Ruth Coppinger
Question:4. Deputy Ruth Coppinger asked the Minister for Finance his views on the Bank of Ireland selling part of its mortgage loan book to Dilosk Limited; and if he will make a statement on the matter. [28626/14]
View answerThursday, 3 July 2014
Questions (4)
Oral answers (6 contributions)
What are the Minister's views on the Bank of Ireland selling off its mortgage loan book to Dilosk Limited, an unregulated company, and does he intend to stand idly by and allow this to happen given the huge subsidy put into the banks by the taxpayers of Ireland, or will he take action to prevent this happening?
It is important in answering the Deputy's question to provide the background as to why Bank of Ireland has agreed to sell €250 million of the ICS loan book to Dilosk Limited. In July 2013, Bank of Ireland agreed an amendment to its restructuring plan which had been agreed with the European Commission in respect of state aid received by the bank. This allowed the bank to retain its life assurance subsidiary, New Ireland. As part of this amendment, the bank committed to certain substitution measures, including the sale of the ICS distribution platform together with, at the option of the acquirer of the platform, up to €1 billion of mortgage assets and a similar quantum of matching deposits. The purpose of the ICS substitution measure is to support new entrants in the Irish mortgage market, thereby increasing competition to the benefit of the consumer.
As the Deputy is aware, the bank announced on 26 June that it had agreed to sell the distribution platform, together with €250 million of mortgage assets at par, to Dilosk Limited. No deposits are transferring as part of the sale. Dilosk is an Irish financial services company, headquartered in Dublin which plans to grow its mortgage business in Ireland by offering new residential mortgage loans. According to its website, Dilosk will offer mortgages to borrowers seeking to purchase or refinance residential property with a particular focus on residential investment properties, that is, buy to let.
The ICS sale is the final divestment commitment to be completed by the Bank of Ireland under its EU restructuring plan. Given the reduced number of lenders now operating in the mortgage market, this transaction is to be welcomed as it introduces a new entrant and should therefore contribute to greater competition.
Why is the bank selling loans that are performing perfectly well? It is alarming that this is happening and that no action is being taken to prevent it. On its website, Dilosk says that it has a focus on residential investment property, that is buy to let. Therefore, it is not the case that it is focusing on ordinary residential lending; it is investment lending. The bank's shareholders and the bondholders were underwritten by the ordinary people of this country who have paid a heavy toll over the past six years, but it appears that ordinary mortgage holders are to be moved into the unregulated sector in which Dilosk Limited operates. There have been accusations that the Minister's Department gave advance warning to the banks to sell mortgages now, a year ahead of new EU laws to force buyers of loan books to observe much stricter codes. Perhaps the Minister would comment on that.
This is part of the restructuring of Bank of Ireland which was agreed with the European Commission several years ago and it is the last piece of it that is now being put in place. It is not a move of a mortgage book into the unregulated sector. As Dilosk Limited has said in its website, it has confirmed that it has applied for authorisation from the Central Bank in Ireland to operate as a retail credit firm. In addition, Dilosk Limited has confirmed that it intends to comply with all the relevant regulatory codes applicable to mortgage lending, including the code of contact for mortgage arrears. Therefore, it is a transfer of ownership of a mortgage book to the value of €250 million but it should not affect the holders of the mortgagees in any way whatsoever. They will just continue to trade according to the terms of their contract and it is regulated by the Central Bank.
People took out those mortgages with ICS Building Society. Building societies were regarded by people at that time as safe and secure places. Now they will be with a company about which we know little or nothing. The Minister appears hell-bent on increasing competition in this sector. Sub-prime lenders who are operating in this sector were brought in for the same reason, to increase competition. Look what they have done to people in this country. Many constituents are suffering because of companies such as Start and Springboard charging exorbitant rates. They are now selling their mortgages to vulture funds such as O3 and Lone Star. Other sales have taken place to Pepper and Tanager. Is this what the Minister means by competition? Those lenders should have been outlawed a long time ago. Their books should have been taken over by the State and the banks, generally, should have been taken over by the State and run in the public interest, not in the interest of the bondholders. We are now seeing the impact of leaving the banks in private hands. They should have been nationalised under democratic control, accountable to consumers and those who work in them.
The banks have not been left in private hands. They have been taken over by the State. AIB is 99% owned by the State, Bank of Ireland is 14% owned by the State and Permanent TSB is 99%-100% owned by the State. The reason building societies were taken over by the State was that they went bust and there was a need to protect the people who were doing business with them, including those who had mortgages. What the Deputy has said simply does not correspond with the facts of the situation. Anything that has happened is in the interests of the people who have mortgages. That is the position.