Joint Committee on Finance, Public Expenditure and Reform díospóireacht -
Thursday, 5 Sep 2013

Overview of Financial Sector: Discussion with Permanent TSB

Chairman

I welcome Mr. Jeremy Masding, chief executive officer, Permanent TSB, Mr. Shane O'Sullivan, managing director, asset management unit, AMU, Mr. Ger Mitchell, mortgages and consumer finance director, and Mr. Stephen Groarke, head of financial reporting. The format of the meeting is that Mr. Masding will make some opening remarks, which will be followed by a question and answer session. I remind members, witnesses and people in the Visitors Gallery that all mobile phones must be switched off. Members of the public are ringing in to complain because people are talking but they cannot be heard because mobile phones are distorting communications in the room. Witnesses should have their phones switched off or on flight mode. It is not sufficient to put them on silent mode as it creates a great deal of technological distortion.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the joint committee. If they are directed by the committee to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing ruling of the Chair to the effect that they should not comment on, criticise or make charges against a person outside the Houses or any official by name or in such a way as to make him or her identifiable.

The primary outcome this committee wishes to achieve in engaging with the witnesses is to find out if Permanent TSB has met the 20% target set down by the Central Bank, and we will be seeking a statistical breakdown of how that 20% has been reached in terms of whether there have been interest rate adjustments, split mortgages put in place, mortgage to rent programmes and so forth. We also wish to find out if letters sent to distressed customers or customers who have not been in contact with the bank are included in the 20% figure. The specific issue we wish to deal with is the distressed mortgage book of the bank. We would also be interested to hear about other matters regarding the bank.

We intend to finish at midday so I ask both members and witnesses to be cogent and succinct in their questions and responses. I invite Mr. Masding to make his opening comments.

Mr. Jeremy Masding

Yesterday afternoon my office submitted a copy of my proposed opening remarks to the meeting with the intention that I would read them into the record this morning. Upon reflection overnight, those remarks echo the approach of the other banks' CEOs who have appeared before the committee this week in so far as I hope they give the committee a broad and compelling account of how the bank is performing and the progress it is making. I have been keeping in touch with the committee's proceedings this week so if you are agreeable, Chairman, it might be a better use of the committee's time to take those rather long-winded remarks as read and to increase the time available to you and your colleagues to ask questions of me and my team this morning.

I am joined by Mr. Shane O'Sullivan, who leads the asset management unit, Mr. Ger Mitchell, who leads the mortgage and consumer finance product business, and Mr. Stephen Groarke, who is head of financial reporting. I will circulate three simple slides which I hope will provide a useful level of clarity about the key issue the Chairman mentioned this morning, which is how the banks have responded by the end of quarter two to the request of the Central Bank to put in place sustainable and affordable treatments for at least 20% of the mortgage cases which were in arrears at the end of quarter one this year. Chairman, do I have your permission to circulate the slides which I hope will give the committee the confidence that Permanent TSB is on top of the issue?

Chairman

Yes. I have not looked at the document yet but if it is what we are seeking, we would be quite happy with that.

Mr. Jeremy Masding

As members know, given a choice between simplicity and complexity, bankers will typically opt for complexity every time. However, I hope we have given, in slide No. 1, as transparent a report as possible on what we have included in our Central Bank return for the end of quarter two. Slide No. 2 shows how that compares to how we report our work internally within the bank and slide No. 3 shows how we are doing, by that internal measure, up to and including this week. I hope that between these slides and the supporting material I and my colleagues have to hand, we will be able to deal with all the members' questions.

With your permission, Chairman, Mr. Shane O'Sullivan will take members through the slides and we will then answer questions.

Chairman

Excellent. Thank you.

Mr. Shane O'Sullivan

As Mr. Masding suggests, I will discuss each of the slides and I hope that will provide a very good context for the discussion thereafter. The first slide sets out in detail our submission to the Central Bank regarding the mortgage arrears resolution targets. The total number of treatments offered in the period to the end of June was 6,650. That enabled us to present a position of 26% versus the 20% target. The denominator is just over 25,000 customers who were in arrears greater than 90 days on 31 March. The breakdown of that 6,650 is as follows. There were 1,500 short-term treatments and 2,750 long-term treatments made to customers in arrears. There were a further 800 treatments that we deemed to be assisted voluntary sale and there were legal proceedings in 1,600 cases. I will talk a little more about each one of the clusters.

The short-term treatments are treatments that we believe are sustainable and appropriate to customers which help them over a short period, typically six months, to rectify and work with us on the situation they are facing. We believe that solution delivers sustainability over the long term and that no more than a six month, short-term treatment is required. Those treatments typically can include a moratorium where no payment is made at all.

Another option might be to pay an amount of money that is less than interest only. A further option might be to pay interest only. A final option might be to pay interest only and a little more. There were 1,500 of those treatments in our submission and they account for 23% of our total count.

To move on to the long-term treatments, we offered 2,750 treatments to the half year and they comprise a number of different types of treatment. We offered 1,000 split mortgages, 600 parked capital and interest, 750 interest only or capitalisation and 400 term extensions. Again, if I may I will give a flavour of what those treatments are like in reality.

Members are familiar with the split mortgage. A portion of the mortgage is parked or warehoused. No interest applies on that and no payment is due on that amount, while the remaining part of the mortgage continues as was. The parked capital and interest treatment is for situations where customers can pay not only the interest only but they can make a contribution to some of the capital. What that means is that at the end of the term there is probably a bullet payment required to repay the capital that has been parked or not paid during the term.

Deputy Richard Boyd Barrett

What kind of payment is required?

Mr. Shane O'Sullivan

It is what we would call a bullet payment.

Deputy Kieran O'Donnell

Is that for the parked capital?

Mr. Shane O'Sullivan

Yes, it is for parked capital and interest.

Chairman

Is that at the end of the term?

Mr. Shane O'Sullivan

Yes. It will depend on the individual circumstances. In terms of capital, some people can pay a small amount and some people can pay a significant amount. Case by case there will be an amount of capital that is parked for the duration of this treatment and at the end of the term the customer will repay that capital. Typically, it is done in a number of different ways.

Deputy Joe Higgins

What is the difference between that and a split mortgage.

Chairman

Deputy Higgins can ask his questions in a moment.

Mr. Shane O'Sullivan

The third option is interest only and capitalisation. Typically, this is a treatment where one pays interest only for a period. At our bank that is typically a period of three years. An alternative is to capitalise the arrears and to move on.

Finally, a term extension is where by extending the term of the mortgage the monthly repayment reduces and our customer is able to meet that reduced monthly repayment. In terms of our long-term treatments, they accounted for 41% of our total count at the half year.

Our next treatment we cluster and call closure. This is where despite every attempt to find a solution, there is no affordability evident and there is no sustainability evident. By that I mean the customer does not have any cash to pay the minimum amount of money that would be required monthly to secure either a short term or long-term treatment and at the end of the term there would be no way of repaying the capital that is due. We offer a treatment called assisted voluntary sale. Essentially, that treatment is where we work collaboratively with our customer to sell the property.

Finally, legal proceedings are cases that are at a particular stage in the legal process. Our count begins at a point where we have asked a solicitor to apply to the courts to secure a hearing date. There is a difference between the first three rows on the chart and the final row. The first three rows are what we would call flow. Those are all treatments, be they short term, long term or closure that were offered in the six-month period to 30 June. The final box "Legal Proceedings" is what we would call a stock figure because the methodology set out by the Central Bank is that one would count legal cases depending on when the case was initiated. If the case initiated in 2012 or 2011 it is a valid count in the legal proceedings category. It is slightly different to the three proceeding columns.

Deputy Kieran O'Donnell

Could Mr. O’Sullivan please recap on that?

Mr. Shane O'Sullivan

It is just before the civil bill but it is close to it. We have appointed a solicitor and asked that a court date would be secured. The solicitor is preparing the affidavit.

Deputy Kieran O'Donnell

Is that then processed?

Mr. Shane O'Sullivan

Yes. To answer the Chairman’s earlier question, before legal proceedings as we define them, there can be letters sent by the bank that suggest that if the account is not kept up to date or if the customer is non-co-operating, legal proceedings may commence. Those letters are not included in our count.

Members are familiar with the subjectivity around the methodology set out by the Central Bank. We have chosen to only count legal proceedings from the point that a solicitor is appointed. What that means is that the customer is non-engaging and we are looking for the court to make an objective review as to how things might develop. That might result in repossession for the bank or it may typically result in a stay for the customer or clearly a subjective view made by the court as it is entitled to do.

That is our submission to the Central Bank at the end of June based on the stock of arrears customers at the end of March. I would like to draw the attention of members to the second slide. This is how we report arrears and categorise arrears at Permanent TSB which is slightly different to the methodology set out by the Central Bank. If members bear with me I hope I will give them an insight into slide No. 2. Essentially, slide No. 2 shows that to the half year, June 2013, we had offered 11,000 short-term treatments to customers, 5,000 long-term treatments, 1,000 assisted voluntary sales and we had introduced a new option to which I will refer more later on slide No. 3, namely, the arrears repayment plan. These numbers, even though they are at the same date as the Central Bank, differ for the reason I set out. We have a different methodology at Permanent TSB to the methodology set out by the Central Bank. I will explain why.

With short-term treatments, we believe there is validity in offering a short-term treatment and that can ensure sustainability over the long term. Equally, there have been a large number of customers at our bank and other banks who have been on short-term treatments for numerous years and continuing the short-term treatment may not be a sustainable answer. There may be a long-term treatment that would work better for those customers. We chose to take a prudent approach in our submission to the Central Bank and we counted only 1,500 of the 11,000 we actually had granted in the half year to June 2013. We feel that was a prudent thing to do.

There is a second factor at play, the Central Bank figures relate to arrears greater than 90 days only, whereas we look at it more holistically. There are clearly customers who are in arrears of between one to 90 days and there are customers who have had moratoriums for a number of years that deserve to be evaluated to see if we can identify a long-term treatment for those customers. Those two factors explain the difference between the first slide and the second slide. For us what is important is what we are doing for our entire customer base for customers who are struggling and in arrears.

