Written Answers Nos. 106 - 114
106. Deputy Michael McGrath asked the Minister for Finance his views on the losses being incurred by certain insurers in the non-life sector, particularly in motor insurance; the steps the Central Bank of Ireland is taking to address the issue; and if he will make a statement on the matter. [10977/15]
View answerIn my role as Minister for Finance I have responsibility for the development of the legal framework governing financial regulation. The day to day responsibility for the supervision of the solvency of Irish authorised financial institutions is a matter for the Central Bank of Ireland which is statutorily independent in the exercise of its regulatory and supervisory functions. My officials meet regularly with the Central Bank and are in ongoing engagement regarding developments and recent trends in the insurance industry.
The Central Bank operates a risk-based supervision model, PRISM. As part of this model and through its engagement with insurers, supervisors assess the financial performance of non-life insurers and the risks those non-life insurers are facing. This includes the mitigating actions taken by insurers. Where appropriate, Central Bank supervisors require insurers to take further actions to mitigate the risks they are facing.
The Central Bank have advised that the 2014 financial performance was unfavourable for a number of non-life insurers in the Irish market due to a number of reasons, most notably the impact of adverse weather conditions in the first quarter of 2014, an increase in claims frequency and severity, and developments in the legal environment in Ireland. The increase in claims frequency may also be attributable to an increase in risk exposure generally reflecting the improved economic environment.
107. Deputy Michael McGrath asked the Minister for Finance the number of employees who have left the National Asset Management Agency to date by way of a redundancy programme; the typical severance payments that apply for individual staff members; if he will provide aggregate details of any payments made to date; if he will confirm the agency's current staff headcount, and the number expected to take up redundancy in 2015 and 2016; the overall severance amounts that are expected to be made; and if he will make a statement on the matter. [10978/15]
View answerTo date no staff member assigned to NAMA has left due to redundancy. A communication to NAMA Officers in January 2015 presented an outline of a possible redundancy programme.
The total number of staff assigned to NAMA was 363 at the start of March 2015. Numbers assigned to NAMA are projected to reduce to 292 by end December 2015 and to 125 by end December 2016 subject to the achievement of NAMA disposal targets as agreed by the NAMA Board. This will be reviewed in line with progress on meeting targets in 2015 and 2016.
I am aware of the significant risk to the performance of NAMA posed by the possible early departure of staff before their objectives are reached. This has been highlighted in the Section 227 review and by the Board of NAMA to me. I understand this has also been brought to the attention of the Oireachtas by NAMA. I am currently in discussions with the Board of NAMA on the appropriate measures to put in place to protect the financial performance of NAMA. I expect to reach agreement shortly and that the overall costs of any redundancy scheme, including statutory redundancy, will be not more than €20 million.
108. Deputy Michael McGrath asked the Minister for Finance if he is ruling out the possibility of payments being made to junior bondholders in the Irish Bank Resolution Corporation as a result of the special liquidation process; if he is prepared to issue a direction order that they would not be paid; and if he will make a statement on the matter. [10981/15]
View answerThe Special Liquidators continue to implement the orderly and efficient wind down of Irish Bank Resolution Corporation Limited (in Special Liquidation) in accordance with the provisions of the IBRC Act and the instructions issued by me under the IBRC Act. By February 2015, loans with a par value of €21.7 bn had been prepared, brought to market and ultimately sold through a series of sales processes which have delivered a very positive result in maximising the return to the creditors of IBRC, including the State. A significant amount of work remains to complete the liquidation of IBRC including, among other tasks:
- migrating activities and servicing of sold assets to their new owners and servicers ;
- managing and realising value for the remaining loan book with a par value of €3.6 bn;
- liquidating or selling the remaining subsidiary interests;
- continuing to manage significant levels of ongoing litigation and new litigation as it arises; and
- managing the operational wind down of IBRC's infrastructure in line with the continued liquidation.
Further detail regarding the progress of the liquidation and remaining tasks to completion will be provided as part of the Progress Update Report to be released by the Special liquidators on Friday 13 March 2015.
