JOINT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE díospóireacht -
Tuesday, 9 Jun 2009

Business of Joint Committee.

Chairman

Apologies have been received from Senators Feargal Quinn and Marc MacSharry and Deputy Michael McGrath. The first item is the minutes of the meeting of 26 May. Draft minutes of the last meeting have been circulated. Are the minutes agreed? Agreed.

On correspondence, there are items 2009/251, 253, 254, 256 and 277 — our reply to the financial institutions concerning penalties imposed on clients who have switched from fixed rate mortgages to variable rate mortgages. Item 252 is from the Financial Regulator concerning the same issue indicating that these preliminary findings suggest that lenders are not applying unjustified penalties intended to dissuade borrowers from early redemption of fixed rate mortgages but that the Financial Regulator intends to conduct further research to verify this. The Financial Regulator offers to provide the committee with further information when the additional work in this area is complete. Item 255 is a letter from Lahiffe & Associates on behalf of the Irish Property Owners Association. In regard to these items, does the committee wish to seek further information when this work is complete or to invite the Financial Regulator to a further meeting when the work is complete?

Deputy Richard Bruton

We should look for an interim report on the issues. We should have a paper now as to the regulator's current assessment of the situation, whether these breakage charges are justified and the basis of them, whether its impression is that the financial institutions are applying the rules in a fair way and whether they have the outstanding fixed rate commitments to match their insistence that ordinary householders pay the fixed rate commitments. We should have a substantive response rather than informing us that work is under way and we can then decide. Interest rates are now at the rate of 1% and people are stuck at very high levels. We should not leave it to a slow bicycle race between the regulator and the financial institutions. We need to get an immediate interim report from the regulator, find out the substantive issues it needs to investigate further and we can then decide whether we want to call in the financial institutions on some of those substantive issues to parallel whatever IFSRA is doing. We cannot leave this to an unaccountable system of the regulator and the financial institutions corresponding with one another.

Deputy Joan Burton

I wish to add one point which is fundamental. Does the regulator take a view of the level of profits it will allow financial institutions on mortgages? When one looks at the euro rates, whether fixed or floating, the position is particularly difficult in regard to fixed mortgages. For tracker mortgages, the margins and the spread are enormous in terms of people. We need to hear the regulator's view of that because obviously the banks will try to recover as much profit as possible as fast as they can. It is for the regulator to take a view of that, whether fixed or tracker mortgages.

Chairman

We can include that question in our letter.

Deputy Joan Burton

At this point, we should try to get the regulator to make a statement on it.

Deputy Chris Andrews

They need to be more proactive.

Deputy Seán Barrett

Back in the 1980s when the late John Boland was the then Minister for the Environment, he enacted legislation imposing restrictions on what building societies could and could not do. I do not see any reason this committee should not be in a position to produce legislation, imposing restrictions or obligations on this matter and hand it to the Government. I think the committee should consider this.

Deputy Joan Burton

I must leave at this point, but I have four minutes remaining. Is the Chairman agreeable to allow me that time later?

Chairman

Yes.

Deputy Chris Andrews

There was an article in the newspaper stating that this was now the best time to enter into a fixed rate mortgage.

Chairman

We will write to the Financial Regulator on those very valid points.

Item 255 is a letter from Lahiffe & Associates on behalf of the Irish Property Owners Association indicating that it would be delighted to accept our invitation to meet it in late September or early October. I propose we schedule a date during this time frame. Is that agreed? Agreed.

The Joint Committee on European Scrutiny sent us a letter and the decisions taken by it on 26 May 2009. It is proposed that we note them.

The Joint Committee on European Scrutiny has forwarded report No. 24 and COM (2008) 805 - a proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax as regards tax evasion linked to import and other cross-border transactions. It is proposed that we note it. The Joint Committee on European Scrutiny has also referred the report entitled, Special Report on New EU Legislation, 1 July to 31 December 2008, for information. Chapter 3.5 relates to financial and economic policy. It is proposed that we note it.

Deputy Seán Barrett

May I comment on the items circulated by the Joint Committee on European Scrutiny? As proposed under the Lisbon treaty, there is an attempt to improve the influence of national parliaments on proposed legislation and if we are being told about EU reports and so on, I suggest they should be referred to the committee's consultant to see if there is anything in them that would be of interest to this country, rather than simply noting them. We moan when they become directives but we never did anything about them. When proposals are made, that is the time to look at them in detail. The easiest way to deal with this would be to ask the committee's consultant to look at them to see if it is necessary for the committee to report on them.

Chairman

We would have to amend the terms of reference of the consultant's contract in order to take on board the Deputy's suggestion. This would have a cost implication.

I will ask the clerk to examine the nuts and bolts of what the Deputy has suggested and outline the costs.

Deputy Seán Barrett

As a busy committee, we are inclined to note these reports.

Chairman

I have no problem with the Deputy's suggestion but we must look at the cost of doing so and whether we have the allocation to cover it. I agree with Deputy Barrett that there is no point in being circulated with reports that float into the wastepaper bin. Perhaps there is another means of obtaining a synopsis of these reports.

Deputy Seán Barrett

A simple one-page document.

Chairman

The main point of the Deputy's suggestion is that we should have a report on the reports, and I have asked the secretariat to see whether it could do it or that it be done by a consultant. We will have a report made on the matter.

Deputy Seán Barrett

The current consultant has experience of it because he worked with the Joint Committee on European Affairs when I was a member of that committee some time ago. He did the same thing.

Chairman

Very good.

COM (2009) 252 is a communication from the European Commission on European financial supervision. It was sent for the information of the committee by the Department of Finance and indicates a formal response to the report of the de Larosière group on financial supervision in Europe. It also indicates that the Commission would welcome a reaction from all stakeholders to the proposal contained in the communication which should be forwarded before 15 July. I suggest we ask the Department of Finance to give us a report as soon as possible indicating its views on the communication from the Commission.

No. 3 is a draft travel proposal on attendance at the Eurofi conference to be held in Gothenburg from 23 to 25 September. The draft programme for the conference on priorities for restoring confidence and improving the efficiency and safety of EU financial services has been circulated, with a draft estimate of the cost. The committee agreed at its meeting of 6 May that it should be represented at the conference. The working group has recommended that no more than three members form a delegation. Can I formally seek approval for attendance at the conference by up to three members at an estimated cost of €1,838 per member and €1,738 for one official? We will be using instant purchase, not a refundable option. I ask the convenors to let the secretariat know the names of the members who wish to travel.

Deputy Seán Barrett

Who are the convenors?

Chairman

Senator Liam Twomey.

Deputy Joan Burton

When is the Dáil due to assemble in September?

Chairman

Actually, I do not know.