Deputy Richard Boyd Barrett

What about legal proceedings?

Chairman

I will allow Deputy Boyd Barrett to speak in a moment. He will get a chance to ask questions.

Mr. Shane O'Sullivan

It is probably one question I would like to answer if I can because it is an important issue. At Permanent TSB, we do not see legal proceedings as a customer treatment so that is why we do not have it on the second chart; we see it as a consequence if customers do not engage or do not accept what we feel is the right short term or long-term treatment for them. We see it as a consequence and not something one would count.

Mr. Jeremy Masding

It is important to emphasise that. All my experience says there will be a consequence through legal proceedings and it invariably means that they go back up the chart into a treatment or they go, sadly, down the chart into a repossession scenario. Over time, as we get through this stock of customers one can see the mix in these charts will change.

I am sure the committee does not want to invite me but if I was back here in six months time the mix of the charts would change. Slide No. 3 is a useful chart because we wanted to show the members that things moved between 30 June as of today. Obviously, as an industry, we have taken a lot of stick for inertia and I do not believe that is fair in Permanent TSB. We are trying to get through this stock of customers and this is the latest up-to-date chart which shows members that there has been much movement between 30 June as of today.

Mr. Shane O'Sullivan

That is exactly it. Slide No. 3 is the exact same slide as slide No. 2 but it is up to date. Two months have passed in terms of time and what we would like to emphasise by using slide No. 3 is the accelerating pace at which we are offering long-term treatments. On slide No. 3 our short-term treatments have dropped from 11,000 at the half year to 10,000 two months later. That is because we are moving away from short-term treatments because we believe there are customers on short-term treatments who should be on long-term treatments. Equally, if we look at the long-term treatments, they have grown from 5,000 at the end of June to 9,000 on 3 September. Significantly in that, our split mortgage offers have grown from 1,500 at June to 3,500 on 3 September.

Deputy Kieran O'Donnell

Are all those people-----

Chairman

I will not allow interruptions because the Deputy is just eating into the time.

Mr. Shane O'Sullivan

Equally, members will see the assisted voluntary sale figure has increased, and I mentioned a new treatment we call the arrears with payment plan, which is for customers we believe are in a position to make their monthly repayment and contribute to their arrears balance.

Mr. Jeremy Masding

That is a function of the standard financial statement, SFS, data the team will have collected and on which they had a dialogue with the customer.

Mr. Shane O'Sullivan

Correct. In summary, we hope that slide No. 1 is explicit enough to show members at a granular level the composition of our submission to the Central Bank. We see that we have reached 26% treatments versus the target of 20% but we caution that the Central Bank will be appointing auditors to visit our bank and other banks and will be evaluating our methodology and interpretation of the guidelines versus the Central Bank methodology.

Equally, we want to show the committee that outside the constraints of the Central Bank methodology we look at issues slightly differently. We are concerned about customers greater than 90 days in arrears but also customers between one and 90 days, and also customers who are not in arrears but who have been on short-term rolling forbearance for months and years. Equally, in the third chart we wish to show the members our commitment and focus to delivering short-term treatments and substantiate it with actual hard facts. I hope that sets out our position.

Mr. Jeremy Masding

The only comment I would add would refer back to the first slide. Obviously, we observed the debates this week around the legal and for clarity we stripped out legal even though I believe "definitionally" - if that is a word - we are within our rights to include it but if we stripped it out we also meet the 20% target.

Chairman

I thank Mr. Masding. We will go straight into questioning. I propose 20 minutes on the first round and then five minutes subsequently because we have to conclude by noon.

I again welcome the witnesses and thank them very much for what they have provided to the committee. This is the type of model we have been seeking from the banks since we commenced this process on Tuesday. With the committee's permission, we will bring in the Governor of the Central Bank around the 25th of this month but I suggest that we write to the other banks using this type of formula asking them to provide this information before the Governor of the Central Bank. In that way we will be using the one formula. Is that agreed?

Senator Paul Coghlan

I agree with the Chairman but would add a rider.

Chairman

Quickly.

Senator Paul Coghlan

It would be very helpful if we could have the Governor and some of the banks' representatives together before the committee because they are working-----

Chairman

I will deal with that later, Deputy Coghlan. You can make that suggestion in your own time.

By way of clarification, the legal proceedings are actual legal proceedings that commenced in 2010 and 2011. These are not proceedings that commenced in quarter 2 or quarter 1 of this year.

Mr. Shane O'Sullivan

Correct. To be clear, we were asked to look at our stock of arrears customers greater than 90 days at 31 March 2013 and we looked at the legal activity associated with those accounts. Strictly speaking, if we look at the definition from the Central Bank, we believe it is possible to count activity where letters have been issued by the bank. We chose not to do that.

Chairman

Yes, and we will deal with the Governor of the Central Bank on that because we believe that definition is not a sustainable solution. That is a communication process that is taking place that has an undetermined outcome.

Mr. Jeremy Masding

Chairman, to protect my team, it is not appropriate this morning for us to get into a debate around-----

Chairman

I know.

Mr. Jeremy Masding

-----my regulator because the banking licence is quite important to us.

Chairman

Mr. Masding, we will deal with the regulator-----

Mr. Jeremy Masding

Okay. Thank you.

Chairman

-----and the Central Bank. He will be before the committee and we will deal with that in our own time.

I want to move on to the issue of split mortgages. The number and percentages of the bank's split mortgages appear to be quite high in comparison to other banks using them. There appears to be a level of resistance or reluctance by some customers in the other banks to go down that route. Will Mr. Masding tell me the average variation of the split? Is it a 50-50 or a 30-70 split? How is it working out in most cases?

Mr. Shane O'Sullivan

Most split mortgages would be between 30% and 45% of the current value of the property.

(Interruptions).

Chairman

Please, Deputy Boyd Barrett. You will get time to ask your questions. Is it the current value on which the bank does the split or is it on the bought value?

Mr. Shane O'Sullivan

It is on the current value.

Chairman

If the current value of a property is €200,000 the bank is warehousing the 40%, the lower figure.

Mr. Shane O'Sullivan

We will consider warehousing up to 50%, therefore, we would consider warehousing up to €100,000. If we look at the actual run rate of offers we have to date, the range is between 30% and 45%. Clearly, there are exceptions. Some will be below and some above but the range is 30% to 45%.

Chairman

What happens the interest on the warehoused payment?

Mr. Shane O'Sullivan

There is no interest-----

Mr. Jeremy Masding

There is no interest payment on the warehouse - zero.

Chairman

Whether someone is on a tracker or on a variable-----

Mr. Jeremy Masding

There are two mortgages. There is the main mortgage and the part mortgage.

Chairman

Okay.

Mr. Jeremy Masding

The part mortgage has zero interest.

Chairman

Out of curiosity, what percentage of the bank's customers are on tracker mortgages?

Mr. Stephen Groarke

Of all the customers, €14 billion of our €24 billion book is tracker.

Chairman

What percentage is that?

Mr. Stephen Groarke

It is about two thirds.

Chairman

Two thirds. It is the same as the other banks.

The term "bullet payment" or "balloon payment" was used. At retirement age on the split mortgage, is that the deadline or the horizon the bank is putting on the bullet payment or is it sooner than retirement?

Mr. Shane O'Sullivan

The split and the bullet concept are different. With the split mortgage the warehouse amount is set to one side and we formally review the position with customers every three years. Typically, in terms of what that review will look like, we will sit down with the customer and again complete a standard financial statement, SFS, to see whether circumstances have changed. That may-----

Chairman

What I am trying to establish concerns the bullet payment. For example, if a couple in their mid-30s engage in a split mortgage on a €200,000 value and approximately €80,000 to €90,000 is parked, when-----

Mr. Jeremy Masding

If we split the two treatments, we have got part capital and interest - that is bullet - and we have got warehouse, which is the parked element.

Chairman

Okay.

Mr. Jeremy Masding

For the parked element that becomes liable - in inverted commas - in a contractual sense at the maturity of the main mortgage.

Chairman

Therefore, if there are 20 years outstanding on that it comes-----

Mr. Jeremy Masding

That is correct. However, I have a responsibility to the taxpayer to try to return as much capital as I can, therefore, there is a three-year review of the customer under a change of circumstances mantra to see if we can change the mix between a main mortgage and the warehouse.

Chairman

I refer to something Ulster Bank put up yesterday afternoon. If somebody borrows €150,000 or €200,000, they are not actually borrowing €200,000 because the payback is far greater than that over a 25 year or 30 year schedule with the interest added. Would it not be a more sustainable approach for people on variable interest rates as opposed to tracker mortgages to get an interest rate reduction, which Ulster Bank is offering, as opposed to going into a split mortgage arrangement?

While there is a more significant advantage if one is on a tracker mortgage, if one is on a variable rate mortgage, the rate even on the split side that is active can be quite high.

Mr. Jeremy Masding

All my experience states one should start from a premise of sustainability, affordability and, to be frank, clarity for the customer. That all starts with what is the net cash flow available to the customer to make a mortgage payment. By using a split, we pass this sustainability test. We pass the affordability test because we have used net cash flow and to be honest with the Chairman, it gives real clarity to customers. It gives them some hope but at the same time, life is a contract. While I am happy to give hope to customers, at the same time there is a responsibility on both the customer and the bank to speak regularly to ascertain whether circumstances have changed. Consequently, all my experience suggests that a split mortgage, which I have used before, is an absolutely valid tool in our toolkit.

Chairman

I will separate two items, namely, the buy-to-let sector and the home-owner sector. Am I correct that in the buy-to-let sector, interest-only indefinitely is considered to be a long-term resolution by the Central Bank?

Mr. Jeremy Masding

Yes. As I think it is important to talk about interest-only, to use-----

Chairman

I will ask the question and Mr. Masding can then talk about it later on.

Mr. Jeremy Masding

I will answer the question.

Chairman

Mr. Masding should respond as to whether the Central Bank facilitates interest-only in the long term in the buy-to-let sector as a sustainable approach.

