Written Answers Nos. 50-69
50. Deputy Pearse Doherty asked the Minister for Finance if the changes in fees structure to move the area in which fees are levelled on each transaction for account holders with less than €3,000 in their account by a bank (details supplied) were notified and approved by the Central Bank; and if he will make a statement on the matter. [10056/19]
View answerBank fees, charges and commissions are subject to regulation under Section 149 of the Consumer Credit Act, 1995 (the Act) as amended.
The Central Bank has advised that they cannot comment on individual entities.
In fulfilling its statutory role under the Act, the Central Bank assesses each notification received from a credit institution pursuant to the Act, where they wish to introduce any new customer charge or increase any existing customer charge in respect of certain services, in accordance with the specific assessment criteria set out in the Act.
Under the Act, credit institutions must notify the Central Bank if they wish to:
- Introduce any new customer ‘charge’ for providing a service, or
- Increase any existing customer ‘charge’ for providing a service.
‘Service’ means any service provided by a credit institution to a customer in respect of the following -
a. Making and receiving payments;
b. Providing foreign exchange facilities;
c. Providing and granting credit;
d. Maintaining and administrating transaction accounts used for the services specified by this subsection, including issuing statements.
‘Charge’ includes a penalty or surcharge interest by whichever name called, being an interest charge imposed in respect of arrears on a credit agreement or a loan, but does not include any rate of interest or any charge, cost or expense levied by a party other than a credit institution in connection with the provision of a service to the credit institution or the customer and that is to be discharged by the customer.
Relevant charges are assessed by the Central Bank in accordance with the specific assessment criteria laid down in the legislation as follows:
- the promotion of fair competition between credit institutions;
- the commercial justification submitted in respect of the proposal;
- the impact new charges or increases in existing charges will have on customers; and
- a credit institution passing any costs on to its customers in proposing to impose or change any charge.
Having considered the proposed charge(s) under the assessment criteria as set out under the legislation, the proposed charges are either rejected, approved at lower levels than requested by the entity or approved in full.
Approvals are issued in the form of a letter of direction and the entity is legally bound to comply with this letter of direction. The letter of direction sets out the maximum amount the credit institution is allowed to charge. Credit institutions are free to impose any pricing differentials for the service up to the permitted maximum and are free to waive fees at their discretion.
If customers are unhappy with their current account provider for any reason, including cost, they have the right to switch to a different provider.
The website of the Competition and Consumer Protection Commission (CCPC) lists the various charges imposed by the various financial institutions in Ireland for different types of transactions www.ccpc.ie.
Irish financial institutions have varying models for charges and have different regimes and conditions under which they are willing to grant transaction free banking. Individuals' use of their bank account will be specific to each individual and I would strongly encourage people to look at this comparison site with their specific circumstances in mind in order to decide which institution offers the best product for their pattern of account usage. My Department has run two media campaigns as part of a range of competition measures agreed with the European Commission to raise awareness and promote customer switching in the retail financial product area. This was agreed in the context of the restructuring plans for AIB and PTSB. The campaign is being funded entirely by the two banks. The campaign website www.switchyourbank.ie provides straightforward practical information and support on switching and I would strongly encourage people to visit it.
51. Deputy Peadar Tóibín asked the Minister for Finance if all existing banks here have a full and valid banking licence. [10077/19]
View answer52. Deputy Peadar Tóibín asked the Minister for Finance if all loans existent here in the hands of commercial banks were issued with complete banking licences. [10078/19]
View answer53. Deputy Peadar Tóibín asked the Minister for Finance if a company (details supplied) was a holder of a banking licence for its full existence. [10079/19]
View answerI propose to take Questions Nos. 51 to 53, inclusive, together.
I am advised by the Central Bank that there are currently 480 entity types registered as Credit Institutions. A Credit Institution means:
(a) an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account, or
(b) an electronic money institution.
The register can be viewed on the Central Bank of Ireland website. Further details are included below.
In addition, to carry out banking business a banking licence is required and all banks have received the necessary approvals from the Central Bank.
Being granted a banking licence authorisation in one Member State opens the possibility that a credit institution can passport throughout the rest of the European Union without the need to establish a subsidiary in another Member State.
Passporting can be effected through either the establishment of a branch in another Member State (subject to notifying the home member state) or by the provision of services in another Member State (i.e. services are provided in another Member State but no physical presence is established in that State), also subject to notification requirements.
In accordance with Article 35 of the Capital Requirements Directive 2013/36/EC (CRD IV) any EEA credit institution wishing to exercise the freedom to provide services within another EEA Member State by establishing a branch shall notify the competent authorities of the home Member State of their intention to do so.
In accordance with Article 39 of CRD IV any EEA credit institution wishing to exercise the freedom to provide services on a cross border basis within another EEA Member State shall notify the competent authorities of the home Member State of their intention to do so.
