Written Answers Nos. 54-62
54. Deputy Terence Flanagan asked the Minister for Finance his views on the tax situation of Irish Bank Resolution Corporation and the mention of tax irregularities; and if he will make a statement on the matter. [3407/14]
View answerOn the appointment of the Special Liquidators, Irish Bank Resolution Corporation Limited was already in dialogue with the Revenue Commissioners in relation to an open tax audit. I have been advised that the Special Liquidators are working with the Revenue Commissioners to close outstanding tax issues. As these are matters which are still being reviewed and discussed between IBRC (In Special Liquidation) and the Revenue Commissioners, it would not be appropriate to comment any further at this time.
55. Deputy Terence Flanagan asked the Minister for Finance his views on the upgrade of Ireland's bond rating by Moody's; and if he will make a statement on the matter. [3408/14]
View answerMoody's upgrade of Ireland by one notch to investment grade on 17 January is very good news.
Ireland is now at investment grade with all five credit rating agencies and this will attract investors who had been hitherto unable to buy Irish government debt because their mandates did not allow them to invest where the credit rating agencies rated the investment below investment grade. Some Asian and Middle-Eastern investors, along with others in Europe including German insurance companies, are now likely to be in a position to buy Irish Government debt. An increase in the market participants and demand for Irish bonds should lead to a reduction in yields.
Market reaction to the Moody s announcement has initially been positive with the yield on the new benchmark 2024 bond quoted at 3.24% (as of Wednesday 22 January, 9am), some 21 basis points lower than the Friday 17 January trading session close. The reduction in sovereign yields should also have a positive impact on the rates at which the commercial semi-state bodies (ESB, Bord Gáis, etc.) can borrow.
This was the first rating change by Moody s since it cut Ireland s rating to sub-investment grade in July 2011. Moody s cited two reasons for the upgrade: (i) the growth potential of the Irish economy, which together with ongoing fiscal consolidation is expected to bring government debt ratios down from their recent peak; and (ii) the Irish government s exit from its EU/IMF support programme on schedule, with improved solvency and restored market access.
In addition to the increase in the rating, Moody's also upgraded the outlook for Ireland to positive. This is significant as it signals that Moody's are prepared to look at another upgrade for Ireland, possibly over the space of the next eighteen months.
All in all, this is good news for Ireland and will help to ensure that the momentum of economic and fiscal recovery is maintained. I would in particular like to compliment, in this House, the hard work done by the National Treasury Management Agency, during the dark days when we were effectively locked out of the markets, in spreading the message that Ireland was dealing with its problems and in paving the way for our return to normal market financing.
56. Deputy Terence Flanagan asked the Minister for Finance his views on the success of Islamic funds in Ireland; his further views on the tax reliefs given; and if he will make a statement on the matter. [3414/14]
View answerThe internationally-traded financial services sector is a valuable contributor to both employment and tax revenues in Ireland, employing an estimated 33,000 people, and generating approximately €1 billion in tax revenue annually.
The success of this sector is founded on the experience and knowledge developed over the last 25 years, and on the ability of the sector to adapt and remain at the forefront of international developments. Recent examples of this include the development of Islamic Finance and Green Finance initiatives, attracting new business lines to the Irish market.
A European Central Bank publication in June 2013 confirmed that Ireland is now a significant location for Islamic funds, with an estimated 20% of the Islamic funds market outside of the Middle East being located here. The first Irish domiciled Shari a-compliant UCIT was established in 2012 by CIMB Islamic Asset Management and this product is now offered in the UK, Germany and France under the UCITS EU passport. At the end of 2013, the Irish Stock Exchange (ISE) had some $11bn of outstanding Sukuk issuance and there were 13 Shari’a compliant funds listed on the ISE. It should be noted that no specific tax reliefs are given for Islamic funds, and the tax measures for specified financial transactions introduced in Finance Act 2010 did not relate to investment funds. Those provisions related to other types of financial products, and their purpose was to ensure that such financial products structured along Islamic finance principles are taxed in the same way as conventional financial products.
57. Deputy Terence Flanagan asked the Minister for Finance his views on the ESM recent comments on the prospects for Ireland; and if he will make a statement on the matter. [3415/14]
View answerI understand that you are referring to the comments made by Mr. Klaus Regling, Managing Director of the European Stability Mechanism (ESM) during his recent visit to Ireland. He addressed the Institute of International and European Affairs on Friday 17th January and earlier that day I met him in my Department.
During my meeting with Mr Regling, I updated him on developments in Ireland following the successful exit from the EU/IMF Programme in December, including the very successful bond issuance by the NTMA on the 7th of January. We also discussed recent developments in the Eurozone and the future prospects.
