Priority Questions
62. Deputy Michael McGrath asked the Minister for Finance his views on whether a comprehensive inquiry into the banking collapse in Ireland is required; the form he believes such an inquiry should take; when he believes that inquiry will commence; and if he will make a statement on the matter. [32225/13]
Amharc ar fhreagraThe Government has already indicated that it is determined to uncover the causes of the banking crisis in Ireland that caused such devastation in the Irish economy and necessitated the bailout from our international partners in late 2010. The key mechanism to achieve this will be the establishment of a formal inquiry into the banking crisis, enabling all those involved to come before the inquiry and provide the necessary information in order for the truth to be uncovered.
In this regard, the Government has published the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Bill, which, once enacted, will provide the legal framework for a banking inquiry to be held within the current constitutional parameters. This legislation is being prioritised both in the Department of Public Expenditure and Reform and in the Office of the Attorney General. I expect the Bill to be enacted before the summer recess and that, once the legislation is on the Statute Book, the Houses of the Oireachtas will move quickly to progress the inquiry.
The purpose of the proposed legislation is to establish a comprehensive statutory framework for the Oireachtas to conduct inquiries within the current constitutional framework as set down by the Supreme Court in the Abbeylara judgment. The Bill provides extensive safeguards to protect the constitutional rights of witnesses, to confirm unfettered access to the courts and to guarantee fair procedures. The Oireachtas inquiry can build on the information provided in the Honohan report, the Regling and Watson report and the Nyberg report. The witnesses will be called and documents discovered to provide a complete picture of the events leading to the banking collapse.
The Nyberg investigation's terms of reference were set up under statutory powers. We must ensure that the proposed inquiry now being considered is carefully constituted so as to avoid the risk of prejudicing any future criminal proceeding. I expect that the proposed inquiry will be conducted in a practical and efficient manner. I also expect it to be a thorough examination that will deliver a clear understanding of the banking collapse and that it will be transparent and valuable to the State and citizens.
Ireland's place in the international arena cannot be compromised. We welcome the transparency and closure that this inquiry will bring and want it to give Ireland the opportunity to learn from this painful experience.
I thank the Minister for his reply. All of us in this House have an obligation to channel the understandable anger of the Irish people from the revelations over the past week into something positive, and to do something constructive. Above all else, the public want to see the criminal justice system work efficiently. I note from today's Irish Independent that the Central Bank is undertaking its own investigation into the question of whether or not it was deliberately misled by Anglo Irish Bank. I find it extraordinary that the Central Bank appears not to have had access to the tapes. It came as news to them, as it did to everybody else.
On the issue of the inquiry, our view is that it should be a fully independent public inquiry. It needs to deal with all of the key issues involved in the banking collapse in a comprehensive way. First and foremost, it should deal with the failures within the banks. In addition, the role of auditors, the financial regulator and the Central Bank must also be carefully examined. Of course, the question of political oversight and political decisions that were made should also be looked at, as well as ECB policy in the European context.
One of the flaws which is glaringly obvious in the approach the Government is taking is that from the very outset, if one goes down the road of a parliamentary inquiry, one is excluding a whole bunch of important people concerning the banking collapse from any possibility of having an adverse finding delivered against them.
A question please.
That is a key weakness. It is one of the reasons why a political banking inquiry will not ultimately be successful. Even at this late stage, I am calling on the Minister for Finance to reconsider his view on that issue.
I would not disagree with the objective stated by the Deputy for an inquiry. It has to be a fully open inquiry and must pursue the facts wherever that pursuit leads. The Deputy is aware that there was a referendum which would have empowered an Oireachtas committee, or committees, much more strongly than they are currently empowered. I still think, however, that the inquiry can be conducted within the present constitutional parameters. Even though some people would like the power in a committee to have adverse findings against individuals, that is principally a matter for the criminal justice system. The gardaí are investigating and we do not want to have a situation arising where a committee cuts across the judicial system because then one might prejudice a trial. We have had examples of that before where words spoken indiscreetly made it impossible for a trial to proceed. We certainly do not want that.
As regards the terms of reference, my understanding from the Minister for Public Expenditure and Reform, Deputy Howlin, is that when the Bill proceeds through the House and is passed, the inquiry will effectively be in the ownership of the House. It will then be up to the committee and the House to decide the terms of reference of that committee.