The Central Bank also informs me that where an entity is operating as a bank, it is then required to hold a banking licence and therefore if it issues a loan as a bank it will have a banking licence. However, it is possible that loans currently on a bank's balance sheet may not have been issued by them originally as they could have bought the loan from another entity, which may not have been a bank when the loan was issued.
With specific regard to KBC Bank Ireland plc, this is a public limited company incorporated in Ireland under the Companies Acts 1963 to 2006 (no. 40537) on 14 February 1973 under the name Irish Inter-Continental Holdings Limited. On 25 April 1973, it changed its name to Irish Intercontinental Bank Limited. On 10 January 2000, it changed its name to IIB Bank Limited. On 29 March 2006, it re-registered as a public limited company under the name IIB Bank plc. On 24 October 2008, it changed its name to KBC Bank Ireland plc. The Transferee carries on a banking business in Ireland from its registered office at Sandwith Street, Dublin 2 and is the holder of a licence in relation thereto granted on 17 May 1973 under Section 9 of the Central Bank Act 1971.
Link to Financial Service Providers Register: http://registers.centralbank.ie/FirmSearchPage.aspx.
54. Deputy Michael McGrath asked the Minister for Finance the number of applications sought for a refund of income tax by taxpayers by virtue of claiming tax relief on certain expenditures, claiming additional tax credits or as a result of a P35 annual statement request for each year since 2010; the amount refunded to income taxpayers each year as a result, in tabular form; and if he will make a statement on the matter. [10153/19]
View answerI am advised by Revenue that the number of PAYE taxpayers who received tax refunds following claims or review requests, and the total amounts refunded for the years 2010 to 2018, are set out in the table below.
|
Tax Year |
Number of Taxpayers |
Amounts refunded €m |
|
2010 |
500,783 |
€413.3 |
|
2011 |
501,419 |
€380.6 |
|
2012 |
587,314 |
€402.7 |
|
2013 |
632,745 |
€440.1 |
|
2014 |
654,296 |
€422.6 |
|
2015 |
663,237 |
€416.1 |
|
2016 |
628,364 |
€421.7 |
|
2017 |
537,656 |
€395.0 |
|
2018 |
174,455 |
€133.7 |
Revenue has also advised me that the data in respect of the years 2015 to 2018 are subject to change as further review requests for those years are still possible. Revenue also confirmed that some 200,000 additional taxpayers also received balancing statements (P21) during the years in question but were not due a refund.
55. Deputy Michael McGrath asked the Minister for Finance his plans to publish the report on the funding gap in relation to the banking system here; if it states that Irish banks need to double their loan to deposit ratio from 0.8 to 1.6 by 2024 in the event that 50,000 new homes were needed each year; and if he will make a statement on the matter. [10154/19]
View answerIn December 2016, the ESRI published ‘Ireland’s Economic Outlook: Prospective and Policy Challenges’. The report included an estimate for the increase in bank credit required to fund the Institute’s estimate for housing supply. The ESRI used COSMO — the structural econometric model of the Irish economy — to generate estimates of both the mortgage credit required to purchase projected housing supply and the construction credit required to build it.
Last year, the Department of Finance undertook to update the work of the ESRI. Given the importance of housing to the macro economy it was deemed appropriate to amend the supply projection to a hypothetical 50,000 units by 2024. The report estimated that if such a level of supply was funded exclusively by the domestic banks, the loan to deposit (LTD) ratio of the aggregate Irish banking system would rise from 70 per cent as of Q4 2017, to 160 per cent in Q4 2024. Of course, housing supply is not funded exclusively by domestic banks and other sources of funding already exist in the Irish market.
Over recent years a number of non-bank entities have emerged to fund residential development. Real Estate Investment Trusts (REITs), pension funds, private equity providers and specialist lenders are now active in the market providing equity and debt to developers. Given the demand/supply imbalance that currently exists, the increase in funders willing to fund construction is most welcome. There are also wider benefits to this process of diversification. As well as being consistent with the EU’s Capital Markets Union agenda, such non-bank investment in the residential sector releases bank capital for alternative forms of lending.
It is important to note that the LTD ratio is also an insufficient metric by which to measure the ability of the Irish banking system to fund their lending activities. It is similarly an insufficient gauge by which to measure banking stability. In fact, under Basel III, LTD ratio requirements were removed and replaced with two quantitative liquidity management regulations — the Net Stable Funding Requirement (NSFR) and Liquidity Coverage Ratio (LCR). The NSFR takes the liquidity value of assets into account, while the LCR aims to ensure credit institutions hold a sufficient reserve of high quality unencumbered liquid assets that can be converted into cash under stressed conditions. Further, banks have many other sources of funding available to support their lending activities. Debt issuance, securitisation and covered bonds are just some examples of options available to the banking system.
