whose salary exceeds €200,000 to consider waiving at least 15% of their salary or such lesser amount of salary as exceeds €200,000. NAMA staff are employees of the NTMA. Under section 42 of the National Asset Management Agency Act 2009, the NTMA assigns staff to NAMA. All relevant NTMA employees agreed to waive such amounts during 2012. I am informed by the NTMA that thirteen of its 522 employees fall within this category. Ten of these – including the Chief Executives of the NTMA, NAMA and the NDFA and the other six members of the NTMA senior management team - are continuing to waive such amounts.
With regard to the Croke Park 2 proposals, following the rejection by the Public Services Committee of Congress of the LRC proposals on a successor agreement to Croke Park, the Government will reflect on the outcome of the ballot and the manner in which the required payroll savings can be achieved this year. In that context it would be premature to comment on the way in which any proposed measures may affect a particular group of employees.
214. Deputy Pearse Doherty asked the Minister for Finance if he has any concerns for the future of KBC Ireland which recently reported an additional bailout by its parent of €380m for 2012 after another year’s losses and which now has €2.7 billion of Irish deposits and €14 billion of Irish loans, having grown its deposit book by 60% in 2012 with relatively high deposit interest rates. [18469/13]
View answerUltimately decisions by foreign institutions to remain active in the Irish market are taken at the level of the parent entity. In the specific case of KBC Ireland, the bank is regulated by the Central Bank of Ireland as a Credit Institution in the Republic of Ireland. In addition its parent, KBC Group, is profitable and has a strong liquidity position and the Group is currently providing the necessary capital and liquidity to its Irish subsidiary. These are challenging times for the whole banking sector in Ireland, not just for the domestic banks. KBC Ireland is an important provider of credit to the Irish housing market and as the Deputy rightly points out the Bank has extended some €14 billion of credit to the Irish economy. This is a very significant investment in Ireland, predominantly in the residential mortgage market.
It should be noted that KBC Ireland anticipate that increasing economic stability will lead to more sustainable conditions in 2013 with the bank hoping for reduced credit costs in the year ahead. I welcome KBC Group’s commitment to the Irish market and note that they are planning to develop their business in Ireland further with new retail branches and distribution platforms to be rolled out in 2013 and continued expansion of their retail product portfolio. This will add welcome competition in the retail banking market in Ireland.
In the first quarter of 2013 the parent company invested €125m in its Irish subsidiary to support on-going business development. In April KBC Ireland opened a new high street retail office in Cork, which is its first new office outside of Dublin. The Cork office, I understand, will employ 28 people initially and the Bank has said they have plans to open new offices in other cities during the course of 2013. Since 2011, employment numbers at KBC Ireland have increased from 521 to 650.
215. Deputy Pearse Doherty asked the Minister for Finance if he will provide an assessment of the risk to the financial health and profitability of Permanent TSB as well as to the public interest, from the announced resignation of persons (details supplie) from the board of PTSB in May 2013; and if he will make a statement on the matter. [18470/13]
View answerAs the Deputy will be aware it is a matter for the Chairman of Permanent TSB to ensure that the board of directors is of sufficient size and has an appropriate mix of expertise to comply with governance, company law and regulatory requirements. I have been informed that the current board complies with all relevant requirements but is subject to on-going review and renewal as required. As the Deputy will be aware the directors have fiduciary obligations to the company and have obligations under Section 48 of the Credit Institutions (Stabilisation) Act.
216. Deputy Pearse Doherty asked the Minister for Finance following news that the National Asset Management Agency is selling large portfolios of loans which bundle together loans to a single borrower, if he is concerned that the borrower may derive a benefit from providing pre-sale advice to certain bidders. [18471/13]
View answerI am advised by NAMA that it cannot preclude market participants from approaching debtors to discuss their property assets or to indicate potential interest in acquiring either properties or loans. Nor can NAMA preclude debtors from engaging with such potential purchasers. To do either would be counterproductive and could stifle normal commercial discussions in the property market and in particular could discourage international investors from exploring acquisition possibilities in Ireland. However, NAMA has very clear rules regarding the open marketing of loans or of properties on which it holds security.
As set out in response to recent Parliamentary Questions on the topic of NAMA loan sales [44286/12, 44287/12, 44288/12, 44189/12, 1549/13, 8753/13, 8754/13], NAMA has adopted a very thorough approach in line with accepted international market best practice for the sale of loan portfolios. As part of the formal sales process, potential purchasers are required to provide an undertaking that they will not engage with the debtor or other obligors at any stage during the sales process. Both debtors and potential purchasers are aware that the infringement of agreed protocols or undertakings may have an impact on NAMA’s decisions as to whether and to whom it sells a particularly portfolio. Furthermore, where NAMA approves the sale of any loan or approves the sale of any secured property by a debtor, it requires a confirmation that the purchaser is not connected to the debtor or other obligors.