The Bill is in process at present and I invite Deputies to contribute to the process of the legislation and give their advice to the Minister.
We will very much contribute to that process but the reality is that the House is controlled by the Executive and therefore the terms of reference will, in essence, be decided by the Cabinet. Let us be honest with people about that. Nobody wants to embark on an inquiry which would in any way compromise important criminal investigations. We all take that as a given, so whatever form of inquiry is established, among its priorities will have to be the requirement to ensure that criminal prosecutions are not in any way undermined.
I wish to ask the Minister about today's revelations from Governor Honohan's interview. I have been greatly surprised by the fact that the Central Bank is only now, because of the revelations, examining the possibility that it was deliberately misled by Anglo Irish Bank in the lead-up to the bank guarantee decision in 2008. Can the Minister confirm that the Central Bank had no knowledge of, or access to, these tapes until they were publicly aired by the Irish Independent?
The fundamental question which emerged in the tapes last Monday for everybody to hear, was whether or not the State was deliberately misled. Has that only come to the fore now and did the Central Bank have no knowledge of, or access to, the tapes until they were publicly aired?
I have not seen Governor Honohan's comments. The Governor and Central Bank are under law independent in the exercise of their functions. I do not answer for the Central Bank before the House. Governor Honohan was involved and was one of the principals in one of the three inquiries that have taken place. The Deputy might seek clarification from the bank.
63. Deputy Pearse Doherty asked the Minister for Finance if he regrets continuing to employ persons (details supplied) in a State-owned bank; and the actions he took to ensure they were fit to hold these positions after revelations that were recently published in the media. [32191/13]
Amharc ar fhreagraLike every citizen in this country who is working hard to restore the economy, I am deeply disturbed by the taped conversations from 2008 involving these executives of the former Anglo Irish Bank and dismayed to hear senior banking executives refer to the banking crisis with such arrogance. Irish taxpayers have grimly endured the austere cost of the bank recapitalisation and the bank guarantee and are, understandably, outraged by these revelations. Irish citizens have suffered greatly as a direct result of the banking crisis and the events which led to the bank guarantee. The recent revelations will only serve to reinforce the Government's resolve to move this country back in the right direction by tightening up regulation and enforcing it.
It would not be appropriate for me to discuss the employment of specific individuals in the bank. Ultimately, the board and management of Anglo Irish Bank-IBRC had responsibility for the ongoing staffing of the bank. As the Deputy will be aware, there was an extensive restructuring of the governance and management of Anglo Irish Bank immediately following the nationalisation of the bank in January 2009. As part of that restructuring, all non-executive directors in the bank, other than the Chairman and those appointed under the guarantee scheme, resigned and were replaced with a new board. None of the new executive or non-executive directors was involved with the bank prior to nationalisation.
In addition, there was an extensive reorganisation of the senior management team, commencing with the appointment of the former CEO of IBRC, Mike Aynsley, in September 2009. Following that appointment, the entire executive of the bank was replaced with an appropriately skilled senior management team to lead the newly formed IBRC, namely, the combined former Anglo Irish Bank and former Irish Nationwide Building Society, through the process of wind-down. Under the relationship framework the board and senior management of the bank were responsible for all staff employment matters at the bank. I had no role in this matter. None the less, the tapes raise serious issues and the Government is committed to ensuring the public is fully informed about what happened in Irish banks in the lead-up to and during the financial crisis.
The Government has published the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Bill 2013 which, if enacted, will provide the legal framework for a banking inquiry to be held within current constitutional parameters. I expect that once that legislation is on the Statute Book, the Houses of the Oireachtas will move quickly to progress that inquiry. It is important that all relevant parties participate fully with any resulting inquiry.
Additional information not given on the floor of the House
There are ongoing investigations by the Garda that must be let run their course. The Central Bank is carefully studying the various transcripts emerging and will be liaising with the Garda in this regard. The Central Bank is also examining whether any breaches of regulatory requirements may have occurred arising from the information contained in the transcripts.