Officials from the Department of Finance are currently working on the bank funding paper, which remains in draft form. The Department intends to publish the work in the near future.
56. Deputy Michael McGrath asked the Minister for Finance if he is satisfied with the operation of exemptions to the lending rules for banks as part of the macroprudential mortgage rules of the Central Bank; if the exemptions are deemed to be used at the point of the mortgage sanction or drawdown; if statistics in relation to the use of the exemptions for each year since they were introduced will be provided; and if he will make a statement on the matter. [10155/19]
View answerThe Central Bank of Ireland has put in place certain requirements in relation to the provision of residential mortgage credit by regulated entities. These are set out in regulations made by the Bank under the Central Bank (Supervision and Enforcement) Act 2013. These mortgage measures are now a permanent feature of the mortgage market and the Central Bank is satisfied that they are operating in line with their stated objectives of enhancing the resilience of banks and borrowers to future shocks and reducing the risk of credit - house price spirals from developing.
The Central Bank introduced proportionate limits, or exemption allowances, for new lending above the stated loan to value (LTV) and loan to income (LTI) caps which apply to new residential mortgage lending. The proportionate limits allow lenders to make credit decisions based on an individual borrower’s circumstances, subject to the overall exemption limit amounts as permitted by the lending regulations. Notwithstanding these proportionate limits, lenders are still required to assess an individual borrower’s affordability and to lend prudently on a case-by-case basis, in line with the requirements of the Consumer Protection Code and other regulatory requirements. The utilisation of these exemption allowances are monitored on an annual basis by the Central Bank in order to check compliance by lenders, and are evaluated relative to mortgage drawdowns.
The current calibration of the mortgage lending exemption measures permits lenders, in respect of the LTV limits, to provide up to 5% of new lending to first time buyers (FTBs) above the applicable 90% LTV cap and for non-first time buyers (non FTBs) to provide up to 20% of new lending above the 80% LTV cap. For buy to let mortgages, up to 10% new lending can exceed the 70% LTV cap. In respect of the 3.5 times LTI limit which applies to all PDH lending, up to 20% of new lending to FTBs and up to 10% of new lending to non FTBs can exceed this cap. (In addition certain types or categories of mortgage lending will also fall outside the LTV or LTI or both restrictions).
The table attached provides the number and value of PDH and BTL mortgages which received either an LTV or LTI exemption allowance from the time the lending rules were introduced in February 2015 to end June 2018.
|
PDH LTI Allowances |
PDH LTV Allowances |
BTL LTV Allowances |
||||
|
Year |
No. |
Value (€m) |
No. |
Value (€m) |
No. |
Value (€m) |
|
2015 |
1,976 |
442.22 |
1,322 |
329.33 |
34 |
4.37 |
|
2016 |
2,655 |
663.15 |
2,058 |
591.92 |
25 |
3.69 |
|
2017 |
4,471 |
1,220.02 |
1,892 |
546.20 |
34 |
7.58 |
|
2018H1 |
1,883 |
556.10 |
753 |
237.10 |
14 |
2.30 |
57. Deputy Michael McGrath asked the Minister for Finance the progress being made on the introduction of an index to track employer and public liability insurance costs; and if he will make a statement on the matter. [10156/19]
View answerAs the Deputy is aware, the Cost of Insurance Working Group (CIWG) made a recommendation that the Central Statistics Office (CSO) consider the feasibility of collecting price information on the cost of general liability insurance for businesses in the State and report to my Department on this by the end of 2018.
I have been informed that the CSO submitted a draft report to my Department in December 2018 on the work undertaken on the feasibility study to date. Subsequently in January, it presented its final report to the CIWG and I understand that the CSO will publish this Report shortly.
The Report outlines in broad terms the challenges that will be faced in developing a business insurance index, in particular the much more heterogeneous nature of the market compared to the relatively homogeneous motor insurance market. This much broader based sector creates significant methodological and practical challenges that would need to be overcome in order to produce a price index which accurately reflects changes in price in this area. For example a decision would have to be made as to what products would need to be tracked consistently which best represents the overall market.
I understand that in its Report the CSO has examined a number of options, many of which it has concluded are not feasible. However, I also understand that the Report also does outline one potential option which it believes warrants further exploration, and it intends doing so over the next number of months to see if it can make such an index operational.
58. Deputy Michael McGrath asked the Minister for Finance the number of insurance awards paid out in each of the years since 2010 in respect of claims related to employer liability and public liability insurance, in tabular form; and if he will make a statement on the matter. [10157/19]
View answer59. Deputy Michael McGrath asked the Minister for Finance the amount paid by policyholders by way of insurance premiums in each of the years since 2010 in respect of employer liability and public liability insurance, in tabular form; and if he will make a statement on the matter. [10158/19]
View answerI propose to take Questions Nos. 58 and 59 together.