Mr. Jeremy Masding

With all due respect, I am the chief executive of the organisation. We decide what treatments we have put in place. We are very careful about interest-only and, consequently, interest-only on home loans has a very clear set of controls. Broadly speaking, long-term interest-only on home loans is not a treatment of which we are in favour. In respect of buy-to-let, it is not someone's primary residence. We have a model we use - to which I would prefer not to share the commercial inputs - but we take a view on asset inflation, on rental available and on rental yield growth. Therefore, it is pretty clear that we have an understanding with the customer that at some point in time, we expect the capital back through the disposal of the property.

Chairman

To return to my question, the interest-only can be in place for quite a number of years and be seen as-----

Mr. Jeremy Masding

In the case of buy-to-lets, yes that is correct.

Chairman

However, in the residential sector, the resolutions Permanent TSB brought in this morning, no matter what they are, must be concluded and ended before someone hits retirement. Am I correct in this regard? Am I correct that the guidelines issued to the bank by the Central Bank are that no matter what, the mortgage must be dealt with and not be outstanding by the time someone reaches retirement age?

Mr. Shane O'Sullivan

As Mr. Masding has stated, we look at our treatment through two lenses, namely, affordability and sustainability.

Chairman

The witnesses should answer the question. All the bank's resolutions must be wrapped up before the customer actually hits the age of retirement. Am I correct?

Mr. Shane O'Sullivan

I will answer it. For home loans, the mortgage must be repaid by 65.

Chairman

For home owners.

Mr. Shane O'Sullivan

Yes. In the case of buy-to-let, it is 70.

Chairman

Yes. I will concentrate on the home owner. All the solutions the bank has must be dealt with and wrapped up by the time someone hits the age of retirement.

Mr. Jeremy Masding

It is 65 for home loans and 70 for buy-to-lets.

Chairman

Okay. I only wish to talk about home loans. Consequently, in the case of people in their 50s who have quite significant arrears, the obligation of having it wrapped up by 65 or 66 years of age sets a very high barrier. While I acknowledge the Central Bank has set guidelines, I seek the witnesses' opinion in this regard because AIB has a concern about it. Moreover, Bank of Ireland is on record of having concerns about it and Ulster Bank also actually expressed concern about this yesterday afternoon. I refer to a case in which someone has a loan outstanding when he or she hits the age of retirement but where the property is in positive equity and the mortgage is on a tracker or the interest rate is quite low because the capital amount is quite low. Moreover, the person in question has a retirement income that comfortably meets that interest payment into the future, meaning the capital amount will not grow. Consequently, given that house prices are beginning to normalise and a modest level of inflation is becoming evident - although one would not wish to see the rate of property inflation that obtained in the past - the asset is secured well into the future. In Mr. Masding's mind, would it be a sustainable solution that the person in question could continue with an interest-only payment into retirement, as opposed to having his or her home repossessed and being obliged to rent a house in the private market?

Mr. Jeremy Masding

I think jumping to the conclusion of repossession is not the same-----

Chairman

There would be a sale one way or another.

Mr. Jeremy Masding

I am clear in my mind that, as used elsewhere, trade-down at expiry is a legitimate request and the best use of shareholder capital. Consequently, I would prefer not to extend post-retirement because to be frank, in my experience one then begins to get into inheritance issues. I would rather have certainty for the customer at expiry and in the situation as described by the Chairman, our default position at expiry is that we would use a trade-down as the method to create a win-win. Mr. O'Sullivan may wish to add to that.

Mr. Shane O'Sullivan

I support that. It also is important to make the point that while it is a cliche to state that each case is looked at on a case-by-case basis, there really is no single mechanical formula that solves all cases. While we have a policy on home loans that the structured mortgage would be repaid by 65, as any bank would, we would look at cases on an exception basis. Sometimes, there are cases that make sense to have an extension beyond 65.

Chairman

Is Permanent TSB a capitalised bank?

Mr. Jeremy Masding

That is correct.

Chairman

To what percentage?

Mr. Jeremy Masding

We were given €4 billion.

Chairman

Is Permanent TSB completely owned by the State or is there a 13% interest, as there is with Bank of Ireland?

Mr. Stephen Groarke

The figure is 99.2%.

Chairman

Thank you.

Deputy Michael McGrath

I welcome Mr. Masding and his colleagues from Permanent TSB. I acknowledge members have received the information they sought, which must be welcomed. I thank the witnesses in that regard. Regrettably, the first question I must ask of Mr. Masding is whether the bank has a viable future. Its arrears rate is quite high and it has quite a high mortgage tracker element to its book. Moreover, I understand that SME lending is not a core part of its business. I welcome Permanent TSB's new initiative in respect of current accounts and that it has got approximately 30,000 such accounts in recent months. However, has the bank a viable future? What is the status of the restructuring plan, which has been submitted to the European Commission?

Mr. Jeremy Masding

The story is as follows: when I last appeared before the joint committee, I explained to members that we had submitted a high-level restructuring plan to demonstrate that we felt there was a journey to viability. We were then tested by the troika and the authorities over the following 12 months to determine whether we could actually create some momentum in the organisation. I of course would argue that we did. The fact I would put before members to demonstrate we have passed the first test is that for the record, management does not submit the restructuring plan, the shareholder does so. The fact that the shareholder has agreed to submit the restructuring plan on the back of 12 months of fantastic work by my team hopefully will give members some confidence that there is a future for this organisation.

The restructuring plan was submitted on 16 August. At a high level, it basically comprises, as we talked about in the half-year results, a bank-plus-two strategy, namely, the core retail bank that is absolutely essential for competition in this country, the asset management unit, on which I hope we have shown the joint committee that we are making progress and then of course we have some non-core portfolios. I am confident that this plan will be approved. We discussed it in detail with all the stakeholders beforehand and I think the delivery and the attitude of my people over the past 12 months in any event requires that they be given a chance to build it up. It is clear that there is an issue with the tracker book but I think it is really important that I kill a myth. Not all trackers are bad.

What we did was put all of the tracker mortgages on a big table like pieces of jigsaw and had two tests, the first of which was a total yield test - the base rate plus the margin. The second was whether they were performing and what were the characteristics of performance. In the restructuring plan we have submitted we have found €9 billion of tracker mortgages which we think are sustainable and would help in terms of the profitability of the good bank.

At the back end of the plan, 2017, one of the key jobs for any chief executive will be to create options for the shareholder. By running a bank, the good bank, the asset management unit, AMU, and the non-core business, I am trying to give the Minister, Deputy Michael Noonan, and his team options for the future of Permanent TSB. What does "options" mean? One could separate the good bank or one could separate the good bank and the AMU. It is too early to make that call. My job is to continue to build the franchise. I am confident that the team I have around me will deliver and that over time we will create a business model that will be attractive to investors.

In summary, we do have a future. The first test was whether we would survive, when many thought we would not, and we did. The second was whether the shareholder had enough confidence in us to submit a restructuring plan and the shareholder has. The restructuring plan will be approved and then the test for us will be whether we can deliver on it through to 2017.

For the record, it is rarely mentioned that there are 2,200 staff who work for Permanent TSB and who are absolutely committed to the survival of their bank. As the committee will be aware, they have made many sacrifices. I genuinely do not feel now is the right time to pull the rug from under their feet. The plan is compelling and fact-based. It has the same quality that the committee has seen this morning. We deserve a chance to compete in this market.

Deputy Michael McGrath

On the issue of the business model, will Mr. Masding give us the profile of Permanent TSB's mortgage book in terms of tracker, fixed rate, variable-rate mortgages, etc.? On the issue of the bank plus two, as I understand it, the asset management unit will deal with the arrears.

Mr. Jeremy Masding

There are also some tracker mortgages which do not pass that performance and yield test.

Deputy Michael McGrath

Mr. Masding might explain what the non-core business aspect will deal with. On Permanent TSB's welcome initiative with current accounts whereby consumers will essentially not incur fees if they transfer to the bank, what is the strategy? The bank is getting in customers through their current account business. Is it the hope Permanent TSB will develop a mortgage business from these customers? How will the bank make money from this?

Mr. Jeremy Masding

If it is acceptable to the Deputy, I will answer his supplementary questions while Mr. Groarke finds the data for him.

Deputy Michael McGrath

Yes.

Mr. Jeremy Masding

In terms of non-core business, any CEO has to have a portfolio lens. I have some tests as to whether it fits within the future business model of the Permanent TSB group. There are portfolios which do not fit within the business model. Examples would include our UK buy-to-let business called Capital Home Loans, CHL, which is a non-core business. Sadly, we have a commercial real estate, CRE, book which is the definition of adverse selection. It is a non-core business. Then we have a couple of other portfolios. My job and that of Mr. Shane O'Sullivan over time is to maximise value from these portfolios. As the Deputy will understand, there is always a trade-off between wanting to dispose of them because of their absorption of management time and not giving them away, which would destroy taxpayers' capital. We try to find that balance.

In terms of the good bank which, thank goodness, is now really beginning to motor, the current account strategy was one about which we thought deeply. We think current accounts are the cornerstone of any - I would hate to use the word pejoratively - "simple" retail bank. We want to be known for doing what it says on the tin.

Deputy Michael McGrath

Mr. Masding might explain the offer.

Mr. Jeremy Masding

Yes, of course. Life is a contract and I am happy to give the customer free banking if he or she delivers €1,500 into his or her account every month.

Deputy Michael McGrath

From his or her salary.

Mr. Jeremy Masding

From his or her salary or whatever else. Also, we have a responsibility to the taxpayer, the Irish people, to manage costs down. The second thing we ask for is that customers use online banking. Some 30,000 consumers have voted with their feet and we continue to exceed weekly targets in terms of numbers, with which I am really pleased.

In terms of mortgages, I made mistake 101 which a group CEO should never make, but I did it consciously at the start of the year. It was to put out a lending target. One will never get me to do this again. The reason was to show Ireland we had capital and wanted to lend. customers have since been walking in. We have had in excess of €600 million of applications. We created something called, "An agreement in principle", because in my experience customers need to know quickly whether, directionally, a bank will lend them some money.

Deputy Michael McGrath

What percentage of new mortgages extended is accounted for by Mr. Masding's bank?

Mr. Jeremy Masding

To answer-----

Deputy Michael McGrath

What is the profile of the mortgage book in terms of tracker mortgages, etc.?