Having ensured, as far as possible, that the sales process is conducted on the basis of all parties having equal access to the necessary information at the same time and that such primary sales are not made to the relevant debtors or to connected parties, NAMA advises that it has no legal right to intervene in any further future management or sales of the loan or underlying property in question post disposal.
217. Deputy Pearse Doherty asked the Minister for Finance if he will outline the safeguards which exist to prevent the special liquidator at Irish Bank Resolution Corporation from being subjected to improper influence from any quarter including borrowers or Government Departments, in his duties to maximize the value of IBRC assets. [18472/13]
View answerThe Special Liquidators have been appointed for the purposes set out in the IBRC Act 2013 and are subject to the duties and obligations set out in that legislation. In addition the Special Liquidators are also subject to the restrictions and obligations as set out in the Special Liquidators engagement. As accountants, appointed as Special Liquidators, normal professional standards apply to all conduct. Independent third parties are being engaged to value the loan assets of IBRC (in Special Liquidation). The appointment of independent third parties ensures that the valuation and sales process is managed without improper influence or conflict of interest. Should a bid not be received that is equal to or in excess of the independent valuation obtained, the loan will transfer to NAMA at the independent valuation price.
218. Deputy Pearse Doherty asked the Minister for Finance if it is appropriate to extend the anti-lobbying rules, which apply to the National Asset Management Agency, to the liquidation of Irish Bank Resolution Corporation. [18473/13]
View answerThe liquidation of IBRC is similar to any other liquidation with the exception that the Special Liquidators have been appointed by the Minister under the Irish Bank Resolution Corporation Act 2013 rather than appointed by the Courts. As such the Special Liquidators are obliged to follow normal Companies Acts priorities throughout the liquidation process and act in a manner that ensures the assets of IBRC are managed in a way which maximises the overall return for all its creditors including the State subject to the provisions of the IBRC Act.
The Special Liquidators are in the process of devising and implementing a valuation and sales process in respect of the assets of IBRC. Any assets that are not sold to third parties for a value higher than the independent valuations will be sold to NAMA at that price. Assets that are transferred to NAMA will be subject to the anti-lobbying rules contained in Section 221 of the NAMA Act 2009. As the Special Liquidator will only be holding the assets for a short period and the sale is guided in a specified manner, the anti-lobbying provisions were not applied to it. As accountants, appointed as Special Liquidators, normal professional standards apply to all conduct.
219. Deputy Pearse Doherty asked the Minister for Finance further to the European Central Bank press conference on 4 April 2013 in which the President of the ECB, Mr Mario Draghi, referred to OMTs and their precise rules, his views that the rules surrounding the criteria for access to the Outright Monetary Transaction scheme are precise; and if so, if he will confirm if the State meets the criteria for accessing funding under the OMT scheme at this time. [18474/13]
View answerAs I informed the Deputy previously (Parliamentary Questions of 12th February 2013, (No. 211) and of 21st February 2013, (Nos. 94 & 95) the Governing Council of the ECB made a decision to establish the Outright Monetary Transaction (OMT) scheme on 2nd August 2012, and issued a press statement on 6th September 2012 which outlined its technical features. According to this ECB Press Release, the purpose of OMT is: “Safeguarding an appropriate monetary policy transmission and the singleness of the monetary policy”
This press statement sets out that a necessary condition for OMT is strict and effective conditionality attached to an appropriate European Financial Stability Facility/European Stability Mechanism (EFSF/ESM) programme. Such programmes can take the form of a full EFSF/ESM macroeconomic adjustment programme or a precautionary programme (Enhanced Conditions Credit Line), provided that they include the possibility of EFSF/ESM primary market purchases. The ECB have also stated that OMT may also be considered for Member States currently under a macroeconomic adjustment programme “when they will be regaining bond market access”. The ECB press statement also notes that the ECB’s Governing Council will decide on the start, continuation and suspension of OMT, following a thorough assessment, in full discretion and acting in accordance with its monetary policy mandate. The decision on whether to grant OMT or otherwise in any particular case is therefore a matter for the ECB.