At the outset, it is important to note that while as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation, my Department does not collect the type of information being sought by the Deputy. Further, I understand that the Central Bank of Ireland does not have access to market-wide data on claims paid and premiums received for Employers Liability and Public Liability Insurance. For example it does not have data with respect to firms that are passporting into Ireland on a freedom of services basis.
I would note however, that the Cost of Insurance Working Group, in its Report on the Cost of Employer and Public Liability Insurance, published data in relation to both types of insurance that it had received from Insurance Ireland, in Chapter 4 of the Report. In this context, there is financial year data provided for the years 2011 to 2016 relating to the number of claims reported in each of the years, certain key financial indicators such as gross earned premium, investment income, gross incurred claims, gross management expenses and gross commissions. The Deputy may find this useful in relation to his immediate enquiries.
The Deputy should note also that Recommendation 4 of the Report requires the Department of Finance to publish a Key Information Report for employer and public liability insurance. In this context, the Department has asked Insurance Ireland to provide a more detailed data on claims paid and incurred claims, to be augmented with data on settlement rates, policy counts, and disaggregated by an accident year basis. This request was submitted to Insurance Ireland in the first half of 2018. The Deputy will also note that it has not been possible for the Department to fully implement this Recommendation as Insurance Ireland, who do not routinely collect such information either, has found the exercise of compiling this data complex and has signalled to my Department that it needs further time to complete this exercise. I am hopeful that Insurance Ireland will be able to submit the requested data shortly so as to allow my Department to commence production of its Report.
In addition, the Deputy will be aware that the Oireachtas recently passed the legislation to provide relevant powers to the Central Bank of Ireland to establish the National Claims Information Database. The Central Bank (National Claims Information Database) Act 2018 was commenced by the Central Bank (National Claims Information Database) Act 2018 (Commencement) Order 2019 (S.I. 2 of 2019) on Monday 28 January 2019. The Central Bank plans to collect claims data for the National Claims Information Database from insurance undertakings in the first half of 2019, with a view to publishing its first annual report under the legislation in the second half of the year. It is expected that the Central Bank will collect and publish motor insurance claims information in respect of the last 10 years, including the number of claims reported and settled, the amounts paid on claims, the incurred cost on claims (i.e. the amount paid plus the outstanding amount to be paid, if any), and the actuarial estimate of the final cost of claims i.e. ultimate costs.
While the National Claims Information Database will focus on private motor insurance initially, the underpinning legislation has been developed in such a way as to allow its scope to increase over time. In this regard, the Cost of Insurance Working Group recommended in its Report on the Cost of Employer liability and Public liability Insurance that by the end of this year, the Central Bank produce a report on the merits and feasibility of collecting employer liability and public liability insurance data for inclusion in the National Claims Information Database.
60. Deputy Michael McGrath asked the Minister for Finance the consumer protection laws, regulations and codes that govern mortgage protection insurance, specifically the area preventing mortgage providers from restricting customers to certain insurance companies; and if he will make a statement on the matter. [10164/19]
View answerI am advised by the Central Bank that when an individual(s) applies for a mortgage loan to buy a home, the individual(s) will generally be required to take out mortgage protection insurance. This is a particular type of life assurance taken out for the term of the mortgage and designed to pay it off on the death of the borrower or joint borrower.
In most cases, a lender is legally required under Section 126 of the Consumer Credit Act 1995 to make sure that a mortgage applicant has a mortgage protection insurance before granting a mortgage loan, with some exceptions. These exceptions apply where:
(a) the house in respect of which the loan is made is, in the mortgage lender's opinion, not intended for use as the principal residence of the borrower or of his dependants,
(b) loans to persons who belong to a class of persons which would not be acceptable to an insurer, or which would only be acceptable to an insurer at a premium significantly higher than that payable by borrowers generally,
(c) loans to persons who are over 50 years of age at the time the loan is approved,
(d) loans to persons who, at the time the loan is made, have otherwise arranged life assurance, providing for payment of a sum, in the event of death, of not less than the sum referred to in subsection (1).
Under the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (“CMCAR”), lenders are restricted from making the approval of a mortgage contingent on the purchase of another product. These Regulations came into operation on 21 March 2016 on foot of EU legislation in this field, and replaced Provision 3.17 of the Consumer Protection Code 2012 in the case of activities coming within the scope of those Regulations. Regulation 13(1) provides ‘Subject to the provisions of this Regulation, a creditor or mortgage credit intermediary shall not sell, or offer to sell, to a consumer a credit agreement to which these Regulations apply in a package with other distinct financial products or services or conveyancing services, auctioneering services or other services relating to land which that person may require whether or not in connection with the loan where that credit agreement is not made available to the consumer separately’.