Mr. Jeremy Masding

Let me finish-----

Deputy Michael McGrath

I am sorry-----

Mr. Jeremy Masding

CEOs like to grandstand.

Deputy Michael McGrath

I am sorry, but Mr. Masding is using my time. That is the problem.

Mr. Jeremy Masding

In that case, I beg the Deputy's pardon.

Deputy Michael McGrath

My time is nearly up.

Mr. Jeremy Masding

That told me. I will get off the grandstand. Apologies.

Mr. Ger Mitchell

We finished last year with less than 2% of the mortgage application business in the Irish market. As of the end of July this year, we are up to 17%. We account for 13% of the mortgage approval business. That is also up from below 2% in December last year. Based on our July pay-out, we account for approximately 8% of mortgages paid out in the year to date. The split is approximately 40% for first-time buyers and 53% for those looking to move.

Mr. Jeremy Masding

That is from a standing start. It is important to reference that this organisation, essentially, had to stop and reinvent itself. As a team, week in, week out we are climbing the mountain. To answer the Deputy's original question, we want to be known as a group of people who are very clear about what we do and do not do. If one wants to have a professional personal banking relationship, we are the people to have it with. If one wants leasing, factoring and corporate finance, that is not what we do.

Deputy Michael McGrath

What about Permanent TSB's book, in terms of tracker mortgages and the split?

Mr. Stephen Groarke

Does the Deputy want the tracker mortgage split?

Deputy Michael McGrath

No, the split of Permanent TSB's total mortgage book between tracker, fixed and variable rate mortgages.

Mr. Stephen Groarke

If we look at the three business units and look, first, at PTSB, the good bank, we have €8.9 billion of tracker mortgages.

Deputy Michael McGrath

The percentages would be fine.

Mr. Stephen Groarke

I have the absolute numbers in front of me.

Deputy Michael McGrath

Okay.

Mr. Stephen Groarke

The other €4.5 billion - call it two thirds, one third - involves a combination of standard variable rate, SVR, and fixed rate mortgages. The vast majority would be SVR mortgages. If one looks at the asset management unit, it is split between €3.2 billion of non-performing tracker mortgages, €2.8 billion of SVR and fixed rate mortgages- the vast majority would be SVR mortgages- and €3 billion of performing tracker mortgages that have not met the yield test for the good bank.

Deputy Michael McGrath

Would Permanent TSB's tracker mortgages account for one third to one half of its book?

Mr. Jeremy Masding

Nine over 14 and five over 14.

Mr. Stephen Groarke

In the whole bank tracker mortgages account for 60% of all mortgages.

Deputy Michael McGrath

I will ask Mr. Masding about the staff pension scheme. I note that the bank has ceased making employer contributions to that scheme. What is the status of the defined benefits scheme that was in place for staff and what are the implications for existing staff, deferred pensioners and existing pensioners in terms of benefits?

Mr. Jeremy Masding

Perhaps, for once, I should be even more clear on what we did. We wound up the scheme, which is the ultimate. I would hate anyone to think I would not be transparent with the committee. It is important that we reflect on why a management team would take such drastic action because it affects people's lives. Of course, our primary goal is to stay in business and capital is scarce and we have to protect it. The following are some quick facts and figures. The trustees of the scheme had indicated to me that the required annual funding for the schemes needed to be tripled, from €18 million to €55 million. I am sorry, but that is just not a test I can pass. Second, in the year-end accounts the deficit on the balance sheet between the assets and the liabilities was €311 million. Again, I am sorry, we just do not have that spare capital flying around.

As with any management team, we had to make choices. The final dimension is that one makes those contributions once but a defined benefit scheme has an open ended liability. The risk for us was consistently coming back to the taxpayer's pocket for more capital.

Deputy Michael McGrath

What are the implications for individual staff?

Mr. Jeremy Masding

In summary, that was why we made the decision. The responsibility then passes to the trustee who has to collect the data on assets and liabilities. That normally takes between six and 12 months. I do not yet know the implications. The trustees will eventually hand out statements to each member setting out how much of the pot he or she has been given. I am afraid I do not have that information at this stage because it takes time to value and sell the assets and to find all of the members of the schemes.

Deputy Kieran O'Donnell

I want to delve into the figures we have been provided with. Slide No. 1 sets out what was provided in the return to the Central Bank. How many of the 1,600 legal proceedings set out on the slide are expected to end up in repossessions? Slide No. 2 outlines PTSB's overall business. Does it include customers fewer than 90 days in arrears?

Mr. Jeremy Masding

We attempted with slides Nos. 2 and 3 to show that while everyone is fixated on arrears of 90 days or more, we do not run our business in that way. Arrears start at one second. The slides refer to the total stock of customers.

Deputy Kieran O'Donnell

How many of the 21,600 customers listed for the end of September are in arrears for 90 days? The return on assisted voluntary sales was 800, which makes up 12% of the 6,650 figure returned to the Central Bank, went up to 1,000 at the end of June and between June and the September it increased by 100% to 2,000. That equates to 500 repossessions or assisted sales per month, which is a very high rate. How has that figure arisen and what offers does PTSB make to people who find themselves in that situation? The figure appears to be much higher than for the other institutions. Why is that the case?

The tracker book comprises €14 billion or 60% of the overall loan book of €24 billion. PTSB regards €9 billion of mortgages as viable and €4 billion as unviable. In other words, it regards one third of its tracker book as unviable.

Mr. Jeremy Masding

Part of that €5 billion of mortgages is non-performing. It is not just a pricing issue.

Deputy Kieran O'Donnell

How much is being lost on the tracker loan book? My question is related to the issue of viability. Is PTSB engaging in writing off mortgages?

Mr. Shane O'Sullivan

The 1,600 cases that are subject to legal proceedings pertain to accounts that were in our denominator at the end of March. The legal process may have commenced in recent times or a number of years ago. Most of the cases commenced a very long time ago because, as members will be aware, issues arose with the legal system on the back of the Dunne judgment.

Deputy Kieran O'Donnell

How many of those are expected to end up in repossessions?

Mr. Shane O'Sullivan

It is difficult to say because some of the cases are at the start of the legal process, where a solicitor has been appointed to secure a court date -----

Deputy Kieran O'Donnell

Mr. O'Sullivan cannot give me a figure.

Mr. Shane O'Sullivan

I cannot because we want to engage with the customer throughout the process.

Deputy Kieran O'Donnell

In the limited time I have left, I ask Mr. O'Sullivan to address my question on assisted voluntary sales because they appear to be escalating at a drastic rate. Why is that the case and have alternatives been offered to customers? Clearly, some of them are in arrears for fewer than 90 days because they do not tie into the figures. I ask for an explanation for this.

Mr. Shane O'Sullivan

The Deputy is correct in that slides Nos. 2 and 3 refer to all arrears, not just those for longer than 90 days. They also refer to customers who fear they may fall into arrears but are not yet in that position. We are moving from a position where customers have been in revolving short-term treatments for lengthy periods to the point where we are making decisions on sustainability. We are seeking to include customers in long-term treatments.

Deputy Kieran O'Donnell

I will cut to the chase because I have very little time. People are coming to my office with offers from PTSB on the assisted voluntary sale route. I question whether these customers are being provided with alternatives prior to reaching that point. How did the figure for voluntary sales increase from 800 at the end of June to 2,000 two months later?

Mr. Jeremy Masding

I will answer the question through the CEO lens because that is important. When I was previously before this committee, I stated that, broadly speaking, we had no arrears management capability when I took over. The story of the tortoise and the hare comes to mind. We had to rebuild from the bottom up. As I explained on the previous occasion -----

Deputy Kieran O'Donnell

I do not have the time for this because the clock is running down.

Mr. Jeremy Masding

The answer to the question is that we are playing catch-up.

Deputy Kieran O'Donnell

It is a very simple question. The rate of growth in assisted voluntary sales, which in effect are repossessions, suggests people are not being provided with alternatives prior to reaching that point. Why had the figure increased by so much in two months?

Mr. Jeremy Masding

With all due respect, the Deputy asked two questions. I have answered one of them, which is that we are playing catch-up. The Deputy's second question was whether the customers were treated fairly in terms of a process which allowed them to make the right choice. I ask Mr. O'Sullivan to defend the team and the process because it is important that we do so.

Mr. Shane O'Sullivan

One needs to look at the two columns together rather than in isolation. The long-term treatments have almost doubled from 5,000 to 9,000. At the same time, the Deputy is correct that assisted voluntary sales have doubled from 1,000 to approximately 2,000.

Deputy Kieran O'Donnell

That is a significant jump.

Mr. Shane O'Sullivan

As is the jump in long-term sustainable treatments such as split mortgages.

Deputy Kieran O'Donnell

Normally the correlation with the other institutions is that the growth in the rate of repossessions is much less than the rate of growth in long-term solutions.

Mr. Shane O'Sullivan

It is important to distinguish between assisted voluntary sales and repossessions.

Deputy Kieran O'Donnell

In respect of the customers who are coming to me, the issue is that they are not being provided with alternatives. They are effectively being told this is the option.

I ask Mr. Masding to re-examine it. On the bank's tracker book, is it doing mortgage write-offs for customers?

Mr. Jeremy Masding

Yes, and write-off is at the end of a process.

Deputy Kieran O'Donnell

How much has PTSB written off in 2013 to date?

Mr. Jeremy Masding

Last time I looked it was €11 million. When one looks at our provision stock versus €11 million-----

Deputy Kieran O'Donnell

How much has PTSB set aside for the write off of mortgages in provisions?

Mr. Jeremy Masding

Nothing. I have provisions. I have no intention of writing off mortgages. I go through a process with customers. At the end of that process, as in any banking system-----

Deputy Kieran O'Donnell

But PTSB will write off mortgages.

Senator Paul Coghlan

I thank Mr. Masding for his approach. It is flexible and helpful as far as possible. It is a better approach than the Central Bank's methodology. I see the Central Bank targets as a blunt instrument, box-ticking approach. Would Mr. Masding agree that its targets can be counterproductive?

