Written Answers Nos. 14-21
15. Deputy Barry Cowen asked the Minister for Finance his views regarding the implications of the liquidation of the Irish Bank Resolution Corporation for local suppliers of goods and services to the firm; the timetable he envisages for resolution of claims for payment by these firms; and if he will make a statement on the matter. [10600/13]
Amharc ar fhreagraNormal Companies Acts’ priorities must apply throughout this liquidation process. This means that the proceeds from the disposal of IBRC’s assets will be used to repay creditors in accordance with these priorities, and consequently preferred creditors will be paid first and then the secured debt which NAMA will have purchased from the Central Bank will be paid. If there are proceeds available after repayment in full of this debt, these proceeds will be applied to remaining unsecured creditors. Amounts owing by IBRC to contractors, trade creditors and other service providers are unsecured debts. It is not yet clear whether IBRC will have sufficient assets to repay unsecured creditors in whole or in part. The Special Liquidators have the power to come to arrangements with any creditor that is considered crucial to maintaining value or vital in providing services for the day-to-day operations of IBRC. Unless covered by the ELG scheme, bonds, guarantees or letters of credit rank equally with debts to contractors and other service providers as unsecured debt. Any creditors who have queries in relation to their status should contact the Special Liquidators.
16. Deputy Martin Ferris asked the Minister for Finance if has considered the impact of Irish Banking Federation’s protocol of 31 January 2013 on the credit union movement. [10569/13]
Amharc ar fhreagra49. Deputy Martin Ferris asked the Minister for Finance if he has had contact with the Governor of the Central Bank on the issue of the Irish Banking Federation’s protocol of 31January 2013; and his views on whether the protocol will contribute to the ending of the mortgage crisis. [10568/13]
Amharc ar fhreagraI propose to take Questions Nos. 16 and 49 together.
While I note the launch of an IBF protocol on unsecured debt, this was solely an initiative of the IBF and neither I nor my Department had an involvement in the initiative.
Initiatives such as the IBF protocol can assist in encouraging and facilitating creditors and debtors to engage with one another in an open, constructive manner to address debt arrears and genuine debt difficulty. This can resolve positions of over indebtedness in a way that is as fair as possible to both the debtor and creditors and could be a beneficial voluntary addition to the broader debt resolution framework.
The Deputy is aware of the mortgage arrears problem and he will also appreciate that the credit union sector is also under financial stress and continues to face significant business challenges. The level of arrears in the credit union sector is also significant. Average credit union sector arrears were reported at 20.1% as at 31 December 2012. The Central Bank has informed me that it believes that changes in the operating environment, including the personal insolvency regime, could have a significant impact on credit unions.
In view of this, the Central Bank has written to credit unions to ensure that they fully assess a member’s ability to service all debts before advancing any new credit or top up credit facilities, especially where the borrower is in arrears on their mortgage or is in a non-permanent forbearance arrangement. Additionally the Central Bank has also invited banking and credit union representatives to a meeting next week to discuss the creation of a workable burden sharing agreement between secured and unsecured lenders.
It is important, however, to point out that any voluntary initiative or bilateral approach can only be successful if all parties are in agreement. Where this does not arise, it is necessary to have an effective statutory insolvency process. Therefore voluntary initiatives, while welcome, do not remove the need for the insolvency reforms as provided for in the recent Personal Insolvency Act. As the Deputy is aware, under the legislation, insolvent debtors can, through the personal insolvency practitioner, formally make a Debt Settlement Arrangement or a Personal Insolvency Arrangement proposal to their creditors, which may include credit unions and mortgage lenders as appropriate. These arrangements represent an efficient framework whereby all the relevant creditors can engage with and consider a proposal from the debtor to deal with their insolvent circumstances short of the full judicial bankruptcy process.
17. Deputy John McGuinness asked the Minister for Finance the plans the National Asset Management Agency has to accelerate the roll-out of its 80:20 deferred payment initiative; if NAMA believes it will suffer a loss in respect of the sales undertaken to date as part of the scheme; and if he will make a statement on the matter. [10614/13]
Amharc ar fhreagraI am advised by NAMA that, although its exposure to residential property in Ireland is limited, it has sought to instigate some market activity through the introduction of a deferred payment initiative, which offers downside price protection for a period of up to five years to buyers. The initiative, which is referred to as the 80/20 Deferred Payment Initiative, was formally launched in October, after an earlier pilot scheme, in respect of an initial 295 houses in 12 counties nationally. NAMA advises that to date sales have been agreed on 115 of these properties with an aggregate value in excess of €20 million. In the past week the NAMA Chairman in a public address stated that, based on the interest to date, NAMA may shortly announce a further increase in the number of properties included in the initiative. NAMA has previously indicated that the initiative will be extended on a phased basis up to a maximum of 750 properties. Under the initiative, home buyers pay 80% of the property’s value upfront. The remaining amount, up to 20% of the property’s value, will be paid in five years by the mortgage provider on behalf of the home buyer directly to NAMA. This will be calculated based on an independent assessment of the property’s value at that time. Example scenarios are set out on NAMA’s website, http://www.nama.ie/about-our-work/deferred-payment-initiative/.