In addition, Regulation 13(7) provides that ‘ If a creditor requires a consumer to hold a policy of insurance related to the credit agreement, the creditor shall accept a policy selected by the consumer (and which can be from an insurance provider different to the preferred supplier of the creditor) provided that such a policy has a level of guarantee equivalent to the one the creditor has proposed and in any event shall be no greater than an amount that would be required to guarantee repayment of the outstanding credit or to insure the value of the security. This is without prejudice to the requirements of sections 124, 126 and 127 of the Consumer Credit Act 1995”.
61. Deputy Michael McGrath asked the Minister for Finance when the next court hearing is expected in relation to the liquidation of a company (details supplied) and the authorisation payments from the Insurance Compensation Fund to outstanding claimants; the number of claimants expected to be paid; the value expected to be paid out; and if he will make a statement on the matter. [10165/19]
View answerSetanta Insurance ("Setanta") was placed into liquidation by the Malta Financial Services Authority on 30 April 2014. As it was a Maltese incorporated company, the liquidation is being carried out under Maltese law. The Deputy will be aware that the Insurance (Amendment) Act 2018 (Act 21 of 2018) was enacted in July 2018. The Act inter alia provides for revised arrangements for the on-going administration of the Insurance Compensation Fund (ICF), including for the relevant applications to the President of the High Court. The most recent tranche of payments to Setanta claimants took place in late November 2018. To date, 670 personal injury claimants have been compensated in full. The liquidator of Setanta has informed me that since the last application was submitted, a further 125 personal injury claimants have now been agreed and these will be included in the next submission to the Fund bringing the total number of personal injury claimants who have agreed settlements to 795. There are a further 411 personal injury claimants who have yet to settle their claims. The latest information from the liquidator estimates that the total value of the next tranche will be approximately €7 million. Currently, no date has yet been fixed for the presentation of the next tranche of payments to the High Court. However, I am informed by the State Claims Agency that the preparatory work has commenced with a view to arranging a court date during March which will allow payments to issue by late March or early April. Finally, it should be noted that the process of settling claims is still ongoing and is subject in some cases to court procedures. The liquidator of Setanta estimates that the process of settling the vast majority of these outstanding claims should be completed by end - 2019.
62. Deputy Michael McGrath asked the Minister for Finance the number of companies that have availed of the capital gains tax entrepreneurial relief in each year since it was introduced; the cost of the relief in each year since it was introduced; and if he will make a statement on the matter. [10166/19]
View answerIt is assumed the Deputy is referring to the revised Entrepreneurial Relief provided for by section 597AA of the Taxes Consolidation Act 1997. This provision was introduced in the Finance Act 2015 and provides relief from Capital Gains Tax for individuals disposing of business investments in certain circumstances.
I am advised by the Revenue Commissioners that the number of claims and the cost of the relief are available at link https://www.revenue.ie/en/corporate/information-about-revenue/statistics/tax-expenditures/costs-expenditures.aspx.
For the Deputy's convenience, the cost of the revised Entrepreneurial Relief was €20.4 million with 406 individuals claiming the relief. At present this information is only available for 2016. Figures will be published in the coming months for 2017 when all returns for that year have been analysed.
63. Deputy Michael McGrath asked the Minister for Finance the number of insurance underwriters authorised and prudentially regulated here to underwrite public liability and employer liability insurance; his views on the lack of competition for small businesses; the number of insurance underwriters for public liability and employer liability that are still prudentially regulated in the UK and regulated here under freedom of service; the impact Brexit will have on this sector; and if he will make a statement on the matter. [10167/19]
View answerAt the outset, it is important to note that while as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation, my Department does not collect the type of information being sought by the Deputy. The day to day supervision of insurance undertakings is a matter for the Central Bank of Ireland, and so my officials have consulted with the Bank in respect of the information sought.
In this regard, I am advised by the Central Bank of Ireland that, during 2017 (the latest available figures), 20 insurance undertakings, which are prudentially supervised by the Central Bank, wrote general liability business in Ireland. It has also indicated that in 2017, there were 13 insurance undertakings, which are authorised in the UK, that were writing general liability business via Freedom of Service (FOS) or Freedom of Establishment (FOE). A further figure which the Central Bank has provided my Department with is the fact that there are currently 139 insurance undertakings, which are authorised in the UK, that are notified to write general liability insurance on a Freedom of Service (FOS) basis in Ireland.
With regard to the point about competition raised by the Deputy, it is accepted that there is a lack of availability of employer/public liability insurance providers for certain types of small businesses. For instance, I am aware of the particular difficulties currently being faced by the play centre sector. It would appear that the main reason for these difficulties is due to a lack of capacity in the market which I understand has been driven to some degree by the overall claims level in the sector. In determining their willingness to enter into or remain in a particular sector of the market, insurers will generally make an assessment of what they consider the overall risk to be. Therefore unfortunately even in situations where there have been no claims, part of their assessment of what premium level to charge, or whether to offer cover in the first place will be based on what they consider the general likely trend for claims in the sector will be, based on their overall past experience. This difficulty is reinforced by the fact that award levels in this country are significantly higher in this country than for instance the UK.