We issued the following agreed statement at the end of the meeting: "Ireland has undergone a major transformation in recent years and is now well positioned to grow and create jobs in the years ahead. Having been frozen out of the markets in 2010, the commitment of the Irish people and the support of funding from the IMF and the EU including the EFSF (the predecessor to the ESM) enabled Ireland to make the necessary fiscal adjustment over a phased period and to make a full return to the financial markets. The success of the Irish programme is evident and Ireland is now viewed as a safe place to invest. The market reaction to Ireland's exit strategy and in particular the very strong investor appetite for last week's 2024 Bond highlights the positive sentiment towards Ireland in the financial markets.
The recovery in the Eurozone is underway and the new architecture put in place since 2010, of which the ESM is a key component, safeguards the stability of the Euro area and will prevent similar crisis occurring in the future. There are many challenges ahead both in Ireland and across the Eurozone and policy makers must ensure that the recovery continues and that the focus is on generating economic growth and jobs."
I understand that a number of the comments made by Mr Regling during his visit have been widely reported, including those to the effect that the reduction in Ireland's borrowing costs can be attributed at least in part to the decision not to impose losses on senior bank bondholders, and that there was, at this stage, no unanimous support in the euro zone for retroactive recapitalisation of financial institutions. However, Mr Regling also noted that the timeline involved in this matter was dependant on the SSM coming into being, which is scheduled to come on stream in the latter part of this year.
The Eurogroup meeting of 20th June 2013 agreed on the main features of the ESM's Direct Bank Recapitalisation instrument (DBR). The DBR instrument will come into effect when the Single Supervisory Mechanism is operational. There is a specific provision included in those main features that provides for retroactive recapitalisation. This provision states that: "The potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement." Therefore, the agreement that we were active in negotiating keeps open the possibility to apply to the ESM for a retrospective direct recapitalisation of the Irish banks should we wish to avail of it. The SSM is expected to be place and operational towards the end of 2014.
Finally, as I have previously stated we will ensure that our case for retrospective direct recapitalisation is made at all levels as appropriate. I remain confident that the commitment made by the Euro-area Heads of State or Government in June 2012 to break the vicious circle between banks and sovereigns will be respected. It is very clear that there is still a lot of negotiation to be done on this aspect of the facility but the agreement now in place keeps the possibility to apply to the ESM for a retrospective direct recapitalisation of the Irish banks open for us, should we wish to avail of it.
Question No. 58 withdrawn.
59. Deputy Terence Flanagan asked the Minister for Finance his views on remarks from the National Asset Management Agency that the property slump is over; and if he will make a statement on the matter. [3418/14]
View answerThe recent positive pricing reports and the NAMA announcement on the closure of the 80:20 as it has achieved its objectives are a welcome sign of stabilisation in the residential property market and a return to more sustainable, normalised conditions. Activity in the market has increased particularly in the larger urban areas but it will be some time before a nationwide recovery of the property market will be evident. In the meantime issues such as supply and demand, credit and funding availability will remain part of our focus and review.
60. Deputy Terence Flanagan asked the Minister for Finance his views on the consolidation in the credit union sector; and if he will make a statement on the matter. [3422/14]
View answerThe Report of the Commission on Credit Unions was published in March 2012. One of the principal recommendations of the Report, which was agreed by all credit union stakeholders, was the establishment of a restructuring board to facilitate and oversee the restructuring of credit unions. The Credit Union and Co-operation with Overseas Regulators Act 2012 - 2012 Act - established the Credit Union Restructuring Board -ReBo - on a statutory basis from 1 January 2013. The 2012 Act also established the Credit Union Fund and €250 million was contributed by the Government to the Fund to support the restructuring process.
The objectives of the restructuring process are to underpin the stability and long-term viability of credit unions and the sector at large and to provide an opportunity for stronger credit unions to develop a more sustainable business model. The restructuring process will be carried out on a voluntary, incentivised and time bound basis. While restructuring will not apply to all credit unions, many credit unions will be able to benefit from the advantages of restructuring such as: achieving economies of scope and scale; securing long term viability and stability; and providing opportunities to expand the range of services to members. ReBo is working towards the timetable set out in the Commission on Credit Unions Report, with a view to completing the process by the end of 2015. ReBo is continuing to interact with all credit unions to identify their willingness and suitability to engage in what is a voluntary restructuring process. A number of credit union amalgamations are already underway and indeed completed, with technical assistance from ReBo, for example the recent combination of Balbriggan, Skerries and Donabate to form Progressive Credit Union in north County Dublin.My expectation is that the pace of restructuring under ReBo will accelerate this year towards the completion of the process by the end of 2015.
