I propose to take Questions Nos. 97 to 100, inclusive, together.
On 18 March last I met with Banking and Payments Federation Ireland (BPFI) and the CEOs of the five main retail banks, and following that meeting the banks outlined a coordinated approach, which included payment breaks on mortgages and other loans, to supporting their personal and business customers who have been impacted by the Covid-19 crisis. Since then, my Department has kept in contact with the BPFI and certain lenders in relation to the impact of Covid-19, and of course my Department always maintains close and regular contact with the Central Bank on all matters of mutual interest. As the Deputy will appreciate, the economic difficulties and issues associated with Covid-19 continue to evolve and the recent statement by the BPFI (on 30 April), which stated that the period of loan payment breaks will increase to six months, is testament to this.
The Central Bank has advised that it continues to work with lenders to ensure the fair treatment of customers who find themselves in financial difficulties due to the exceptional circumstances of Covid-19. Payment breaks give borrowers affected by Covid-19 the opportunity to postpone or substantially reduce their repayments at a time of stress. It is clear that these payment breaks are necessary for many borrowers to enable them to deal with the immediate shock that they are experiencing. The Central Bank expects lenders to clearly explain to their customers the implications of a payment break, for the term, payment schedule and costs of the loan. This includes clarity on how the term of the mortgage will extend, and / or whether the payment break will require increased monthly payments in the future once the break expires.
Across the European Union, non-performing loans are classified according to a common set of rules under the accounting and banking regulations. Changes to interest charging can, under these rules, result in forbearance implications and in loans becoming classified as in default under distressed restructuring, with consequences for both consumers and banks. The Central Bank has engaged extensively with its counterparts across the EU (in the European Banking Authority and as part of the Single Supervisory Mechanism) to ensure that the non-legislative payment breaks applied in Ireland avoid the classification of exposures under the definition of forbearance or as defaulted under distressed restructuring, where appropriate. In this context, the recently published EBA Guidelines (see https://eba.europa.eu/eba-publishes-guidelines-treatment-public-and-private-moratoria-light-covid-19-measures) provide clarity on the treatment of payment moratoria and in particular that payment moratoria do not trigger classification as forbearance or distressed restructuring if the measures taken meet certain conditions.
As you will be aware, An Taoiseach, Leo Varadkar, the Minister for Business, Enterprise and Innovation, Heather Humphreys and I met with the Chief Executives of the five Irish major retail banks earlier this week.
The Taoiseach emphasised the important role of the banking sector in supporting the gradual re-opening of the Irish economy by ensuring a flow of credit to businesses as they begin to trade again, in line with the government’s Roadmap for Re-opening Society and Business.
We welcomed the ongoing work of the banks in helping business customers and mortgage customers impacted by COVID-19, the initial three month payment-breaks, allowing households and businesses to defer some of their most significant outgoings and their intention to extend these payment breaks to six months for households and businesses.
Finally, we welcomed the commitment by the banks to continue to play their part by working positively with their customers, in as supportive a manner as possible, to ensure that the recovery can take place as quickly as possible.
We will continue to have ongoing engagement with the Central Bank of Ireland, the BPFI and the retail banks on a wide range of issues as we emerge from this crisis, in line with the Government’s Roadmap for Re-opening Society and Business.