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Banking Licence Applications

Dáil Éireann Debate, Tuesday - 12 June 2018

Tuesday, 12 June 2018

Questions (223)

Jackie Cahill

Question:

223. Deputy Jackie Cahill asked the Minister for Finance if under current legislation it is possible for a local authority to secure a banking licence to enable it to raise funds for the purpose of issuing mortgages; and if he will make a statement on the matter. [24888/18]

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Written answers

Any person seeking a licence to carry out banking business in Ireland will need to satisfy the relevant statutory requirements set out in the Central Bank Act 1971, which transposes the authorisations provisions of the Capital Requirements Directive (Directive 2013/36/EU). These requirements relate to, inter alia, initial capital, the suitability of shareholders and members, the programme of operations and structural organisation, and the corporate characteristics of the applicant. Under the Single Supervisory Mechanism, the European Central Bank (ECB) has exclusive competence for granting licences. Pursuant to section 9 of the Central Bank Act 1971, the Central Bank of Ireland’s role is to propose decisions to the ECB to grant licences. In the absence of all relevant information and the completion of the full assessment of an application in the normal course, the Central Bank is not in a position to provide any views on potential decisions that may be made in this context.

The prohibition on accepting deposits from members of the public without a banking licence does not apply to local authorities by virtue of section 7(4)(f) of the Central Bank Act 1971 (provided that this activity is subject to regulations and controls intended to protect depositors and investors). However, this exemption does not appear to preclude an application for a banking licence by a local authority. In addition, notwithstanding any exemption from an obligation to hold a banking licence in order to engage in deposit-taking such person may still require an authorisation to engage in lending to retail consumers, e.g. a retail credit firm authorisation under Part V of the Central Bank Act 1997.

Regarding the remit of local authorities, the statutory role and responsibilities assigned to local authorities are as provided for in legislation and overall policy responsibility for such matters are a matter for my colleague the Minister for Housing, Planning and Local Government. Nevertheless, in relation to mortgage lending, the Deputy will note that, under section 11 of the Housing (Miscellaneous Provisions) Act 1992, a local authority, subject to regulations made by the Minister for Housing, Planning and Local Government with the consent of the Minister for Public Expenditure and Reform, may make loans for the purpose of acquiring or constructing houses.

Under the powers conferred by this provision, the Minister for Housing, Planning and Local Government, Mr Eoghan Murphy T.D. launched the Rebuilding Ireland Home Loan Scheme earlier this year. It was set up in accordance with the Housing (Rebuilding Ireland Home Loans) Regulations 2018, which set out the criteria for local authorities to issue loans and the eligibility to avail of loans under the Scheme.

The Scheme which replaced the Home Purchase Loan and the Home Choice Loan Schemes, enables credit-worthy first-time buyers to access sustainable mortgage lending to purchase new or second-hand properties in a suitable price range.

The scheme is targeted at first-time buyers who have access to an adequate deposit and have the capacity to repay a mortgage, but who are unable to access a mortgage sufficient for them to purchase their first home from a commercial lender. The Scheme is operated by the local authorities with support from the Housing Agency, which carries out assessments of applications on behalf of the authorities.

At the end of May 2018, the Agency had received approximately 1,500 applications for assessment from the local authorities. The Minister for Housing, Planning and Local Government is confident that the Scheme is working well and will achieve its objective of providing loans to people who meet the criteria set out in the Regulations.

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