61. Deputy Terence Flanagan asked the Minister for Finance his views on the consolidation in the banking sector; and if he will make a statement on the matter. [3423/14]
View answerGiven the extent and nature of the financial crisis in Ireland it was inevitable that the banking sector would consolidate in order for the sector to better match the needs of the economy. That process is still underway with the announcements last year by ACC Bank and Danske Bank.
I do expect that the restructuring of the banking sector in Ireland and the recovery of the economy will present opportunities for the entry of new market participants well positioned to be confident in the future profitability of an Irish branch or subsidiary. This Government continues to work to create an environment conducive to the entry of such new entrants primarily through the implementation of policies to promote economic recovery and employment creation but also through different initiatives to ensure that there is an adequate pool of credit to underpin the recovery. This is a theme common to our EU partners and Ireland has been leading the debate at EU level on the mechanisms to promote, for example, alternative forms of financing for SMEs. It is important though that we establish an environment conducive for banks and alternative credit providers to enter the Irish market and compete.
In this regard: we are working to manage and minimise potential market expectations of future State support for the state owned banks which could act as a deterrent to new market entrants; we are working to establish equality in the assessment of credit risk through the establishment of an industry wide credit register to allow for the appropriate measure of risk in lending, allowing incumbent and new lenders to lend with full visibility of the risk of that lending. The Credit Reporting Act was passed at the end of 2013; we are working to reduce switching costs to allow customers to move between banks more easily, enhancing competition and forcing banks to work hard to retain their customers on a commercial basis; we are encouraging risk sharing partnerships to encourage new lending, such as the AIB/European Investment Bank lending initiative; alternative innovative mechanisms to involve other lenders are actively being explored and progressed such as the initiative with the German State Development Bank, KfW; and we are in regular dialogue with potential market entrants as they evaluate potential opportunities in Ireland and will be supportive of new entrants as they emerge.
The RBS review by the UK Government confirms the continuing role that Ulster Bank will have in the lending and deposit taking business for all customers here in Ireland. KBC have been expanding their network and their ambitions in Ireland. I believe that it is fair to say that it is not all bad news and that the Irish financial market does offer opportunities to institutions. This Government has also taken steps to ensure that the Irish financial market is accessible to any financial institution considering establishing in Ireland. In seeking to reduce the barriers to entry which are specific to the Irish banking market, Section 149 of the Consumer Credit Act, which provides for the regulation of bank fees and charges has been disapplied for three years in the case of new financial service providers setting up in Ireland.
62. Deputy Terence Flanagan asked the Minister for Finance his views on the mortgage arrears numbers; his plans to tackle same; and if he will make a statement on the matter. [3430/14]
View answerThe Government is aware of the significant difficulties some homeowners are facing in meeting their mortgage obligations and the Deputy will know that a comprehensive strategy to tackle the problem is in place.
The Deputy will be aware of the Central Bank's Mortgage Arrears Resolution Targets (MART) announced last March which sets time bound and measurable targets for the main banks requiring them to systematically address their arrears book. Under this rolling process, quarterly performance targets have now been set to the end of June 2014 to require the banks to propose and put in place durable long term solutions to address individual cases of mortgage arrears of more than 90 days in arrears.
The Central Bank has indicated that all six mortgage lenders covered by the MART process have reported that they met the 20% proposed sustainable solutions target for the second quarter of 2013 and also the 30% target for the third quarter in 2013. In particular, with respect to the third quarter 2013 target, which is the latest available data, the lenders have reported to the Central Bank they had issued proposals to 43% of mortgage accounts in arrears against the 30% target.
The new monthly mortgage restructures and arrears data published by my Department will also provide an impetus for those MART banks to increase the pace of provision of mortgage restructures. The latest publication, which is in respect of the end of November, shows that some progress has been made in putting permanent mortgage restructures in place. For example, the number of permanent restructures of permanent dwelling mortgages more than 90 days in arrears has risen from around 41,200 in August to around 49,300 in November 2013, an increase of almost 20%.
The Central Bank's mortgage arrears and restructure statistics for the quarter ending September 2013, published in November (www.centralbank.ie), shows a decline in the total number of principal dwelling houses (PDH) mortgage accounts in arrears of one per cent compared to the end of June 2013 position. Within this, early arrears have declined significantly during the reporting period with a quarter-on-quarter fall of six per cent. The data published by my Department and the Central Bank would appear to demonstrate some success by the lenders in addressing the accounts in early arrears and putting in place appropriate measures to prevent borrowers from going into arrears.
It is accepted that the issue of mortgage arrears is a major problem that needs to be resolved, not only for an individual borrower and lender, but also for the long term economic and social health of the country and the Government will ensure that the comprehensive strategy it has put in place to tackle the problem is now fully implemented by all the parties involved in the process.