As the initiative offers the buyer protection from the risk of further house price declines for the first five years of the mortgage, it is not possible at this stage to estimate the potential loss, if any, to NAMA arising from this initiative. However, NAMA advises that any potential future loss is more than offset by the generation of transactions, and therefore the monetisation of NAMA residential property, under the initiative that might not otherwise take place in today’s market place and by the wider benefit for the property market and the economy from increased transitional activity in the market. NAMA considers that part of its objective is to contribute in a tangible way to sustainable recovery in the Irish property market and by extension the wider Irish economy.
18. Deputy Willie O'Dea asked the Minister for Finance if he is satisfied that the projected worst case scenario of losses in PCAR 2011 for the covered banks of €9 billion on their mortgage books over the period 2011-13 will not arise; and if he will make a statement on the matter. [10620/13]
Amharc ar fhreagraAs the Deputy will be aware, the Irish banks were required to raise €24bn in capital following the 2011 Prudential Capital Assessment Review (PCAR) in order to remain above a minimum capital target of 10.5% Core Tier 1 in the base scenario and 6% Core Tier 1 in the stress Scenario. The Central Bank made its decision on required recapitalisation based on loan-loss projections along with further calculations concerning the prospective income, expenditure, and deleveraging plans of the banks as outlined in the 2011 Financial Measures Programme (FMP) Report.
In order to arrive at a stressed loan-loss estimate that was fully credible to the international markets, the Central Bank engaged BlackRock Solutions, a specialist in analysing potential loan losses under stressed conditions. However I must again reiterate that the stress test scenarios were designed to represent extreme albeit plausible events, but they were not forecasts.
The Central Bank is responsible for monitoring such losses and capital at the banks and tracking their progress against PCAR 2011. I understand that they are due to publish such a report tracking this in the near future, which should provide answers to the type of question you have posed.
19. Deputy Michael Colreavy asked the Minister for Finance his views on the treatment of developers at the National Asset Management Agency, following reports that certain developers with substantial loans in NAMA continue to enjoy lavish lifestyles; and his views on the €200,000 NAMA allowance certain developers enjoy. [10571/13]
Amharc ar fhreagraIt is unclear what reports the Deputy is referring to. As has been previously advised to the House, NAMA seeks to ensure that income generated by assets securing NAMA loans is applied towards repaying a debtor’s indebtedness to NAMA. In certain circumstances, debtors are allowed to retain a portion of asset income in lieu of overheads which include staff costs. NAMA also seeks to obtain charges over a debtor’s unencumbered assets and to realise such assets so as to further reduce indebtedness. Clearly, however, NAMA has no control over the application of income generated by assets securing loans which have been advanced to debtors by other financial institutions.
The Deputy will be aware that where the evidence available to NAMA is that a debtor has failed, as part of a sworn statement of affairs, to disclose all his assets, he will be faced with very serious consequences. NAMA has made it clear that it will not work with debtors who fail to co-operate fully and openly with it. NAMA will also pursue through the courts debtors who fail to co-operate with it in terms of agreeing to the reversal of asset transfers or to the granting of legal charges over unencumbered assets.
20. Deputy Mick Wallace asked the Minister for Finance his views on news reports that Independent News and Media may have some of its debts written down by State-supported banks; and if he will make a statement on the matter. [10626/13]
Amharc ar fhreagraThe write-down of any debt is a commercial matter for the management and the Board of the Institutions. As the Deputy will be aware the Relationship Frameworks we have in place provide that the State will not intervene in the day-to-day operations of the covered banks or their management decisions. These frameworks are published on the Department of Finance website at http://banking.finance.gov.ie/presentations-and-latest-documents/.
21. Deputy Denis Naughten asked the Minister for Finance the steps being taken to regulate food securities trading on the stock market; and if he will make a statement on the matter. [10491/13]
Amharc ar fhreagraFood securities trading form part of the regulation of derivatives. This can be divided into OTC (over-the-counter) derivatives and derivatives traded on exchanges. The regulation of both types of derivatives features in formal proposals by the EU Commission. OTC derivatives are now regulated by the European Markets Infrastructure Regulation (EMIR). This EU Regulation, which is directly applicable in all Member States, entered into force on 16 August 2012.
In relation to derivatives traded on exchanges, the existing regulatory regime which comes from the 2004 EU Markets in Financial Instruments Directive (MiFID) is currently being reviewed at EU level. The negotiations on the MiFID review (‘MiFID 2’ and ‘MiFIR’) are still underway in the Council of the EU and the European Parliament. The trading of derivatives is part of this agenda.
EMIR and MiFID 2/MiFIR combined are expected to result in a tighter regime for all derivatives, including food securities, whether traded OTC or through exchanges. The measures are intended to keep pace with trends in derivatives trading, and in line with G20 commitments.
The Central Bank of Ireland is the competent authority in this country for the purposes of derivatives legislation.
