Dáil Éireann Debate, Thursday - 10 November 2016
17. Deputy Pearse Doherty asked the Minister for Finance the plans of State backed banks to sell mortgage loan books to third parties; and if he will instruct these banks to only sell to regulated and reputable parties. [34030/16]
View answerAs the Deputy is aware, significant progress has been made across the Irish banking sector in reducing the level of non-performing loans (NPLs) since the financial crisis. This has been primarily achieved by customers engaging directly with their banks and agreeing a sustainable payment plan which allows the customer an achievable path out of arrears, as well as protecting the value of the loan for the bank. In many cases these agreements have included elements of debt restructuring and writedowns. This is the most equitable means of dealing with problem loans for both borrowers and lenders, and I would urge all those in arrears to engage constructively with their bank in order to reach an appropriate repayment arrangement. In the vast majority of cases this achieves the best outcome for all involved.
Despite the significant progress made, the levels of NPLs in the Irish banking sector remain elevated by European standards. Banks are under pressure to reduce these exposures, both from their regulator and the market. Notwithstanding whether or not the State is a shareholder, it is the management and board of each institution that are tasked with developing and implementing a strategy to address this challenge.
In recent years banks have introduced multiple engagement channels to facilitate those customers who are reluctant to engage directly with them. Having exhausted these initiatives, if meaningful engagement is not forthcoming from particular customers the bank may be left with no option but to look at alternative solutions which could, as a last resort, include the sale of the loan.
As the Deputy will know, I as Minister for Finance have no role in the day-to-day management of the Irish banks. Notwithstanding that the State is a significant shareholder in a AIB, Bank of Ireland and Permanent TSB, these banks are run on an independent and commercial basis. Strategic decisions for these institutions, such as a decision to sell any asset or portfolio of assets, are the sole remit of the management and board of each bank. The terms of my relationship as Minister for Finance with the banks in which the State is a shareholder fall under the Relationship Framework Agreements in place with each institution. These relationship framework agreements are available on the Department's website.
The Central Bank in its role as regulator, oversees the conduct of all providers and servicers of mortgage products in the state. Legislation ensures that all mortgage holders are entitled to their full contractual and conduct rights, regardless of the owner of the loan. The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 was enacted in July 2015 and is designed to protect relevant borrowers whose loans are sold on to unregulated entities. The Act introduced a regulatory regime for a new type of entity called a 'credit servicing firm'. These are firms that manage or administer credit agreements such as mortgages or other loans on behalf of unregulated entities. Under the Act, purchasers of loan books must either be regulated by the Central Bank themselves or else the loans must be serviced by a credit servicing firm who is regulated by the Central Bank.
Under the Consumer Protection Act 2015 relevant borrowers, whose loans are sold to third parties, maintain the same regulatory protections they had prior to the sale, including under the various statutory codes, such as the Consumer Protection Code, Code of Conduct on Mortgage Arrears, issued by the Central Bank.
