Wednesday, 19 June 2019

Questions (38)

Joan Burton


38. Deputy Joan Burton asked the Minister for Finance his views on State-owned banks selling non-performing loan books to vulture funds; and if he will make a statement on the matter. [25320/19]

View answer

Written answers (Question to Finance)

The Deputy will be aware that the reduction in the level of non-performing loans, or NPLs, across European banks is a major priority for the banking regulator, the SSM. The Irish banks have made huge progress in this regard since the height of the crisis. According to the Central Bank of Ireland, the average NPL ratio of the domestic Irish banks was 8.5 % in December 2018, falling from 13.8% a year earlier and from greater than 30% at peak in 2013. In volume terms, NPLs in the domestic Irish banks have now fallen by €67.3 billion, or 88%, from peak in 2013. A major contributor to this has been the almost 127,000 mortgage restructures that are currently in place. 

Despite this progress, the NPL ratios at the Irish banks remain at an elevated level and are above the European average of under 4% and further work is required by the banks to address this.

It is important to reiterate that the protections in place for all borrowers before a sale remain unchanged. For example, Start Mortgages and Pepper, the firms who were involved in the Glas and Glenbeigh loan sales transacted by PTSB in 2018, are both regulated by the Central Bank of Ireland. When dealing with borrowers, these firms are required to comply with the Consumer Protection Code and the Code of Conduct on Mortgage Arrears. Furthermore, assurances have been given that the terms of a restructure agreed before these sales took place will continue to be honoured.

In addition, in 2018 I asked the Central Bank to carry out a review of the CCMA to ensure it remains as effective as possible. The result of this review was published last October and it is encouraging to note that the key findings included confirmation that for borrowers who engaged with the process, the CCMA is working effectively as it is intended in the context of the sale of loans by regulated lenders.

Finally, I wish to highlight that I cannot stop loan sales, even by the banks in which the State has a shareholding. These decisions are the responsibility of the Board and management of the banks which must be run on an independent and commercial basis. The banks’ independence is protected by Relationship Frameworks, which are legally binding documents that I cannot change unilaterally.