As the Special Liquidators maximise the proceeds of the liquidation, it is important that they have a comprehensive view of the creditors who ultimately may be entitled to these proceeds. To this end, the Special Liquidators have published advertisements and written to those known creditors in order to finalise their claims in the liquidation. Creditors in the UK and Ireland have until 31 March 2015 to submit their claims and those creditors in the US have until 31 May 2015. Once all claims have been submitted, they will be reviewed in detail and adjudicated on by the Special Liquidators. In order to finalise this process, further information may be sought from some creditors in order to validate their claim. The Special Liquidators are unable to comment at this stage both on the level of proceeds that will ultimately be generated from the liquidation and on the level of valid creditor claims that will ultimately be received in respect of the liquidation. It is the balance between the proceeds generated and level of valid claims that will ultimately determine the dividend to which each creditor may be entitled.
The ultimate level of dividend paid, if any, to each creditor cannot be known until such time as all loan assets are sold, the total level of adjudicated creditors is finalised and the other contingent creditor claims which may crystallise, including those from litigation, are known.
For the payment of proceeds from the liquidation, unsecured creditors will rank in priority to the holders of subordinated debt. The priority for the distribution of assets under the Companies Acts is generally:
1. Costs and expenses of the ongoing liquidation;
2. Preferential creditors, including certain taxes and employee and pension claims arising prior to the date of liquidation (these claims are certain to be paid in full);
3. Amounts owing to NAMA under the Facility Deed acquired from the Central Bank which were secured by a floating charge over the bank's assets (these claims have been fully repaid and the floating charge has been released)
4. Unsecured creditors, including:
1. Debts owing to the Minister/NTMA under ELG and to DGS;
2. Unguaranteed debt/depositors;
3. Unknown, including:
1. Local authority development bonds;
2. Suppliers / other normal unsecured creditors;
3. Employees that are not preferential creditors;
4. Contingent creditors and other potential costs principally relating to litigation, etc.
5. Subordinated creditors;
6. Members of the company - the Minister currently holds 100% of all shares and preference shares in the company.
109. Deputy Michael McGrath asked the Minister for Finance the progress that has been made in respect of the liquidation of Setanta Insurance; if those caught up in outstanding claims are facing any losses; the role of the Insurance Compensation Fund; and if he will make a statement on the matter. [10982/15]
View answerSetanta Insurance Company Limited is a Maltese incorporated company. Setanta was formally placed into liquidation by the Maltese Financial Services Authority on 30 April 2014 when a Liquidator was appointed under the provisions of the Maltese Companies Acts 1995. The liquidation is proceeding according to Maltese law.
The liquidation of an insurance company is a legally complex and time consuming process. The Liquidator has advised that settlements and refunds of premiums can only be paid out after all of the Company's liabilities are quantified. Since it could some time for a particular case to be finalised and, under the Statute of Limitations, claimants are given two years following an accident to make an initial claim, it may take some years before the liquidation process is completed.
The Insurance Compensation Fund provides for payments to meet the liabilities of insolvent insurers in certain cases where it is unlikely that claims can be met otherwise than from the ICF. Management and administration of the ICF is under the control of the President of the High Court acting through the Office of the Accountant of the Courts of Justice. The approval of the President of the High Court is required before any payments from the ICF to policyholders can commence and the Accountant has advised that clarification has been sought on some legal matters before progressing further.
The Accountant of the Courts of Justice can only deal with claims which are submitted by the Liquidator, so the advice to all claimants continues to be that they should contact the Liquidator of Setanta.
