Dáil Éireann Debate, Thursday - 21 July 2016
141. Deputy Pearse Doherty asked the Minister for Finance the policy of the State-backed banks in applying discounts to foreign earnings when assessing a mortgage application; and if he will make a statement on the matter. [23962/16]
View answerIndividual credit policy and lending criteria are in the first instance a matter for the boards and management of each of the individual institutions.
I am advised by AIB that the bank applies a 20% stress factor on the currency exchange rate to mitigate against currency risk as part of the banks' mortgage assessment process. The gross income as converted using the 20% stress factor is then applied in the assessment of the mortgage application. Furthermore, in circumstances whereby a customer derives part or all of their income from a non Euro currency and this income is used in the mortgage assessment process and/or if a customer resides in an EEA country outside the Eurozone, AIB monitors currency exchange rate fluctuations for these new credit mortgage agreements. In cases whereby the exchange rate fluctuates by 20% or more, AIB issues a communication to impacted mortgage customers to advise them of the potential currency risk. AIB have informed me that the bank complies with the requirements set out in the EU Mortgage Credit Regulation, which came into effect on 21 March 2016.
I am advised by permanent tsb that they have amended its policy in respect of the application of discounts to foreign earnings when assessing mortgage applications pending a broader review of the issue following the recent introduction of the EU Mortgage Credit Regulation. At present under this amended policy, I am informed that the Group excludes non-Euro income from the credit assessment for mortgages. This has been done in order to avoid potentially serious exchange rate challenges impacting on the affordability of mortgages for customers and also ensures compliance with the MCD criteria relating to Foreign Currency Loans.
In relation to BOI the bank has responded to a recent Parliamentary question relating to features of its products that "Disclosures to the market in relation to Bank of Ireland products and services are provided in the Bank of Ireland Group Annual Results. Bank of Ireland is regulated by the Central Bank of Ireland."
