Dáil Éireann Debate, Wednesday - 18 June 2014
43. Deputy Derek Nolan asked the Minister for Finance the supports available to businesses who are struggling with debt, in particular bank loans and mortgage debt; and if he will make a statement on the matter. [26317/14]
View answerIn June 2013, the Central Bank set quarterly institution-specific performance targets for covered banks to move distressed SME borrowers onto longer-term forbearance solutions. The targets set reflect the banks' capacity, processes and systems.
Resolutions offered to SME customers in difficulty are assessed on the basis of the borrower's maximum affordability. The restructures are often complex due to multiple debt connections. Irish banks are advancing the process of restructuring their SME loan books. I am informed that Bank of Ireland have indicated that they had reached resolution in 90% of distressed SME cases and the AIB's results indicate a resolution level of approximately 65%. It is also worth noting that defaulted loans for both banks have reduced year-on-year.
The Central Bank's process of assessing financial institutions in their efforts to move distressed SME borrowers onto longer term sustainable solutions is an important element in assisting SMEs to potentially transition from a distressed to a more sustainable state and will continue throughout 2014. Additionally, the Government's enactment of legislation to allow small companies (as defined by the Companies Acts) to apply to the Circuit Court for examinership and the ongoing work of the expanded Credit Review Office are all initiatives that will assist viable SMEs in addressing their debt situation and consequently enhance the employment prospects for the sector as a whole.
The fair resolution of problem mortgage and other personal debt is a key priority for Government and a comprehensive strategy to tackle the problem, in line with the main recommendations of the 2011 Keane Report, is being implemented. Key elements of this strategy are:
1. An intensification by the Central Bank of its engagement with mortgage lenders to require them, under the Mortgage Arrears Resolution Targets (MART) process, to propose and conclude sustainable and durable alternative arrangements to their customers in mortgage (both primary home and buy to let) arrears of more than 90 days;
2. Significant reforms to personal insolvency law and practice to provide a fairer balance between the interests of creditors and insolvent debtors, including a reduction in the period of bankruptcy and the provision of new insolvency resolution frameworks to make it easier for people with unsustainable personal and mortgage debt to address their position;
3. Updating the Code of Conduct on Mortgage Arrears to provide safeguards to cooperating borrowers regarding their primary home, while also promoting and encouraging efforts by both lenders and borrowers to meaningfully address mortgage arrears or pre-arrears;
4. The introduction of the social housing Mortgage to Rent scheme which can allow eligible people with unsustainable mortgages to remain in their home; and
5. The provision of an independent mortgage information and advice service.
Regarding the Central Bank's MART process, quarterly performance targets have now been set to the end of 2014 to require the banks to propose and put in place durable long term solutions to address individual cases of mortgages in difficulty. Based on the information submitted, the Central Bank has advised that the banks have indicated they have met the end 2013 targets of proposing solutions to 50% and concluding solutions for 15% of accounts in arrears greater than 90 days.
The Central Bank's Code of Conduct on Mortgage Arrears (CCMA) provides a strong consumer protection framework to ensure that borrowers struggling to keep up mortgage repayments are treated in a fair and transparent manner by their lender, and that long term resolution is sought by lenders with each of their borrowers in arrears. Under the CCMA, if a borrower is not satisfied with the way that their lender is dealing with them or if they think the lender is not complying with the CCMA, the borrower can make a complaint to their lender. Borrowers also have the right to appeal to the lender's Appeals Board if they are not happy with the alternative repayment arrangement offered or where a lender declines to offer an alternative repayment arrangement or if they believe they have been wrongly classified as not co-operating. If the borrower is still unhappy with the outcome of the appeal or the complaint made to the lender, they can refer the matter to the Financial Services Ombudsman.
The monthly mortgage restructures and arrears data published by my Department also provides 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 April, shows that some progress has been made in putting permanent mortgage restructures in place. For example, the total number of permanent restructures of principal dwelling houses (PDH) mortgages has risen from around 51,000 in December 2013 to almost 66,000 at end April 2014. Taken together, the framework is now in place to enable banks to work with distressed homeowners to reach sustainable solutions to deal with unsustainable personal debt. Early and effective engagement between borrowers and lenders is key to resolving cases of mortgage difficulty. Where there is effective and meaningful engagement by all parties regarding a mortgage difficulty, the data shows that an increasing number of durable long term mortgage restructures are being put in place. However, it is accepted that it will be necessary for lenders and borrowers to continue to build on this.