Consequently, these difficulties in the employer/public liability insurance sector explain why Minister of State D’Arcy is placing such an emphasis on implementing the recommendations of the second PIC Report as both of us are of the view that bringing our award levels more in line with other jurisdictions is essential if there is to be a sustainable reduction in insurance costs in the near future. If this were to occur, I have no doubt that that there would be more entrants into the Irish market and more competitive pricing.
With regard to Brexit and its impacts, the decision of the UK to exit the European Union undoubtedly poses challenges for the Irish insurance market, given the level of cross-border insurance business. This will be the case no matter what the outcome is of negotiations on the UK’s withdrawal from the EU. However, in terms of general liability insurance (including employer and public liability insurance in particular), I understand that the majority of the main non-life insurers operating in Ireland also write this type of business. In addition, the Central Bank has advised that in 2017, 40% of the domestic Irish liability market was provided by UK authorised insurers, with one large UK insurer accounting for 22% of that total liability exposure. The Central Bank notes that:
- this insurer has implemented its Brexit plan for both new and existing business;
- the majority of undertakings providing liability insurance have developed and are currently progressing and implementing their Brexit plans on time for 29 March.
As liability insurance is a commercial insurance product, the Central Bank expects that insurance brokers are reviewing the capacity of the insurance market and ensuring that their commercial clients are provided with suitable products from insurers to match their commercial client needs.
In conclusion, my view is that the impact of Brexit on the provision of insurance should not be that significant. I think of much more importance to the general health of the sector is the need to address the high award levels for soft tissue injuries in line with the recommendations of the PIC.
64. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he continues to monitor the economic situation arising from unsettled international trade conditions and notwithstanding Brexit; and if he will make a statement on the matter. [10200/19]
View answerI regularly monitor the latest economic developments. My Department continually analyses and prepares briefing on short and medium term macroeconomic trends in European and international economy. This includes informing me of the latest forecasts of the global economy and of our key trading partners from the international institutions.
The Economic and Fiscal Outlook published with Budget 2019 identified a number of external risks relating to trade disruptions and Brexit. My Department’s latest macroeconomic outlook, including the external risk assessment, will be contained in the Stability Programme Update which will be published in April.
At European level, through both the ECOFIN and Eurogroup meetings, ministers work alongside the European Commission and the European Central Bank (ECB) to take stock of the latest economic situation, including the risks to the European economy’s growth prospects.
The latest forecasts from the international institutions show a sharp deterioration in the external environment. There are strong indications that the global economic expansion, underway since 2016 and for longer in the EU and the US, has peaked. Momentum in the global economy has been slowing since the second half of 2018. Global GDP growth is projected to ease gradually from 3.7 per cent in 2018 to around 3½ per cent in 2019 and 2020.
Short-term indicators are pointing to a slowdown in the pace of growth. This reflects continuing risks relating to Brexit, tighter global financial conditions, geopolitical tensions and trade protectionism.
Escalating trade conflicts are negatively affecting the growth outlook in all countries. Indicators such as trade volumes, industrial production and manufacturing purchasing managers index (PMIs) are all declining. The key issue for Europe and the world economy is to safeguard the open, rules-based, global trading system which has been associated with raising living standards throughout the world.
Ireland, as a highly open, export focussed, economy is particularly sensitive to a slowdown in world trade and overall economic growth. The slowing world growth momentum and the implications for Ireland’s economy, underline the importance of improving the resilience of the economy by building fiscal buffers and focussing on competitiveness.
65. Deputy Bernard J. Durkan asked the Minister for Finance the extent of discussions he has had with the European Central Bank and the Central Bank here in the context of bringing mortgage interest rates into line with the European norm; and if he will make a statement on the matter. [10203/19]
View answerAs the Deputy is aware, the European Central Bank is independently responsible for the formulation and implementation of monetary policy in the euro area. Accordingly it is a matter for the ECB to set official interest rates and to operate the other tools for the implementation of its monetary policy decisions. In the context of the Single Supervisory Mechanism, the ECB also plays a key role in the prudential supervision of European banks and the maintenance of the stability of the overall banking system.
While the ECB will have an interest in matters relating to the transmission of monetary policy, the ECB does not have a role in the setting of lending or deposit interest rates by individual banks or other financial institutions. That is a commercial and business matter for individual banks. Nevertheless, when he appeared before the Joint Oireachtas Committee on Finance, Public Expenditure and Reform and Taoiseach in November 2018 with the Governor of the Central Bank of Ireland, the President of the ECB acknowledged that lending rates in Ireland are high. More particularly, this is the case in relation to the provision of new mortgage credit. As the Deputy is aware, there are a number of factors for this such as the cost of funds, the need for lenders to reflect the level of credit risk (and which is still an important factor in Ireland as a consequence of the banking and property collapse) and the need for banks to build up adequate capital buffers to meet increasing regulatory requirements and to withstand future adverse shocks. The high level of concentration in the market for the provision of new mortgage credit is also a relevant factor.