Mr. Jeremy Masding

The Central Bank is my-----

Senator Paul Coghlan

The structure of the legal process can increase the arrears. We will be meeting with the Governor of the Central Bank. If we got Mr. Masding and the other CEOs into that meeting that could help to bring everybody to a one process approach. Would Mr. Masding agree? I again compliment him on what he has set out here this morning.

Mr. Jeremy Masding

I thank Senator Coghlan for respecting the efforts of my team. The Central Bank is my regulator. It sets the rules and I play by them. I do not have sufficient momentum yet to put our banking licence at risk.

Chairman

We will not tell him. Mr. Masding can tell us.

Mr. Jeremy Masding

At the moment I will focus on what I can control, which is working with Mr. O'Sullivan to do the right thing for customers. If I am called in to help the system I will do that, but now we are trying to keep the bank alive, keep people in jobs and do the right thing for our customers.

Deputy Pearse Doherty

Like other committee members, I welcome PTSB's approach in providing this information. It is helpful. Looking at slide No. 3, I acknowledge that there is momentum in the bank in the last couple of months to deal with the mortgage arrears crisis. Some of that momentum is taking homes from people through voluntary surrender. There is a substantial increase in split mortgages, etc. PTSB was atrocious at dealing with people in mortgage arrears and, in some cases, still is. Last time, the bank was very frank in saying it did not have a process and it is playing catch up but the impression that everything is fine in the offers it is providing to customers is wrong. Hopefully many of the customers who do not contact us or other public representative are being treated fairly and well by PTSB, but it is making offers to people to voluntarily surrender their family home.

I have sat with one family in particular at approximately 11 p.m. one night and pored over their details. They went into arrears of approximately €300 on one occasion, which they had paid off the following week, and the letter from Mr. Masding's bank stated it had adjudicated the situation and believed the best option for the family was to surrender its house. I said that has to be wrong and when the family contacted Mr. Masding's bank a couple of weeks later, one of the staff said these are computer-generated letters. As has been stated, there have been 1,200 additional voluntary surrender requests. Can Mr. Masding talk to me about the computer-generated letters and acknowledge that in some cases these letters are going to customers they should not go to and causing major distress to families? The letters are very clear. They say PTSB has made the funds available as a result of the Central Bank's guidelines and the customer can contact an independent accountant to adjudicate the offer, but the customer has 28 days to contact the bank with a decision.

Mr. Jeremy Masding

I will talk about the philosophy and the process and then I will ask Mr. O'Sullivan to give the detail. The philosophy is that this is a waterfall. The customer gives us some standard financial statement, SFS, information and we have a team that goes through each of the treatments down the waterfall. We examine affordability and sustainability and come up with a treatment. There is also a group of people who second-eyeball that before it goes out to the customer. The customer has a right of appeal and we have an appeals committee. The customer has the ultimate right to go to the financial ombudsman. I am confident that the way of working we have built is absolutely acceptable for any banking system. There are times-----

Deputy Pearse Doherty

Does Mr. Masding acknowledge that letters calling for voluntary surrender of the house have been sent to some of his customers in error?

Mr. Shane O'Sullivan

My area issues these letters. In our asset management unit we try to return non-performing customers to performing. That is our starting point; it is what we attempt to do six days a week. The vehicle for making the assessments is the standard financial statement we complete with customers. Thankfully, that has enabled us to offer many customers long-term treatments. Despite that, there are cases where, unfortunately, whatever way we look at it, affordability and sustainability are not there. I wish that were not the case, but in some circumstances it is the case.

Deputy Pearse Doherty

I am five minutes into my question. The question was not on the process but whether the bank acknowledges that it has asked customers for the voluntary surrender of a family home in error in the past.

Mr. Shane O'Sullivan

I am not aware that that is the case. When we issue a voluntary-----

Mr. Jeremy Masding

We should stop there. I am not aware of that being the case.

Deputy Pearse Doherty

It is the case.

Mr. Jeremy Masding

I am not aware of that but the Deputy asked me a question-----

Deputy Pearse Doherty

PTSB is asking for the voluntary surrender of a house that went into arrears of €300 for only ten days. The bank acknowledged to the individual that they are computer-generated letters and the bank is not pursuing the voluntary surrender of it.

Chairman

I cannot take an individual customer's case on board but I will take the substance of the allegation Deputy Pearse Doherty is making and I am sure he can provide Mr. Masding with a copy of the letter.

Mr. Jeremy Masding

I was just about to suggest that. I am not aware of that being the case but obviously I respect the relationship between a customer and his or her Deputy. If any of the Deputies would like to share these cases with us, of course we will examine them.

Deputy Pearse Doherty

Is Mr. Masding concerned that 36% of the 6,650 cases that are required to meet the Central Bank's targets are repossessions, either voluntary or legal, that will take people's family home or property from them? This is a trend with the banks. PTSB is at the lower end at 36%. In Bank of Ireland the figure is 50%, AIB 70% and Ulster Bank 82%. There is a heavy concentration on requesting people to surrender their properties.

Mr. Jeremy Masding

Mr. O'Sullivan was very clear at the beginning about our definition of legal proceedings. We beg to differ. That is not what we say. We did not say the way we have defined legal proceedings will automatically lead to repossession. From my experience, that is not the case.

Deputy Pearse Doherty

Let me rephrase the question.

Based on this table, in 36% of the cases customers have no choice but to surrender their house or have their house taken from them. They do not offer split mortgages or any other solution. It is surrender the house or legal proceedings to take the house from them.

Mr. Shane O'Sullivan

It is important to point out that the legal proceedings are a legacy position. They are not a flow of new cases that have been initiated this year as part of a targets process. They are a legacy position. I can understand why the Deputy would add the 24% and 12% to get 36%. However, he must also remember we have been very prudent in the number of short-term and long-term offers we have submitted. Chart 2 shows that we actually have a significantly larger number of long-term mortgages and short-term mortgages. We have to be careful of the direct comparison.

Deputy Pearse Doherty

There are 1,600 legal proceedings ongoing so far. It is fair enough that some of them are legacy proceedings going back over a number of years. However, the number of requests issued in the past two months for people to surrender their houses voluntarily after adjudicating on their financial statements is 1,200. That is based on fact and the bank cannot claim that is a legacy position. The bank has scrutinised these individuals' financial statements. It is likely that in the bank's view, those people have to vacate their properties. There is a heavy proposition of surrender. Obviously, if those people do not comply, the bank will go down the legal route because the bank has adjudicated they are not sustainable.

Mr. Shane O'Sullivan

We attempt in every case to find a solution that brings people who are not able to pay their mortgage back to paying. The Deputy is correct. There are cases in which, no matter where we look, there is not a solution, and in those cases we arrive at a decision around the assisted voluntary sale. What Mr. Masding said is important. We have a legacy book of customers and for many years they have been on revolving moratoriums. While it might appear that customers have no arrears or very small arrears, the reality is that they have not been repaying their mortgages for a great number of years. We have to be careful. While it might seem that a customer is only in arrears of a very small amount of a couple of hundred euro, the reality is those customers have not been able to pay us for a great number of years. We have worked with those customers to provide forbearance over those years. When one looks at the account, the affordability and sustainability is not there and we have to be careful we do not think these letters have been offered just where there are small amounts of arrears.

Deputy Pearse Doherty

Many of the bank's customers speak to me about tracker mortgages. How many complaints of Permanent TSB moving customers from tracker mortgages to variable interest rate mortgages has the ombudsman upheld?

Mr. Jeremy Masding

I am sorry, I do not know the answer to that.

Deputy Pearse Doherty

Has it happened? Has the ombudsman upheld complaints over moving customers from tracker mortgages to variable interest rate mortgages?

Mr. Jeremy Masding

Not that I am aware of. May I come back to the Deputy on that one? I do not have those facts to hand.

Deputy Pearse Doherty

Has the bank done that? Is the bank involved in moving people from tracker mortgages to variable interest rate mortgages?

Mr. Shane O'Sullivan

Not that I am aware of. It is interesting that under the new CCMA, the banks have an entitlement to do that but I am aware of no case where we have done that.

Deputy Pearse Doherty

When the ombudsman offers mediation between the bank and a customer on moving people from tracker mortgages to variable interest rate mortgages, why does the bank refuse that?

Mr. Shane O'Sullivan

That is a broader question outside my remit in the arrears area of our business.

Mr. Jeremy Masding

From my perspective, that is an ongoing challenge that we have to work our way through. The Deputy will understand that we have a perspective that it was legitimate to do what we did. By definition there are others who think not. We are working through the cases. I do not have the facts with me. I will come back to the Deputy.

Deputy Pearse Doherty

The Central Bank code of conduct for directors of banks requires them to behave honestly regarding customers. Does Mr. Masding not believe it would have been important to inform customers that when the bank moved them from tracker mortgages to variable interest rate mortgages, it was basically getting one over them? Some customers may have asked to be moved from a tracker mortgage to a variable interest rate mortgage because at the time the variable interest rate was lower. Officials in the bank, who are very well paid, knew fine well that they were getting one over the customers and that was in breach of a code of conduct requiring them to behave honestly in the interest of the customer, yet they failed to inform customers of the consequences of such.

Mr. Jeremy Masding

It would be inappropriate for me to engage in a subjective debate with the Deputy. I commit to collect the facts and come back to him. I will present them to him in a transparent way. I am sorry I do not have the data with me.

Chairman

Mr. Masding will bring back those facts. What Deputy Doherty has raised here is very interesting. In the cases where the bank has flipped people from tracker mortgages to variable interest rate mortgages, has there been a reduction in the loan?

Mr. Jeremy Masding

Again, I will come back to the committee on the facts. The point I was making-----

Chairman

Permanent TSB has €3 billion of performing tracker mortgages. The suggestion has been made that if it were to flip those people over to standard variable rates and give them a 20% reduction on their capital, it would make a saving of €2.4 billion, which would represent a significant yield for the bank if it were to do that.

Mr. Jeremy Masding

Are we in the arrears space now or just in the generic space?

Chairman

No. I am discussing performing tracker mortgages. The bank has €3 billion of performing tracker mortgages. These are people who are not in any kind of resolution process. If rather than just flipping them over and getting no benefit the bank were to consider a 20% write-down in the mortgage while putting them on the standard variable rate, it could yield the bank €2.4 billion in performing mortgages. It would allow the bank to move to a more sustainable position because if it is not sustainable, it means all those loans are going into NAMA anyway and there will be a write-down of far greater than 20% on those debts.