The question was whether the Minister regrets continuing to employ Mr. John Bowe and Mr. Peter Fitzgerald, the latter until February of this year, in respect of which the Minister has passed the buck to the board of the bank. In October 2011, I asked the Minister how many of the top 50 senior executives employed in Anglo Irish Bank prior to the crash were still employed by the State. The Minister was forthright in his answer and said that 22 of the top 50 were still employed by the State, 19 of whom were earning in excess of €175,000.
Mr. John Bowe and Mr. Peter Fitzgerald, who are now household names as a result of the Anglo tapes, are two of the individuals who continued to be employed by the Minister for Finance on behalf of the State. Others, whom I have previously named in this House, were involved in reckless lending at that bank. One of these employees, heard on the Anglo tapes, left his position in February this year. This is at the same time as the public is experiencing huge austerity.
We were promised by Government that it would clear out the banks and burn the bondholders. That was the chant of the Government parties prior to the election. It is clear that this is not what has happened. Not only did the Government fail to burn the bondholders - one of the first things it did was pay the promissory note due on 31 March 2011 - but it also protected these individuals in the same way as it protected Mr. Richie Boucher, head of the retail division in Bank of Ireland in the run-up to the crash and now in charge at that bank, commanding a salary of €843,000 per annum.
I will put my question again to see if I can get an answer from the Minister. Does he regret continuing the employment of Mr. John Bowe and Mr. Peter Fitzgerald? The latter was one of the 22 senior executives in Anglo Irish Bank before the crash who, as the Minister stated in the House two years ago, was still in the employment of the State.
The new management and staffing arrangements of IBRC-Anglo Irish Bank were in place long before I became Minister for Finance. I have no role in the day-to-day running of any of the banks and decisions about who does and does not work in a bank are a matter for the board and management of the bank in question.
The Deputy is moving on to very dangerous ground in naming individuals and assuming culpability. This is exactly what happened when the former Deputy, Ms Mary Harney, engaged in a rant against the former Taoiseach, the late Charles Haughey, and a court subsequently found she had prejudiced the case and charges could not proceed.
Notwithstanding the revelations on the Anglo tapes, I have made clear for a long time that those who were in senior positions in Anglo Irish Bank should not have been in the employ of the State. The individuals in question earned more than the Minister for Finance until February this year, despite having been involved in a bank that cost the State more than €30 billion. We see the pain this caused in every community in the State.
We have heard a great deal about fitness and probity. Why did the Minister for Finance not issue an instruction that senior executives in Anglo Irish Bank be subjected to a fitness and probity test to ensure they could continue, in senior positions, to restructure the bank? As a former leader of the Fine Gael Party, why did he not speak to another former leader of his party, Mr. Alan Dukes, who was appointed as public interest director in Anglo Irish Bank, to ascertain what Mr. Dukes knew about the reasons some of the 22 individuals in question continued to be in the employment of the State and were awarded salaries in excess of the salary earned by the Minister for Finance?
Has the Minister taken it upon himself to inquire as to whether any other types of tapes exist in Bank of Ireland and Allied Irish Banks? Has he ensured that no one who was in a senior position in Anglo Irish Bank is working in any financial institution being bailed out by the State?
It is a matter for the directors, boards and management of banks to decide who does and does not work in a particular bank. I remind the Deputy - I am sure he will be disappointed to hear this - that I brought in a special liquidator and liquidated IBRC last February. We closed down the bank. The Deputy would love to be able to point across the Chamber and tell me the individuals in question are still working in the bank. I am sorry to disappoint him because we liquidated the bank and moved it on.
64. Deputy Shane Ross asked the Minister for Finance if his attention has been drawn to any Government members or staff, advisers or associates of his Department who were aware of the existence of the Anglo Irish Bank tapes released and published in the media in recent days; if his attention has been drawn to any members of staff of the Central Bank or any State-owned banks with any knowledge of the tapes; if there are similar tapes in existence recording the activities of staff of other banks; and if he will make a statement on the matter. [32305/13]
Amharc ar fhreagraI confirm that neither I nor any official in the Department of Finance was aware of the contents of the tapes which have emerged in the media until now. The contents of the tapes were not raised with my Department by the board or management of IBRC and my attention has not been drawn to any Government member, staff, adviser or associate of the Department who was previously made aware of the content of the tapes. I am further advised that the Central Bank was not aware of the tapes or the content contained therein until the recent publication.