I also maintain close contact with the Governor of the Central Bank and it should be noted that the Bank has recently made a number of changes to the Consumer Protection Code which are designed to facilitate and promote mortgage switching through enhancing the transparency of the mortgage framework, to provide additional protections to consumers who decide to switch mortgage provider and overall to help consumers make savings on their mortgage repayments.
66. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which it is expected that Ireland does not become a collector of corporation profits tax in respect of profit earned in jurisdictions other than here; and if he will make a statement on the matter. [10206/19]
View answerI assume the Deputy is referring to the Apple State aid case as the European Commission has said publicly that the recovery amount may be reduced if other countries were to require Apple to pay more taxes.
Notwithstanding the appeal that the Government has lodged in the Apple State aid case, Ireland is required to comply with the binding articles of the Commission’s Final Decision and to recover the alleged aid from Apple. As such the collection of the alleged State aid has been completed, with the funds having being transferred to an Escrow Fund in which they will be held until the conclusion of the legal process.
The Commission’s Decision does not change the taxing rights in other countries and what the Commission is referring to here forms part of the regular private tax process for any global company, whereby they are responsible for managing their global tax affairs in the various jurisdictions in which they are located. It is therefore a matter between the company in question and the tax authorities in the various locations where they do business as to whether there are any taxation issues to be addressed and I am not in a position to comment on any such engagement due to the necessity to respect taxpayer confidentiality.
67. Deputy Bernard J. Durkan asked the Minister for Finance if his attention and the attention of the Central Bank has been drawn to the pressure being exerted on borrowers that have consistently engaged with their lenders and have made payment in many cases up to the maximum required but are now being pursued in the courts notwithstanding; and if he will make a statement on the matter. [10207/19]
View answerI am advised by the Central Bank of Ireland that within the remit of its responsibilities for safeguarding stability and protecting consumers, its approach to mortgage arrears resolution is focused on ensuring the fair treatment of borrowers through a strong consumer protection framework and ensuring that lenders have appropriate arrears resolution strategies and operations in place.
The Code of Conduct on Mortgage Arrears (CCMA) forms part of the Central Bank’s Consumer Protection Framework. It is a statutory Code first introduced by the Central Bank in February 2009, with the current CCMA becoming effective from 1 July 2013. The CCMA provides a strong consumer protection framework, aimed specifically at the process to be followed by relevant firms, to ensure borrowers in arrears or pre-arrears in respect of a mortgage loan secured on a primary residence are treated in a timely, transparent and fair manner.
Banks, retail credit firms and credit servicing firms are all required to comply with the CCMA. The overriding objective of the CCMA is to ensure the fair and transparent treatment of consumers in mortgage arrears or pre-arrears, and that due regard is had to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits. The CCMA recognises that it is in the interests of borrowers and regulated firms to address financial difficulties as speedily, effectively and sympathetically as circumstances allow. It sets out the Mortgage Arrears Resolution Process (MARP), a four-step process that regulated entities must follow:
Step 1: Communicate with borrower;
Step 2: Gather financial information;
Step 3: Assess the borrower’s circumstances; and
Step 4: Propose a resolution
Each regulated entity must consider the borrower’s situation in the context of the solutions they provide, which may differ from firm to firm. The CCMA does not prescribe the solution which must be offered.
Under the CCMA, a regulated entity may only commence legal proceedings for repossession where it has made every reasonable effort to agree an alternative repayment arrangement (ARA) with the borrowers and other clear requirements are met or the borrower has been classified as not co-operating.
This framework requires lenders to exhaust the options available from the suite of ARAs offered before taking action which may result in the borrower losing his/her home (whether by voluntary sale or repossession). During the legal process, borrowers have opportunities to re-engage with lenders to find a solution. In some circumstances, however, loss of ownership may be unavoidable.
The arrears handling provisions in Chapter 8 of the Consumer Protection Code (the Code) apply when the loan is not a mortgage loan to which the CCMA applies. The Code requires that regulated entities have in place written procedures for the handling of arrears. Where an account is in arrears, a regulated entity must seek to agree an approach that will assist the personal consumer in resolving the arrears. Specified information in relation to arrears must be made available to personal consumers, including general information to encourage the consumer to deal with arrears and stating the benefits of dealing with arrears.