Mr. Jeremy Masding

We do not have mortgages that go into NAMA. For the record, my primary duty is to protect taxpayers' capital and be very judicious in its use. I promise to take away the Chairman's concept and look at it, but my starting point is to be judicious with the use of capital.

I return to Deputy Pearse Doherty's question. When we all started working together, the Irish phrase "kicking the can down the road" and not providing certainty for customers was thrown at me regularly by Tom, Dick and Harry. While we might disagree in the mix - I take the Deputy's point on assisted voluntary sale - I will try to protect my team by saying we do not kick cans down the road anymore and we are trying to give certainty. We might all disagree with what that certainty is, but I want to impress on the committee that the team under Mr. O'Sullivan is genuinely trying to make progress on this very systemic issue.

Deputy Pearse Doherty

AIB and Bank of Ireland informed us that no employee earning over €100,000 has taken a reduction in base salary as a result of the Mercer recommendations. Does the same apply to the approximately 200 employees in Permanent TSB?

Chairman

I ask Mr. Masding to limit his answer to "Yes" or "No".

Mr. Jeremy Masding

Yes.

Deputy Pearse Doherty

They have taken a reduction.

Mr. Jeremy Masding

The Deputy's question was whether it was true that no one had taken a reduction. The answer is nobody has taken a reduction.

Deputy Pearse Doherty

Nobody has taken a reduction.

Mr. Jeremy Masding

The Deputy's question asked me "Yes" or "No".

Chairman

Deputies Spring and Ó Ríordáin are sharing time. I call Deputy Spring.

Deputy Arthur Spring

Mr. Masding alluded to the fact that his primary responsibility is to the bank and not to the customers. On Monday, the Personal Insolvency Act will come into force for customers. How will that change the relationship Permanent TSB has with its customers, particularly when one considers what the bank has done to date with customers to resolve their issues?

Mr. Jeremy Masding

Just to be clear, it is the job of any CEO who runs a plc to protect the capital.

Deputy Arthur Spring

We understand that.

Mr. Jeremy Masding

However, how one does that is important. For the record, I absolutely do not want to be accused of not being customer-centric because I am. Otherwise I would not be in my job. Regarding the insolvency dimension, since I have been here I have said on the record that an element of the Irish banking system that was missing was the net at the bottom for the most vulnerable. We welcomed and participated in the development of the Personal Insolvency Act. Once there is momentum around customers and PIPs, personal insolvency practitioners, we will contribute to the system in a professional way.

Deputy Arthur Spring

I have met a number of people who have gone to Permanent TSB branches and have not been made aware of the impact the Personal Insolvency Act will have on them to renegotiate a loan that is too burdensome on their families. Why is the bank not providing that level of information?

The level of knowledge the customer has is quite limited. This is not owing to a lack of intelligence but because the bank is not providing them with enough detail in regard to the options open to them and the benefits of these options. Ultimately, the upper hand will be returned to the customer following implementation of the personal insolvency legislation. While the biggest nightmare for the banks will be if people start handing over their keys and putting the onus on them to put an affordable and sustainable proposal to them, none of the people who have visited me at my office has been provided by PTSB with any detailed information. Why is that the case?

Mr. Shane O'Sullivan

We see personal insolvency as a key part of the resolution process. As a bank, we welcome and support it. There has been a great deal of ambiguity about how exactly the process will work. At a sectoral level, we have in recent times come to almost fully understand how the process will work. Permanent TSB has appointed a personal insolvency manager and put in place a team to work with the personal insolvency practitioners, PIPs. The team is engaged in mock cases. We welcome the obligation on Permanent TSB and others under the CCMA to be explicit in respect of the PIA.

Deputy Arthur Spring

I can point to cases which have come to my attention during the past two weeks involving individuals who have not been educated by Permanent TSB staff about the implications for them of the personal insolvency process. PTSB has a problem and it is not being fair to its customers. Mr. Masding said earlier that he was customer centric, while Mr. O'Sullivan said the purpose of the bank on a daily basis was to make non-performing loans perform. As politicians, our objective is to lift a generation of people out of the quagmire in which they find themselves as a result of poor governance, poor regulation and bad banking. I have not seen any evidence of this to date. PTSB needs to up its game and treat people fairly. The personal insolvency practitioners will be in a position to assist people, but they are not even being made aware of this. What does the bank propose to do in this regard?

Mr. Shane O'Sullivan

The insolvency legislation is not up and running yet. We are almost there. Once it is up and running-----

Deputy Arthur Spring

It will be up and running from next Monday.

Mr. Shane O'Sullivan

Yes. From Monday-----

Deputy Arthur Spring

That is not an excuse for not educating customers about what they can do. The bank is sending letters to customers stating they should consider vacating their properties and not educating them about what the Government is providing to resolve this issue.

Mr. Shane O'Sullivan

People should be aware of all of the options. As I said, we are in the process-----

Deputy Arthur Spring

Pardon me. Mr. O'Sullivan has just stated people should be aware of all of the options, but the bank is not making them aware of them. It is incredible.

Mr. Shane O'Sullivan

As a bank, we are working to deliver on our obligations under the CCMA to advise people of all of the options available to them.

Deputy Arthur Spring

Mr. O'Sullivan has just admitted that the bank is not doing that.

Mr. Jeremy Masding

The Deputy will see from the data we have provided that we are making enormous strides to provide sustainable and affordable solutions. The Deputy's question is whether we can check that communication of these solutions is transparent enough to include the insolvency regime soon to be implemented. That is a fair question. I will go away and-----

Deputy Arthur Spring

I will go further. The people with whom I have met have not been provided with ample information on how they can negotiate with the banks. Thus far, there have not been personal insolvency practitioners in place to assist them in this regard.

Am I correct that Permanent TSB has received €4 billion by way of capitalisation funding from the State?

Mr. Jeremy Masding

Yes.

Deputy Arthur Spring

There has been a write-down of approximately €11 million. Mr. Masding has stated Permanent TSB does not have in place a figure for provisions. How does the bank deal with its balance sheet if it does not know the amount of its contingent liability? Mr. Masding said when responding earlier to another speaker that he believed the bank should be an institution that could survive. Surely, he has a figure.

Mr. Jeremy Masding

A banker's first duty within the machine is to ensure the bank's provisions models are run to create a level or stock of provisions that should get it to the end of a process where it is able at least to write off the debt. The Deputy is correct that the figure of €11 million is disproportionately small in terms of the bank's stock of provisions.

Deputy Arthur Spring

What is the figure for provisions?

Mr. Jeremy Masding

As I said, as we run through the stock of non-performing loans, in respect of which I admitted we were playing catch-up, the Deputy can expect that we will be writing off debt at the end of a process.

Deputy Arthur Spring

What is the level of provisions? We have different priorities. I do not wish to be disrespectful, but our focus is on customers. I accept that the priority for the delegates must be the bank. What level of provision has the bank identified at this point in respect of a debt write-down?

Mr. Jeremy Masding

I will ask Mr. Groarke to provide the figure for the stock of provisions. For the record, that stock of provisions is not for a debt write-down: it is a stock of provisions that at the end of a process I may or may not use. The Deputy's performing mortgage constituents-----

Deputy Arthur Spring

We are running out of time.

Mr. Jeremy Masding

-----would expect me to do everything I could not to use that stock of provisions.

Deputy Arthur Spring

And taxpayers, I agree.

Mr. Jeremy Masding

I am not saying I will not use it, rather that there is a stock available and that we will use it.

Deputy Arthur Spring

What is the figure?

Mr. Jeremy Masding

There is no figure.

Deputy Regina Doherty

There must be a figure.

Deputy Arthur Spring

There must be a provision figure.

Mr. Jeremy Masding

Yes. That is not what the Deputy asked for.

Deputy Arthur Spring

It is. Everybody in the room heard me ask the question several times. I apologise to the Chairman for going over time, but this is not fair. Has money been set aside and, if not, why are we recapitalising the banks?

Mr. Jeremy Masding

I will ask Mr. Groarke to provide the committee with the stock of provisions amount.

Mr. Stephen Groarke

In home loans, on a book of €17.7 billion, a €1.4 billion provision has been set aside. The figure for buy-to-let properties, on a book of €6.5 billion, the provision is €1.1 billion.

Deputy Arthur Spring

I thank Mr. Groarke. They are two fantastic figures, although we had a struggle to get them.

Some people have been advised that their interest-only repayments on loans can be pushed out further. However, they have not been made aware that the Irish Credit Bureau has subsequently made PTSB aware that this will result in their having an M rating, which means that they may not be able to access car loans, credit cards and so on. Why are customers not being made aware of this? I have evidence before me in respect of one institution that is not educating people about this.

Mr. Jeremy Masding

I am unable to answer that question.

Chairman

What Deputy Spring is asking is that if a person engages in a resolution process with PTSB, will he or she be locked out from accessing further credit? If so, that is very worrying. The insolvency process provides for payment breaks to allow people to deal with emergency financial issues. The question Deputy Spring has asked is: will people who so engage with PTSB be locked out from accessing further credit?

Mr. Shane O'Sullivan

I do not believe we are doing so. When we reach a resolution with a customer, we formally restructure the mortgage. Once the customer adheres to that reschedule payment, he or she is not in breach of any contract.

Deputy Arthur Spring

Will PTSB ensure customers who engage in the resolution process will not receive an M rating from the ICB which would prevent them from accessing future credit?

Mr. Shane O'Sullivan

There is no reason a person subject to a moratorium or restructure would be exempt from receiving credit. I will look into it, but I have no sense that an issue arises in that regard.

Deputy Arthur Spring

I apologise if I appear forceful, but this is an issue which confronts all of us daily in our offices. People are under real pressure.

Mr. Jeremy Masding

I am equally sorry that I am forceful. By way of clarification, the Deputy asked earlier for the figure for the provision for a write-off.

Deputy Arthur Spring

Yes.