I am advised that the tapes have previously been provided by Anglo Irish Bank-IBRC to the Garda and a number of other authorities involved in investigations relating to Anglo Irish Bank. I also understand the recordings have been provided by way of discovery in certain legal proceedings involving IBRC.
From the date of the nationalisation of Anglo Irish Bank on 16 January 2009, the Minister for Finance directed the bank to co-operate fully with all regulatory investigations. I am advised by the bank that it is fully co-operating and in that context the bank has provided originals and copies of large data sets under compulsion and court order to the Chartered Accountants Regulatory Body, the Garda Bureau of Fraud Investigation, the Office of the Director of Corporate Enforcement, the then Financial Regulator and the Nyberg banking commission. In particular, the bank has informed me of the following matters.
In 2009, the ODCE seized under court search warrant approximately 3 million electronic documents and in excess of 5,000 original hard-copy documents. In 2009, the Financial Regulator compelled the production of approximately 45,000 hard copy documents and approximately 9 million electronic documents. The electronic material remains in the possession of the bank as the Financial Regulator investigation was deferred in 2009 pending DPP proceedings. In 2010, the Garda Bureau of Fraud Investigation under court order received significant quantities of electronic and hard-copy documents and recordings requested in respect of 18 employees of the bank whose lines were recorded. In 2010, the bank was compelled to provide large volumes of electronic and hard-copy material to the Nyberg banking commission. Minutes of meetings as requested were provided to CARB, the ODCE, the GBFI, the banking commission and the Financial Regulator. In civil litigation copies of various items including certain recordings were provided to parties to such litigation.
I am advised that the special liquidators are taking the leaking of this material very seriously and have written to the Garda and the Data Protection Commissioner in that respect. They have written to all parties whom they know have access to this material and I am also advised that the special liquidators intend to appoint an independent party to investigate if the leak came from IBRC or KPMG. These investigations are ongoing.
I thank the Minister for his reply. I accept everything he says about who knew what, when they knew it and when these tapes were handed over. I am surprised about one aspect of his reply. It is well known that all conversations of this sort were recorded. I cannot understand why nobody in the Department and particularly in the Central Bank, which was the regulator at the time, knowing full well that the staff of Anglo Irish Bank, Bank of Ireland, Irish Life & Permanent and AIB recorded all conversations particularly in certain situations and particularly those involving the head of capital markets, who is the key figure in this, did not ask, immediately the crisis broke or immediately there was a question about solvency or liquidity for these tapes, to see what had been going on inside the bank if it had any doubt.
The Minister rightly said that when the former Minister for Finance, the late Mr. Brian Lenihan Jr., informed the Dáil that €7 billion was sought and in subsequent weeks advised that there was more sought and then more again, he could work out that there was something funny going on. At a minimum Anglo Irish Bank was putting out a teaser to the Central Bank to suck it in for more. In those circumstances, when anybody with knowledge of this matter could guess what was happening, is it not extraordinary that the regulator, which was being taken for a ride, did not ask for taped conversations of what was happening inside in Anglo Irish Bank?
Seemingly he did. As I said in my original reply, in 2009, the Financial Regulator compelled the production of approximately 45,000 hard copy documents and approximately 9 million electronic documents. The electronic material remains in the possession of the bank as the Financial Regulator investigation was deferred in 2009 pending DPP proceedings. As I understand it from the information provided to me, the DPP commenced an action. He compelled, I presume under court order or under his own authority, the production of all these data. However, his investigation did not then proceed because there was an indication that criminal proceedings would commence and his investigation was suspended because of the possibility of DPP proceedings.
I thank the Minister and I accept what he has said. My quarrel is that the Financial Regulator did not ask for them far earlier. He did not ask for them in 2008 when the crisis broke. He did not ask for them at the time he was saying all the banks were solvent. He did not look for these tapes at the time although the tapes were obviously in existence. That is an extraordinary situation and to do it under pressure from court orders is a completely different matter. His job is to regulate.