Where an account remains in arrears for 31 calendar days after the arrears first arose, a regulated entity must inform the consumer of the status of the account and other specified information. This includes the amount of the arrears to date and the interest rate applicable to the arrears, details of any charges in relation to the arrears that may be applied and the importance of the personal consumer engaging with the regulated entity in order to address the arrears. This must be updated every three months, where the arrears persist.
Where a regulated entity reaches an agreement on a revised repayment arrangement with a personal consumer, the regulated entity must provide the personal consumer with a clear explanation of the revised repayment arrangement and clarification on what data relating to the consumer’s arrears will be shared with the Irish Credit Bureau or any other relevant credit reference agency.
I would also like to draw the Deputy's attention to the Abhaile scheme, the aim of which is to ensure that people who are at risk of losing their homes to address their mortgage arrears and to help them wherever possible, to remain in their homes. The Insolvency Service of Ireland have stated that if a debtor can, at least, service the current market value of their home, irrespective of the mortgage balance, a Personal Insolvency Practitioner will be able to secure a permanent solution that returns the debtor to solvency and allow them remain in their family home. In over 90% of Personal Insolvency Arrangements, the debtor has remained in their home notwithstanding the fact that the majority of such cases were in long term arrears.
Since Abhaile was established in 2016, over 10,000 households in mortgage arrears have received free financial, legal and insolvency advice from a Personal Insolvency Practitioner or a Dedicated Mortgage Arrears Practitioner under the scheme. Over 7,100 borrowers facing repossession proceedings have received advice and support from a Court Mentor and almost 4,800 borrowers facing repossession proceedings have received legal assistance at court from an Abhaile Duty Solicitor.
68. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which his attention has been drawn to particular circumstances in which small business borrowers on foot of a court judgment or otherwise who continue to make payments in line therewith are being forced into court for the purpose of repossession; if a particular intervention may be appropriate in such circumstance with particular reference to lending agencies no longer operating here; and if he will make a statement on the matter. [10208/19]
View answerAs the Deputy is aware, the courts are independent in the exercise of their judicial functions, and as Minister for Finance I cannot intervene in matters before them.
The Central Bank has published regulations for firms lending to small and medium enterprises, these aim to strengthen protections for SMEs when borrowing from regulated lenders, they set out a framework which regulated entities must comply with when dealing with SME borrowers in arrears and financial difficulties. The SME Regulations require regulated entities to establish and maintain in writing policies and procedures for dealing with borrowers in financial difficulties.
My Department will continue to keep all relevant legislation under review in order to ensure that borrowers whose loans have been sold are properly protected. In addition, the Department of Finance expect that the Central Bank, as regulator of credit servicing firms, will be vigilant in this area and raise any specific instances where they have found consumers have not had their protections upheld or that their positions have been disadvantaged.
69. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which issues with the potential to overheat the economy have been identified; and if he will make a statement on the matter. [10210/19]
View answerOn the back of the strong growth recorded over the last number of years, our economy has moved from a stage of economic recovery to a more mature stage of development. The recovery in the economy in part reflects improvements in Ireland’s competitiveness over the last number of years. As measured by the Central Bank’s Real Harmonised Competitiveness Indicator, Ireland’s competitiveness has improved by over 21 per cent from the low point in 2008.
Despite the rapid rate of recovery, the main signs of overheating – for instance pay developments, credit growth, and inflation - do not yet suggest that overheating pressures have emerged. While price pressures have been seen in the housing market, these are more a function of structural imbalances between supply and demand, which we are actively seeking to alleviate, rather than evidence of over-heating.
The strong growth in employment over the last number of years has seen the unemployment rate fall from a peak of 16 per cent in early 2012 to 5.7 per cent in January 2019. Despite the improvements in the labour market, the economy is not yet operating at full capacity, with the unemployment rate still above the level considered to represent full employment in Ireland. Although, average hourly earnings grew at just over 3 per cent in 2018, this follows nearly a decade of low or negative earnings growth.
Importantly the recovery in the economy has not yet given rise to inflationary pressure. For the sixth consecutive year inflation, as measured by the Harmonized Index of Consumer Prices, has been below 1 per cent. This trend has continued into 2019, with inflation of just 0.8 per cent recorded in January 2019.
As in any healthy economy, the pickup in credit growth has taken hold, albeit at a modest pace. However, since the financial crisis, a number of additional safeguards have been put in place to prevent the unsustainable build-up of credit, most notably the introduction of the macro-prudential regulations by the Central Bank.
Over the medium term, with the domestic economy expected to drive growth, it is important that we remain cognisant of the potential upward pressure this will place on both prices and wages, which could give rise to a loss of competitiveness. Indeed, in order to prevent overheating pressures emerging we must focus on maintaining competitiveness-oriented policies, whilst avoiding pro-cyclical policy measures. To this end, the Government will continue to implement budgetary policies designed to ensure economic stability and fiscal sustainability. This prudent approach to our public finances will help to mitigate against any future downturn in economy activity.