Mr. Jeremy Masding

I must clarify that my job is to create a stock of provisions and minimise use of same. Of course, we will use it, if necessary.

Chairman

I thank Mr. Masding.

Deputy Aodhán Ó Ríordáin

All of the other banks have made clear their positions on Priory Hall. Allied Irish Bank was the most positive; Bank of Ireland stated it would be led by other banks, while Ulster Bank was less than positive. Perhaps Mr. Masding might set out what he believes PTSB can do for its mortgage holders of properties in Priory Hall.

Mr. Jeremy Masding

I noted Mr. Duffy's comment which was, "We are very sympathetic. We will work to find a solution up to and including write-down, if necessary. We have called them all and said we will find a sustainable solution." I would like to replicate that comment on behalf of Permanent TSB, with the caveat that I do not listen to everything Mr. Duffy has to say.

Deputy Aodhán Ó Ríordáin

I have a final question. Mr. Duffy has said this is happening over the next number of weeks so can that commitment be given as well?

Mr. Jeremy Masding

As a foreigner, I know this is a sad case, and Mr. Duffy summarised it in exactly the same way as I would want to. There is something unique about it and we need a level of empathy and sympathy, which we will have. Like Mr. Duffy in AIB, I commit to sustainable solutions.

Deputy Aodhán Ó Ríordáin

Is contact being made with the individuals involved?

Mr. Jeremy Masding

Yes.

Deputy Aodhán Ó Ríordáin

Will there be a resolution in the foreseeable future?

Mr. Jeremy Masding

I would not go as far as that. As a foreigner I have also observed how many different stakeholders are involved in this case.

Deputy Richard Boyd Barrett

I thank Mr. Masding and his team for coming in but as time is short, I will be quick. I have one positive statement, not because I want to be negative but rather because our job, as others have noted, is to represent constituents in the problems they raise. These figures are positive and helpful and I wish the other banks had responded as quickly. I will go further in saying the banks have a way to go beyond the responsiveness they have shown in discussions with this committee. The evidence I have coming to me from constituents is that not all deeds are matching the words, although I hope the bank will carry through the commitment to be fair to customers, taking on board what has been said here.

The witness has indicated the bank wants to engage with customers and if it does engage, it will do its best to come up with a fair solution. That is not happening with the cases coming to me. I have a typical example and although I will not name the persons in question, there is a working couple watching who want an answer. They have taken a massive hit on their income and therefore cannot make the original payments. They are in negative equity, etc., and have been part of a merry-go-round of temporary solutions, moratoriums and so on; they are up the wall about the issue. The woman is now pregnant and will have to take maternity leave, leaving them in even more difficulty. She has written several letters to the bank asking for a meeting to discuss something more than a short-term solution but she has not even got a response to that. She has received computer-generated letters telling her she can have another moratorium but she does not want this. She wants to sit down with people from the bank and work out a long-term solution. She wants to decide if it is best for her to engage in voluntary surrender or if there is a long-term solution to keep her in the home.

During the summer, when Mr. Masding was away, I directly contacted his office and the letter sent by this person-----

Chairman

Could we have a question?

Deputy Richard Boyd Barrett

-----to Mr. Masding's office was passed around to four different people.

Chairman

I cannot allow the Deputy discuss an individual.

Deputy Richard Boyd Barrett

I did not mention names.

Chairman

Nevertheless, I must push you to a question.

Deputy Richard Boyd Barrett

Those people still have not got a meeting. Will the witness explain what is going on, as somebody is begging the bank for a meeting in order to formulate a long-term solution but it is not forthcoming?

Mr. Jeremy Masding

I will talk about a point of principle. The Deputy may recall that last time, Deputy Mathews quite rightly criticised the bank because Deputies had no direct access to the chief executive. Virtually the day after that meeting we created a dedicated e-mail account and I have had many e-mails from Deputies since. Mr. O'Sullivan and I work directly from that so I encourage members to use that facility.

Letters that come to my office related to arrears are dealt with by me and Mr. O'Sullivan. If the letter was passed around the office, it is not acceptable and I apologise to the Deputy. With regard to the particular case, I mention what I said to Deputy Doherty outside the realms of the committee. If the case is passed to Mr. O'Sullivan and me, I give my word that it will be considered seriously.

Deputy Richard Boyd Barrett

I welcome that and I will certainly take up Mr. Masding's offer. I hope he recognises that this indicates, as others have noted, that there is a problem in not engaging on the part of the banks. There has been much talk this week about strategic defaulters and people not engaging but there is clear evidence of people wanting to engage but not getting the response they should get from the banks. I would like the issue to improve.

The next matter relates to long-term solutions, so I ask about split mortgages. Could this be contrasted with a new product mentioned by Ulster Bank, and will the witnesses comment on a possible comparison? This is the split mortgage versus the economic concession. When many people I deal with hear about split mortgages, they do not like the idea of having to pay one part of the split for 25 years-----

Chairman

That question was already asked.

Deputy Richard Boyd Barrett

The Chairman could give me the chance to ask my question. At the end of the process these people would be left with a huge debt that would have to be paid off before selling the house. What is the difference between that and the economic concession and is the economic concession possibly a better deal?

Mr. Jeremy Masding

I refer to my previous answer and I am happy the split mortgage is an acceptable treatment for us as a group.

Chairman

Do you think it is a better product than the concession product?

Mr. Jeremy Masding

For us as a group, yes it is.

Deputy Stephen S. Donnelly

I welcome Mr. Masding and his team. I will pick up the split mortgage issue. I recognise the 0% rate on the shelf, which is a reasonable and welcome move from the bank. We have seen similar action from other banks except Bank of Ireland, which is pretending it has a split mortgage product but it is charging the market rate on the full amount. That is an exercise in deep cynicism.

My anecdotal evidence is that the figures seem to be moving in the right direction and I hope that what we are hearing comes from the edges, or the 1% of people falling through the cracks. We do not know that, and they might be the norm. I will read out an anonymised split mortgage offer relayed to me from a constituent at 9 a.m. this morning, and I ask the witnesses if they stand over it. The correspondence reads:

My wife and I are Permanent TSB customers currently experiencing difficulties with a shortfall of €400 [in capital and interest]. Permanent TSB has offered us a split mortgage which would reduce our payments by €140, including a five-year term extension. It has allowed us €10 per month for credit union and family loans and it wants us to default on the credit union and prioritise the mortgage. I explained that the credit union was being used to pay my college fees and if I default on that loan I will be unable to continue my studies. Permanent TSB replied that the situation was serious and the mortgage must take priority over everything.

I understand the difference between secured and non-secured credit, and typically, in banking, secured credit takes precedence. Would the bank stand over a case whereby enforcing the primacy of the secured credit would result in one of the borrowers having to leave a degree programme?

Mr. Jeremy Masding

Everything is done on a case-by-case basis. I think I would have to say I stand by that letter.

Mr. Shane O'Sullivan

We do not force these decisions and the debt prioritisation topic is here and now. We are very clear with our customers that they have a choice about the prioritisation of their debt.

Deputy Stephen S. Donnelly

I do not mean to cut across the witnesses but in the interest of time, I think Mr. Masding has answered the question. That is deeply disappointing as such an issue gets to the heart of the problem with this entire approach. The banks are dealing with arrears - they will be penalised if they do not - and the arrears targets will come down at the cost of the Irish citizens and the economic recovery of the country. If banks are forcing people to leave university in order to pay a split mortgage, probably with money they should not have borrowed and Permanent TSB should not have loaned, it will be bad for the country.

By my calculation, 65% to 80% of the solutions being offered will increase the level of payments made over the life of the debt from the borrowers to the bank. Mr. Masding and I have spoken about this before and the crisis is not about arrears but debt. Unfortunately, what I and other members are hearing is that whereas the banks are understandably meeting targets, the consequences, at least in some cases, will be to the detriment of Irish citizens and the economic recovery of this country.

What is Mr. Masding's view on that?

Mr. Jeremy Masding

The Deputy will understand that I fundamentally disagree with that perspective. Every time, we try, within the boundaries that we can control, to do the right thing for customers. The last time we met-----

Deputy Stephen S. Donnelly

Mr. Masding said he tries to do the right thing for the customer-----

Mr. Jeremy Masding

Let me finish.

Deputy Stephen S. Donnelly

On the example he has just given, does he think that is the right thing for the customer? It is an easy statement to make but when it comes down to the detail, he is going to ask her to leave university.

Mr. Jeremy Masding

Within what I can control, we make decisions. The last time I appeared before the committee, we had a macroeconomic debate about the banking system and I think we agreed that that was probably not within my control and that should the rules of the game change at a system level, many of the discussions would move to a different place. I retain my answer from the first time I was before the committee. I make decisions within that which I can control.

Deputy Stephen S. Donnelly

In this case, the decision Mr. Masding is standing over is that one of the bank's borrowers should leave university. I do not think he or I would believe that is in the best interests of the country, if they are the types of decisions he is willing to stand over.

Mr. Jeremy Masding

I understand why the Deputy keeps asking me to answer that question, but I must go back to the principles of the banking system in which I have grown up. The Deputy says he understands it and I know he does. He probably does not want me to reinforce it but it is right that I do. There is a priority of payment and there is a choice customers must make. The secured payments, by definition, must be that priority. I cannot make a judgment for what happens to the unsecured element. That is out of my control.

Deputy Peter Mathews

The banks-----

Chairman

Deputy Mathews, I will have to ask you to leave if you open your mouth once more. I call Deputy Donnelly.

Deputy Stephen S. Donnelly

I have a final comment for Mr. Masding. I appreciate that he has a very difficult job, and we will keep him under pressure. He spoke about what his customers and other customers want-----

Chairman

The Deputy should ask a question.

Deputy Stephen S. Donnelly

It is a final statement.

Chairman

No statements. The Deputy must ask a question. I am not taking statements, only questions.

Deputy Stephen S. Donnelly

A question would take longer. It is a final comment.

Chairman

You can make the statement when we are summing up. I am moving on.

Deputy Stephen S. Donnelly

Okay, I will ask a question. The PCAR test made up to €2.7 billion of public money available for residential mortgages and Permanent TSB has taken an accounting provision of €2.5 billion, so those figures tie.