Will the Minister answer the second part of the question? What is happening now in terms of Bank of Ireland and Allied Irish Banks at a similar time and since? Are there tapes in existence of which we should be aware? I am concerned, as are many Members of the Independent group, because the scope of the inquiry is limited up to the night of the guarantee. I cannot understand why that is essential. I can understand the reason the inquiry should concentrate on the guarantee when there are other matters which should be subject to investigation as well. There was one night here which all of us can remember, that is, the night of 7 February this year, to which the Minister referred, which saw the liquidation of Anglo Irish Bank. There was confusion and chaos that night because of what was happening and there were changes going on. I would have thought it would be helpful, balanced and less political if the Government was prepared for any inquiry to examine tapes and the facts and events that occurred on that night as well.
The question was whether tapes exist in the other banks, and I assume they do. If a customer rings a bank looking for a statement, there is usually a warning on the answering machine that tells the customer his conversation could be recorded. Anyway, what I was unaware of was that there were internal recordings of conversations between banking executives. I had thought only the calls from outside into the bank had been recorded. I inquired subsequently and I have been informed that it is always the practice to record calls in and out of the treasury department of the bank - for obvious reasons, when one thinks about it. I assume there are recordings of calls in and out of the treasury departments of the other main banks as well. The banks should be on alert, if they were not already before today, since Deputy Ross has raised the matter, that these electronic data may be required by the Oireachtas inquiry when it is put in place.
65. Deputy Michael McGrath asked the Minister for Finance his views on the negligible number of split mortgage arrangements in place to deal with distressed borrowers at the end of March 2013; if he has sought assurances that the banks are putting in place genuinely long-term solutions as required by the mortgage arrears resolutions targets programme; and if he will make a statement on the matter. [32226/13]
Amharc ar fhreagraOn 13 March last, the Central Bank, in its capacity as regulator of credit institutions, announced new measures to address the problem of mortgage arrears. These included the publication of performance targets for the six main banks in respect of the number of sustainable solutions to be proposed to mortgage borrowers. Initially, the Central Bank required the relevant lenders to propose by the end of June sustainable solutions to 20% of mortgages that were in arrears of more than 90 days. The target rises to 30% by the end of September and to 50% by the end of December 2013. The Central Bank will in due course set targets for the conclusion of sustainable solutions.
In determining whether a proposal constitutes a sustainable solution, the lender must evaluate both actual and prospective affordability of the solution by the borrower as well as the capital implications for the credit institution in terms of its prudential responsibility to minimise losses. While the Central Bank is not mandating any particular model of restructuring and while sustainable solutions will be arrived at on a case-by-case basis, it has indicated that there are some fundamental principles that must be respected in this matter. The affordability assessment of the borrower must be based on his current and prospective future servicing capacity in respect of all borrowings, and assumed prospective future increases in the debt servicing ability of the borrower must be credible and conservative.
Lenders must apply a realistic valuation of the borrower's assets. This also applies to any assumption of potential asset price appreciation, as well as the estimated costs related to a potential repossession of property and lenders must use an appropriate interest rate when discounting future income flows, which should take account of the lender's cost of funds.
The Central Bank has been in communication with each of the relevant institutions to set out the reporting requirements with regard to the public and non-public targets of the respective institution. It also will assess compliance with the sustainability principles as outlined above in its supervisory audit of compliance with the targets, including an analysis of a sample of modifications.
Additional information not given on the floor of the House
The necessary overall strategy and building blocks to address the mortgage arrears problem are, therefore, now in place. These include the Central Bank targets initiative, the new code of conduct on mortgage arrears, the fundamental change to personal insolvency legislation including the provision of new, more accessible and less penal resolution mechanisms to debtors and a comprehensive mortgage information and advice service. The onus is now on lenders to move to address individual arrears cases in a comprehensive and speedy manner. Therefore, I expect the banks to increase the number of split mortgages and the other long-term restructured mortgage arrangements put in place over the remainder of this year.
As part of the process banks are requested to make regular returns to the Central Bank on their performance against the targets and the Central Bank will audit the performance of the lenders in this regard. I can assure the Deputy that both my Department and I will keep in close liaison with the Central Bank and individual banks on this important issue.
I thank the Minister for his reply. I believe that with all the focus in the last week or so understandably having been on the Anglo tapes, the revised code of conduct and the latest mortgage arrears statistics have not received the attention they deserve. More than 142,000 families are in mortgage arrears on the family home at present. This is a national crisis that deserves a decisive response. In his reply, the Minister outlined that under the mortgage arrears targets programme, 20% of those in arrears were to be offered sustainable solutions by the end of June 2013. These sustainable solutions can involve being put on interest-only repayments, putting someone into insolvency or the voluntary surrender of the property. Many of them will not, by definition, represent genuine long-term restructuring of the mortgage.