110. Deputy Michael McGrath asked the Minister for Finance the number of residential mortgages that are classified as sub-prime; the number of sub-prime lenders, currently operating in the market; the total value of sub-prime mortgages outstanding; the rate of arrears on these mortgages; the actions specific to the subprime sector, which are being taken to address arrears; and if he will make a statement on the matter. [10984/15]
View answerIt is important to note that there is no such regulated category as "sub-prime lender". However, Retail Credit Firms are authorised to provide credit, in the form of cash loans, directly to individuals (these firms are not licensed to accept deposits). Some firms authorised in this category are mortgage lenders. Retail Credit Firms have been subject to regulation by the Central Bank since 1 February 2008. A register of all Retail Credit Firms is available on the Central Bank website at the following link:
http://registers.centralbank.ie/DownloadsPage.aspx
In light of their activities, Retail Credit Firms are not subject to the same prudential supervisory regime as licensed credit institutions; however, the same consumer protection framework applies to Retail Credit Firms as to all other regulated lenders, i.e. Irish licensed banks or banks providing services into Ireland on a cross border/branch basis, including the Central Bank's statutory Consumer Protection Code and the Code of Conduct on Mortgage Arrears ('CCMA').
The CCMA sets out requirements for all mortgage lenders, including Retail Credit Firms, dealing with borrowers in arrears or pre-arrears on a mortgage loan which is secured by their primary residence (as defined). It 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.
The Central Bank engages with Retail Credit Firms in relation to their treatment of borrowers under the Mortgage Arrears Resolution Process (MARP), as provided for in the CCMA. The MARP sets out the steps which lenders must follow:
Step 1: Communicate with borrower;
Step 2: Gather financial information;
Step 3: Assess the borrowers circumstances; and
Step 4: Propose a resolution.
The Central Bank conducted a review of lenders' implementation of the CCMA in 2013. This review covered all lenders, including Retail Credit Firms.
In 2014 the Central Bank commenced a themed inspection of compliance with the CCMA and this is currently ongoing. The Central Bank plans to publish the results in the first half of 2015. The themed inspection includes onsite inspections of a number of regulated mortgage lenders to examine the processes in place around certain provisions of the CCMA and the controls lenders have in place to ensure compliance with those processes and the CCMA. The Central Bank expects to see that mortgage lenders have taken the letter and spirit of the CCMA seriously and it will seek to ensure that they can demonstrate compliance with its provisions. Where the Central Bank finds evidence of instances of non-compliance, it will continue to hold regulated lenders to account for any deficiencies in their policies and practices in this regard.
Data published by the Central Banks shows that non-bank lenders accounted for 5.6 per cent of the total stock of residential mortgage accounts outstanding at end-December 2014 (6.3 per cent in value terms). A total of 19,937 mortgage accounts issued by these lenders were in arrears of more than 90 days at end-December this figure accounted for 18.5 per cent of total mortgages in arrears over 90 days. The outstanding balance on these accounts was €4.6 billion, equivalent to 54.5 per cent of the total outstanding balance on all mortgage accounts issued by non-bank lenders
111. Deputy Michael McGrath asked the Minister for Finance the number of complaints that have been made against banks for non-compliance with the Code of Conduct on Mortgage Arrears since it was instituted; the number that have been upheld; the sanctions that have been imposed on banks for cases of non-compliance; the maximum sanction that may be handed down; and if he will make a statement on the matter. [10985/15]
View answerI am informed by the Central Bank that it does not publish statistics in relation to the number complaints against banks for non-compliance with the CCMA.
The Central Bank monitors compliance with the statutory consumer protection requirements through its on-going engagement with firms; reviews and research; themed inspections; mystery shopping; and advertising monitoring. The Central Bank regularly conducts themed inspections to ensure compliance with all of its codes of conducts, including the CCMA.
Themed inspections examine issues across a sector. Where a specific compliance issue arises with an individual firm, this is addressed directly with the firm and where appropriate, supervisory action is taken.
To date the Central Bank has not imposed a sanction on a mortgage lender in relation to breaches of the CCMA. However, it is important to note that supervisory intervention is not limited to the use of administrative sanctions.
The Central Bank has conducted a number of themed inspections on the CCMA since its introduction in 2009. Details of these themes and the feedback issued can be found at the following link: http://www.centralbank.ie/regulation/processes/consumer-protection-code/compliance-monitoring/Pages/themed-inspection.aspx
In 2014 the Central Bank commenced a themed inspection of compliance with the CCMA and this is currently on going. The Central Bank plans to publish the results in the first half of this year.