Chairman

Deputy, you are eating into other members' time.

Deputy Stephen S. Donnelly

I am trying to ask the question.

Chairman

You had time to ask the question.

Deputy Stephen S. Donnelly

Chairman, I could have asked the question in less time than I am taking to you.

Chairman

You could have prioritised it at the start. I am setting the same discipline for you as I am for other members. Either wrap up your question or I will move on.

Deputy Stephen S. Donnelly

Does Mr. Masding not think it would be a better thing for the economic recovery of the country to accept that more of that €2.5 billion, which Permanent TSB has provided for and which has been provided to the bank by the Irish people, should be used for write-downs than the approximately €11 million provided for so far?

Mr. Jeremy Masding

As I have answered three or four times, the Deputy can expect, as we go through the stock of long-term arrears customers, that at the end of a process it is banking practice across the globe that bank CEOs write off debt. I have said on the record, even at the results last week, that we apply that banking model. If at the end of the process it is right that we use some of that provision to write off debt, we will.

Chairman

We must move on as this meeting must conclude at midday. I will take one question each from remaining members. It is to be asked cogently and quickly and responded to in the same manner. I call Deputy Regina Doherty for a question, not a comment.

Deputy Regina Doherty

Mr. Masding has said two things repeatedly, that Permanent TSB is a customer-centred bank and that in every case it will attempt to bring customers back to sustainable solutions. Of the voluntary assisted sales in both of the charts, the 800, 1,000 and 2,000, how many of them have not been offered any or all of the other options that are available in the long-term solutions category?

Mr. Jeremy Masding

I am not sure I understand the question. We go through an SFS process to collect data. We have assessive treatments. We match the SFS in terms of affordability and sustainability to the treatments. In a particular case, known as the purple box, having looked at the SFS and spoken to the customer, the most appropriate treatment in the bank's opinion is assisted voluntary sale. That is the process.

Mr. Shane O'Sullivan

That same customer would more often than not have had multiple short-term treatments over many years. We have given these customers a six month moratorium or interest-only opportunities, which is absolutely the right thing to do, over a long period of time but, as Mr. Masding said earlier, we are at a point where we are trying to make sustainable decisions for the future. Unfortunately, no matter what way we try, sometimes we cannot place people in the long-term options.

Deputy Simon Harris

To return to the issue Deputy Pearse Doherty raised, Mr. Masding has already conceded in the media that the bank wrote to a customer who had arrears of €200 asking them to sell their house and his spokesperson told TheJournal website on 25 July last that these apparently low arrears balances almost always reflect the fact that payments have been paused or reduced for a sustained period of time by agreement. Are people who have come to agreements with Permanent TSB and who think they are fully in compliance now getting letters that are bolts from the blue, like the person who had arrears of €200, telling them the only solution available to them was to sell their home, despite the fact that they had complied, by agreement, with the bank's arrangement up to that point?

Mr. Shane O'Sullivan

That is correct. We have worked for many years with customers who have had revolving short-term treatments but, as Mr. Masding said, we are at a point where we are moving from repeatedly offering short-term treatments to trying to work out the right answer for the long term. What that means for many customers, as is seen on the charts, is split mortgages and other long-term options. Unfortunately, for some customers it means that no matter what way we look at it, the affordability or sustainability is not there and that results in the assisted voluntary sale option. That is an option we speak about to customers before we ever send a letter. I appreciate that sometimes it might not have happened but we never send one of those letters, to my knowledge, unless there is an unintended error, without a conversation with the customer in advance, because we acknowledge the significance of what we are saying in those scenarios.

Mr. Jeremy Masding

I must repeat the point of principle. Quite correctly, the last time we appeared before the committee, "kicking the can down the road" and "lack of certainty for customers" were thrown at us. What we are trying to show the committee this morning is that we have tried to build infrastructure that is now beginning to create certainty.

Senator Thomas Byrne

To clarify, the Central Bank return is in respect of the target the Government and the Minister for Finance, Deputy Michael Noonan, set for the bank. The bank has exceeded that target and, in doing so, it has asked 36% of the 6,650 to leave their home or they are subject to legal proceedings to leave their home. By doing that, the bank is doing better than the Government asked it to do, as it has exceeded the target set by the Government. This gets to the point. The banks are doing what they are told to do by the Government. They are getting away with it and we are criticising the banks when the real target-----

Chairman

The Senator must ask a question or I will move on.

Senator Thomas Byrne

-----should be the Minister, Deputy Michael Noonan, who set these targets for the banks and allowed them to throw people out of their homes and offer that up as a sustainable solution to mortgage difficulties.

Chairman

That is a statement so there is no need for a response.

Senator Thomas Byrne

It is a fact.

Chairman

I call Deputy Higgins.

Deputy Joe Higgins

There have been three days of proceedings in the committee with four major bankers. All we have been doing, to put it crudely, is poking at a lightly formed scab over a deep wound that continues to fester underneath. Arising from the banking system that Mr. Masding said he grew up with and which is the only one he knows is an utter disaster from the orgy of speculation and profiteering. Now the collapse in the economy is affecting a generation of people, not just those in arrears of 90 days but also those who are not in arrears and are desperately striving to make their payments. Is it not obvious that Permanent TSB, as a State-owned bank, albeit by negative necessity, should be discussing a global response to this situation with the Minister for Finance and the Government instead of this ridiculous system of putting everybody through a wringer and, at the end of the day or perhaps at their graveside, giving people some type of write-down?

Is the obvious solution not that all banks, along with the Government, should have a policy of a general write-down to today's values of people's homes, with the monthly payments written down accordingly? Is it not the only sustainable solution to give people back their lives and to give back to the economy some of the billions of euro now going into these enforced mortgages and ruining our shops and services, etc.?

Mr. Jeremy Masding

As I answered to Deputy Michael McGrath, I am confident we can build a viable and profitable bank within the boundaries set for us-----

Deputy Joe Higgins

I did not say anything about a viable and profitable bank. Has Mr. Masding discussed with the Minister for Finance or considered, as a State-owned entity, a global approach to this disaster?

Mr. Jeremy Masding

That is a policy decision that is not for me to discuss. I am working as hard as I can with Mr. Shane O'Sullivan to create certainty for those who have had uncertainty for a long time. That is my job.

Deputy Joe Higgins

Mr. Masding's certainty is that he will be at their graveside, with his hand out, to take whatever they have left in terms of debt.

Chairman

Does Deputy Higgins have a question?

Senator Sean D. Barrett

I welcome our visitors. Mr. Masding said at the beginning that a buy-to-let property is not someone's private residence. I think he meant that it is not the landlord's residence but it is the tenant's principal private residence. Is that taken into account when dealing with buy-to-let properties? Does the bank extend the protection of the Family Home Protection Act to the tenant who has paid his or her rent and pursue the landlord who is the defaulting party rather than the tenant? Is it the bank's policy to seek vacant possession?

Mr. Shane O'Sullivan

That would not be the norm. Our contract is with the buy-to-let mortgagor and we work with the mortgagor in that situation. We work with the tenant in cases where rent receivers are appointed.

Senator Sean D. Barrett

There is some €4 billion of taxpayers' money-----

Mr. Jeremy Masding

Sorry, I make this slight error all the time. The sum of €4 billion was then, on a net basis, reduced when we sold Irish Life to Canada Life. I argue that the net taxpayer injection into the Permanent TSB Group Holding is €1.7 billion. We were given €4 billion when we owned Irish Life. That was sold by the Minister so one can make the argument that the net taxpayer investment is €2.7 billion.

Senator Sean D. Barrett

Did the Minister not pay €1.3 billion?

Mr. Jeremy Masding

Sorry, €4 billion was what we originally received and my recollection is that €1.7 billion was the disposal proceeds of Irish Life. Is that right?

Mr. Stephen Groarke

The sum of €1.3 billion was the disposal proceeds of Irish Life so taking that from €4 billion leaves €2.7 billion.

Senator Sean D. Barrett

We are losing €900 million a year on this investment according to page 2 of the initial presentation. The operating loss for the first half of 2013 is €449 million and for the first half of 2012 is €457 million. That amounts to €906 million so we are losing the best part of €1 billion a year on the €4 billion we put in. I do not know whether the company is viable.

Mr. Jeremy Masding

Deputy Michael McGrath asked me that question. On 16 August, we submitted a restructuring plan with the agreement of our shareholders. It showed that, over the planning period, we can return to viability.

With regard to the figures, my head is in arrears. We were given a cheque for €4 billion. Irish Life was sold for €1.3 billion and the net investment into the Permanent TSB Group Holding was €2.7 billion. I apologise for sounding like a drunk man. I have arrears figures all over my head.

Chairman

With that said, I will bring matters to a conclusion. I thank Mr. Masding, Mr. O'Sullivan, Mr. Mitchell and Mr. Groarke. That concludes this module of meetings with the banks. We will meet the Governor of the Central Bank on 25 September. As other members said, I appreciate the modelling of how these witnesses laid out the resolution process. It was helpful. We will communicate with other banks to give us data using the same modelling process. That will inform our engagement with the Governor of the Central Bank as we deal with the issue of what is resolution and what is not.

As I said to other institutions, the target figure of 20% set for 30 June is an increasing figure, to reach 30% by the end of this month and 50% by the end of the year. We will be engaging with the banks on an ongoing basis and we expect to engage early in the new year, when the 50% target has been met. We wish the bank success in reaching that target in a way that is sustainable-----

Senator Thomas Byrne

I do not. The targets involve throwing people out of their homes so I do not wish the bank success and I do not want to be joined with the Chairman's comment.

Chairman

Senator Byrne can do whatever he wants but I am speaking as the Chairman. I wish the bank success in finding sustainable, long-term solutions to people trying to meet their debt obligations and, in doing so, working their way out of the debt burden. The committee has been focusing on how financial institutions have achieved it. When we meet with Permanent TSB and other institutions in January, we will scrutinise it to ensure it is doing that.

I thank the witnesses for appearing before the committee and I propose to suspend the meeting until we resume with the OECD discussing the lobbying legislation.

Sitting suspended at 12.10 p.m. and resumed at 12.30 p.m.