The Minister's reply refers to the reporting arrangements. Will Members receive information at the end of each of the those milestones, namely, the 20% and 30% targets, as to what is being offered? While I do not expect such detail by bank, will Members be informed that X percentage received an offer of a split mortgage, while Y percentage is being put into insolvency? While this is the responsibility of the Central Bank, such information is critical because the banks are becoming increasingly aggressive with people on the ground. This is being facilitated by the change in the law concerning repossession, by the removal of the limit on the number of unsolicited contacts, by the tracker rate now being on the table for the first time and by the removal of the moratorium at 12 months. Moreover, if one is deemed to be non-co-operative, the banks now can move immediately. They are becoming more aggressive and while all Members accept they also must face up to the crisis, my difficulty is that the banks are firmly in control. They are in the driving seat and decide what is a sustainable solution. They decide who is or is not non-co-operative. Many people wish to work through their situation and are in genuine financial distress.
Thank you Deputy. I must call on the Minister.
At present, the evidence on the ground is that the banks are becoming more aggressive. They are being armed with more and more tools by the Central Bank and the Government.
Thank you. I call on the Minister.
Will Members get information on the sustainable solutions that are being offered?
I agree with the Deputy. This is a difficult situation and I am glad that there is now movement to resolve it. On the data available to me on the targets set down, approximately 25,000 offers have been made across the banks already. I can get more precise data for the Deputy. I do not have to hand the breakdown on what are the specific solutions across the range of solutions that may be applied but the general principles are as I have laid out. These general principles now have been refined further by the code of conduct on mortgage arrears, which has been reviewed again by the Central Bank. The criteria taken into account are the personal circumstances of the borrower, the overall indebtedness of the borrower, information provided in the standard financial statement, the borrower's current repayment capacity and the borrower's previous history.
However, the principle under which everything is operating is an attempt to distinguish between those who cannot pay and those who will not pay. For those who cannot pay, the banks are engaging and providing sustainable solutions. There is of course a difference between the target on offer and the subsequent targets on solutions. Consequently, there will be a second set of data giving information on the offers that have been accepted.
We need the breakdown in aggregate form of the 25,000 sustainable solution offers the Minister said have been made. Under the definition provided in the mortgage arrears resolution targets it is up to the bank to make the call as to what that solution is but it can be interest only. That is fine for those in short-term financial difficulty but it can mean putting somebody into insolvency or handing back the keys to the House. They might be sustainable solutions in one person's definition but in another person's definition that could mean the family home is gone. We need to have the data. Looking at the latest figures to the end of March, the reality is that of the more innovative long-term solutions such as split mortgage or a permanent interest rate reduction, less than 400 have been put through and in the context of 142,000 people actually in arrears with their family home, that is a drop in the ocean.
Progress in this area must be accelerated. We need more data. I hope the Minister's plan works but I have my doubts. I would rather that an independent office had the final say in determining what is a fair solution to a person's mortgage difficulty but the Minister has gone down a certain road. I hope it works but we need the data.
I have some statistics that may be of help to the Deputy. At the end of March 2013, a total stock of 79,689 private dwelling house mortgage accounts were categorised as restructured. That is an increase of 1.8% on the end of December 2012. Of the restructured accounts, 53% are not in arrears. New data collected this quarter, that is, quarter 1 of 2013, indicated that 76% of restructured accounts were deemed to be meeting the terms of their agreement. A total of 24,706 new structure arrangements were agreed during the first quarter of the year. A total of 33.1% of the restructured accounts are on interest only arrangements, a fall of four percentage points on the end of December position, while a further 21.7% are on payments that are greater than interest only. Together, interest only arrangements and reduced payment arrangements account for approximately 55% of all restructured types. That was 59% at the end of December. A total of 144 accounts are in split mortgage arrangements, an increase of 92 cases on quarter 4, while 241 accounts have availed of permanent interest rate reduction, an increase of 17 cases. We have data and I will try, when we are making various statements, to give as much data as I can.