The themed inspection includes onsite inspections of a number of regulated mortgage lenders to examine the processes in place around certain provisions of the CCMA and the controls lenders have in place to ensure compliance with those processes and the CCMA. The Central Bank expects to see that mortgage lenders have taken the letter and spirit of the CCMA seriously and it will seek to ensure that they can demonstrate compliance with its provisions. Where the Central Bank finds evidence of instances of non-compliance, it will continue to hold regulated lenders to account for any deficiencies in their policies and practices in this regard.
112. Deputy Michael McGrath asked the Minister for Finance the value of Government bonds held by the Central Bank of Ireland, in respect of the arrangement entered into to replace the promissory notes; if he will provide details of the disposal to date of any of these bonds; the minimum disposal schedule agreed with the European Central Bank; if there have been any changes to this agreed minimum disposal schedule; the annual coupon or interest being paid by the Government to the Central Bank of Ireland, in respect of the bonds; and if he will make a statement on the matter. [10986/15]
View answerAs part of the liquidation of the Irish Bank Resolution Corporation (IBRC) on 6 February 2013, the Central Bank of Ireland (CBI) acquired €25.034 billion of Floating Rate Notes (FRNs) and €3.461 billion of the fixed rate 5.40% Treasury Bond 2025. The table below sets out the details in respect of each of the eight FRNs and the fixed rate bond, including the applicable interest rates, maturity dates and the nominal amounts originally acquired by the CBI. Reported subsequent movements in the CBI's holdings are reflected in the notes below the table.
Full details of the FRNs and the fixed rate bond, including the offering circulars, can be found on the website of the National Treasury Management Agency (NTMA) at http://www.ntma.ie/business-areas/funding-and-debt-management/government-bonds/.
|
Note Type |
Rate |
Maturity |
Nominal |
|
Floating Rate Note |
Euribor+268bps |
06/18/53 |
5,034 |
|
Floating Rate Note |
Euribor+267bps |
06/18/51 |
5,000 |
|
Floating Rate Note |
Euribor+265bps |
06/18/49 |
3,000 |
|
Floating Rate Note |
Euribor+262bps |
06/18/47 |
3,000 |
|
Floating Rate Note |
Euribor+260bps |
06/18/45 |
3,000 |
|
Floating Rate Note |
Euribor+257bps |
06/18/43 |
2,000 |
|
Floating Rate Note |
Euribor+253bps |
06/18/41 |
2,000 |
|
Floating Rate Note |
Euribor+250bps |
06/18/38 |
2,000* |
|
Fixed Rate |
5.40% |
03/13/25 |
3,461** |
* On 22 December 2014, the NTMA purchased from the CBI and subsequently cancelled €500 million of the FRN due to mature on 18 June 2038. Following the cancellation, the total nominal outstanding for this FRN declined from €2 billion to €1.5 billion and the overall total nominal outstanding for all of the FRNs from €25.034 billion to €24.534 billion
** By end December 2013 the CBI had sold €350 million of the 5.40% Treasury Bond 2025. As of 9 March 2015, the total nominal outstanding of this bond was €11,745 million.
In its 2013 Annual Report the CBI stated that it intends to sell the combined portfolio of the FRNs and the fixed rate bond as soon as possible, provided conditions of financial stability permit. The CBI stated it will sell a minimum of these securities in accordance with the following schedule: to end 2014 (€0.5 billion), 2015-2018 (€0.5 billion per annum), 2019-2023 (€1 billion per annum), and 2024 on (€2 billion per annum until all bonds are sold). As part of these minimum sales, the CBI disclosed in its 2013 Annual Report that it had sold €350 million of the 5.40% Treasury Bond 2025 by end December 2013. There were no sales, purchases or transfers of FRNs in the year 2013.
The CBI has confirmed to officials in my Department that its approach to the disposal of these bonds remains unchanged: they will be sold as soon as possible, provided conditions of financial stability permit, with the minimum disposal schedule for future years, as already mentioned, being unchanged. I have been advised by the NTMA that total cash interest payable on the FRNs was €638 million in 2013 and €755 million in 2014. As noted above, the CBI sold €350 million of its holdings of the 5.40% Treasury Bond 2025 in 2013. However, as the CBI's bond holdings during 2014 have not been published, it is not possible to state the level of interest the CBI received on its holdings in 2014. The next CBI annual report will contain the updated overview of their holdings of these bonds as at YE2014 and is expected to be published in April 2015.