I believe the ECB’s announcement regarding its OMT programme is a significant development and is viewed as such by the financial markets. I also note Mr Draghi’s comments that one of the reasons why the ECB’s OMT scheme is successful “was because governments made significant progress in undertaking both fiscal consolidation and, in some cases, structural reforms.”
We are now in the final year of our EU IMF programme and our focus is now firmly fixed on a successful and durable exit from the programme. The recent highly successful sale of long term bonds by 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 OMT or otherwise in any particular case is a matter for the ECB, which is an independent body.
220. Deputy Pearse Doherty asked the Minister for Finance if he is concerned at the criticism of the former management of Halifax Bank of Scotland by the British Parliamentary Commission on banking standards in its fourth report on 5 April 2013; and if he will confirm that he has confidence in a person (details supplie) of Bank of Ireland who previously occupied a senior position in HBOS. [18475/13]
View answerI can confirm to the Deputy that nothing has been brought to my attention to suggest that the individual referred to is not a fit and proper person to fill the role of Governor of the Bank of Ireland. In advance of the Bank’s Annual General Court scheduled to be held tomorrow, 24th April, I am entitled to vote on a number of Resolutions attaching to the stock held by the State, one of which relates to the election and re-election of the Bank’s Directors, including the Governor. I can confirm for the Deputy that I will be voting in favour of this Resolution.
221. Deputy Pearse Doherty asked the Minister for Finance if he will outline any relevant lessons and recommendations for the Irish banking sector, following the recent fourth report by the British Parliamentary Commission on banking standards on 5 April 2013. [18476/13]
View answerThe recent Fourth Report of the House of Lords / House of Commons Parliamentary Commission on Banking Standards examines why HBOS failed and what the failure says about the culture and standards in UK Banking. There are clearly lessons to be learnt from this analysis of the decline of HBOS particularly as the Report makes it clear that to an extent its dramatic demise was ‘an accident waiting to happen’ and it in this context senior management and the Financial Services Authority failed to follow through on the implications of its high risk growth strategy despite the fact that this was signalled as early as 2004.
The Report clearly highlights failures at a number of levels – the senior management of the bank, the internal risk control, at the regulatory level and within the financial markets. As set out in the Report in relation to the HBOS failure whilst structural and regulatory reform at national and European level are key to future financial stability it does not diminish the need for appropriate management and supervision of traditional banking activities. The case of HBOS also highlights that prudential supervisors cannot rely on financial markets to do their work for them as neither the stakeholders nor rating agencies exerted the effective pressure that might have acted as a constraint upon the flawed strategy of the bank.
As the Deputy is aware, the situation in relation to the Irish banking system has been the subject of reports and analysis by Honohan, Nyberg and Regling and Watson. The Government continues the process of addressing the regulatory failures of the past. This week the Central Bank Supervision and Enforcement Bill will be debated at Committee Stage. This Bill further enhances the supervisory and regulatory framework under which financial institutions in Ireland will operate into the future. Separately this will be complemented by the enhancement of the supervisory framework at the EU level, and as the Deputy will be aware, much progress has been made on this agenda during the course of Ireland’s Presidency of the European Union.
222. Deputy Pearse Doherty asked the Minister for Finance if he will outline the activity over the past year of the National Asset Management Agency Advisory Board comprising persons (details supplied); and if he will outline any recommendations made by that board to him and the subsequent treatment of any such recommendations. [18477/13]
View answer223. Deputy Pearse Doherty asked the Minister for Finance if he will provide an assessment of the utility over the past year of the National Asset Management Agency Advisory Board comprising persons (details supplied) [18478/13]
View answerI propose to take Questions Nos. 222 and 223 together.
I met with the group on four occasions in 2012 and once to date in 2013. It is also open to the Chair to contact me as issues arise. The group’s advice to me primarily relates to the strategy of NAMA as proposed by the board of NAMA; the remuneration of the senior executives of NAMA and any further advice that I may seek on any matter relating to NAMA. The group operates on an informal basis and reports directly to me. Any issues raised are discussed with senior officials within my Department. The advisory group plays a valuable role and I am satisfied it is working effectively and with the progress to date. However it is important to note that this group is not a shadow Board nor is it intended to provide a route for me as Minister to get involved in the day to day running of the Agency.