113. Deputy Róisín Shortall asked the Minister for Finance the reason a person (details supplied) in Dublin 11 has had arrears deducted from a Department of Social Protection payment due to an incorrect allocation of tax credits; the reason for the incorrect allocation; and if he will make a statement on the matter. [11004/15]
View answerI am advised by the Revenue Commissioners the information available to Revenue had indicated that the person concerned and her spouse were in receipt of separate pensions from the Department of Social Protection (DSP). On that basis the spouse of the person concerned would have been entitled to an additional PAYE Tax Credit or an additional Standard Rate Band in respect of the Qualified Adult portion of his pension. Subsequent information received by Revenue from the DSP, indicated that the person's spouse is in fact in receipt of an Old Age Pension with an increase in respect of a Qualified Adult. In the circumstances the person's spouse is entitled only to one PAYE Tax Credit.
In March 2015, following receipt of a health expenses claim for 2014, a review of the joint liability of the person concerned and her spouse was carried out by Revenue. An underpayment of tax arose due to the fact that they have no entitlement to an additional PAYE Tax Credit of €1,650 or the additional Standard Rate Band. The underpayment will be collected by reducing the tax credits of the person's spouse over a 3 year period commencing on 1 January 2016.
Should the person concerned require further clarification or assistance she may contact Ms Aisling Malone, City Centre / North City Revenue District, 14/15 Upper O'Connell St., Dublin 1, telephone 01-8655511.
114. Deputy Finian McGrath asked the Minister for Finance the reason the European Central Bank programme of quantitative easing €1.1 trillion is being used to create further debt instead of providing deficit easing across Ireland and Europe and if this process of quantitative easing displays the complete subjugation of the European Union to the sick debt-based money system where money is printed to create debt; if this is the case, the reason money is not being printed to resolve debt; and if he will make a statement on the matter. [11018/15]
View answerThe European Central Bank's mandate is price stability, which it defines as an annual rate of inflation close to, but below, 2 per cent. Inflation in the euro area has been below levels consistent with price stability for some time and, in fact, became negative last December and remained negative in January and February. The fall in inflation, combined with the fact that inflationary expectations have begun to drift downwards, pose a risk to price stability.
As a result, and with policy rates effectively at zero per cent, the ECB, on 9 March, launched an expanded asset purchase programme to include bonds issued by euro area central governments, agencies and European institutions. Under this expanded programme, the combined monthly purchases of public and private sector debt securities will amount to €60 billion. These monthly purchases are intended to be carried out from March 2015 until end-September 2016 and will, in any case, be conducted until inflation moves onto a path consistent with price stability.
The ECB does not have a mandate to reduce existing debts or deficits of the private or public sectors. In addition, monetary financing by the ECB of the public sector is prohibited under the Treaty on the Functioning of the European Union. By purchasing debt in the secondary market, however, the ECB can affect the cost of financing in the economy more broadly, and this will help towards achieving price stability.
In this regard, the Irish economy should benefit from the monetary stimulus through a number of channels which will create employment and reduce unemployment. For example, the economy should benefit directly through improved financing conditions for households and firms. In addition, the euro area is Ireland's single largest export destination; therefore, by supporting real economic activity and raising inflation in the euro area this will underpin the growth of Irish exports. Monetary policy also works through the exchange rate channel the depreciation of the euro will provide a further boost to Irish exports.
So quantitative easing will be beneficial in terms of supporting economic recovery, thereby generating employment in Ireland and in the wider euro area. Living standards of euro area citizens will benefit accordingly.
An inflation rate which is consistent with price stability, and which is supported by appropriate fiscal policies and the implementation of the necessary structural reforms by Member States across the euro area, will facilitate economic recovery and the associated repair of public and private sector balance sheets.