224. Deputy Pearse Doherty asked the Minister for Finance the reason he did not advertise the vacancy on the National Asset Management Agency board before deciding to appoint a person (details supplied) to the position of board member as announced by him on 5 April 2013; and if he considers the notification of vacancies on the NAMA board by his Department in February 2012 with a closing date for expressions of interest of 6 March 2012, sufficient to optimize the current pool of potential candidates from which to make an appointment to the board. [18479/13]
View answerMr. Ellingham was appointed to the board of NAMA as he has significant international experience in finance as well as his experience as a member of the board of IBRC. His experience as a board member of IBRC, since October 2011, will prove invaluable to NAMA as they acquire loans from IBRC following its liquidation.
225. Deputy Pearse Doherty asked the Minister for Finance if the National Asset Management Agency has compared its internal rate of return with internal rates of return targeted by investors bidding for, and buying, NAMA properties and loans; and if he will make a statement on the matter. [18480/13]
View answerI am advised by NAMA that, for the purpose of measuring and comparing the profitability or attractiveness of potential transactions or projects, it uses a range of qualitative and quantitative metrics. The decision by NAMA on whether or not to proceed with a transaction or project is made by reference to whether it is in the best interests of the State, in accordance with Section 10 of the NAMA Act. When measuring the projected internal rate of return or discounted cash flows on a particular transaction or project, NAMA takes account of the unique risks and characteristics of that transaction or project. The market may or may not use a different discount rate depending on their own investment objectives but that is not a matter NAMA can control.
226. Deputy Michael McGrath asked the Minister for Finance the average maturity of each of the components and the overall average maturity of the general Government debt; and if he will make a statement on the matter. [18487/13]
View answerThe latest estimate for Ireland’s general government debt at end-2012, which was published yesterday as part of the March EDP Returns, stood at EUR 192 billion. Details of the composition of this debt by its maturity are set out in the table below.
General Government debt as at end-2012
|
Instrument |
Outstanding |
Average Residual Maturity |
|
€bn |
Years |
|
|
Government Bonds |
88 |
6.2 |
|
EU-IMF Programme |
56 |
9.0 |
|
State Savings |
16 |
* |
|
Promissory note (IBRC) |
25 |
18.25** |
|
Short term debt |
3 |
0.13 |
|
Other General Government debt |
4 |
*** |
|
Total General Government debt |
192 |
Source: NTMA, CSO
Rounding may affect totals
*The State Savings products offered to personal savers include overnight demand and 30 day notice Deposit accounts and savings products with maturities from 3 to 10 years. These balances generally have a very high re-investment rate.
**The Promissory Note maturity figure at end-2012 is calculated as the then remaining schedule of payments of the IBRC Promissory Notes until the principal and interest were fully paid off. The last instalment which was due to be paid on the IBRC Promissory Note was scheduled to be 31 March 2031. As part of the liquidation of IBRC, the Promissory Note was replaced, in February 2013, with a portfolio of floating rate Irish Government bonds, which have a weighted average maturity of 34-35 years.
***The balance of €4 billion of other general government debt includes debt of Local Authorities, the Housing Finance Agency, non-commercial semi-state bodies, voluntary hospitals, the HSE, State savings accruals and the outstanding EBS Promissory Note of €227 million.
227. Deputy Michael McGrath asked the Minister for Finance his views on reports that banks are refusing to restructure mortgages until customers stop paying the credit unions and other unsecured debts; and if he will make a statement on the matter. [18488/13]
View answerThe Central Bank has informed me that it is aware that in many circumstances borrowers with mortgage arrears are being asked to assess their scope for increasing debt repayment capacity through prioritisation of their debts and adjustment of living expenses, noting the particular consequences of non-payment of a mortgage on the family home. Many borrowers with home mortgage arrears also have significant other debts (including investment properties and personal debts such as credit union, credit card or bank loans). Agreeing a restructure on a mortgage is often not sustainable unless the borrower’s full financial position is considered by all lenders.
228. Deputy Michael McGrath asked the Minister for Finance his estimate of the proportion of mortgages held with institutions covered by the mortgage arrears resolution targets programme; and if he will make a statement on the matter. [18489/13]
View answerThe Deputy will be aware that 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. The performance targets have been set for: ACC; AIB; Bank of Ireland; KBC Bank; Permanent TSB; and Ulster Bank. The targets are set in relation to both Principal Dwelling Homes and Buy to Let mortgages.
These institutions cover the vast majority of the mortgage book in Ireland, accounting for 9 out of ten of mortgages held. The Central Bank has and continues to engage with all mortgage lenders to ensure adequate mortgage arrears resolution strategies are in place. Also the Code of Conduct on Mortgage Arrears (CCMA) and Personal Insolvency legislation covers all lenders. However, the Central Bank will examine whether it should extend the targets to sub-prime lenders in due course.
