Written Answers Nos. 1-22
6. Deputy Peadar Tóibín asked the Minister for Finance the checks, protections and processes in place to prevent insider dealing in respect of banks selling loans to third-party financial institutions at prices significantly lower than would otherwise be realisable. [17566/15]
Amharc ar fhreagraA broad range of regulatory principles could apply in circumstances where the assets of a bank were disposed of in inappropriate manner. For instance, there may be breaches of market abuse rules, company law principles, Central Bank rules on fitness and probity and/or the criminal law.
The rules in relation to insider dealing are set out in the Market Abuse (Directive 2003/6/EC) Regulations, 2005 (S.I. 342/2005), Part IV of the Investment Funds, Companies and Miscellaneous Provisions Act, 2005, Part V of Companies Act 1990 and the Companies (Amendment) Act 1999. In circumstances where loans take the form of transferable securities traded on a multilateral trading facility or junior market then the rules on insider dealing in the 1990 Act may apply.
Where loans or loan books do not take the form of financial instruments such as transferable securities, the Market Abuse regime would not apply but other legal principles and rules would continue to apply. For example specific and general principles of company, financial services and criminal law would continue to apply.
Directors of any Irish company, including banks, incorporated under the Companies Act, 1963, or the Companies Act, 1990, are required to comply with their fiduciary duties to that company, which include:
- acting in good faith and in the interests of the company as a whole,
- avoiding conflicts of interest,
- a prohibition on making undisclosed profits from their position as directors and must account for any profit which they secretly derive from their position as a director, and
- an obligation to carry out their functions with due care, skill and diligence.
In addition, directors of banks operating in Ireland are required to ensure that they have governance and control arrangements in place that comply with, inter alia, the Central Bank of Ireland's Corporate Governance Code and the European Banking Authority's Governance Guidelines. The Central Bank of Ireland's Fitness and Probity regime also requires credit institutions to assess the suitability of members of the management body and requires high standards of behaviour of those individuals on an ongoing basis. Banks are expected to have strong controls in their front line businesses, in their risk management and compliance functions and an effective internal audit capability, such that conflicts of interest are managed appropriately and the associated risks are mitigated. These arrangements are assessed through, for example, external audits and are also subject to ongoing supervisory engagement by the Central Bank of Ireland, including through regular inspections.
If directors were to approve the selling of a company's asset at less than market value where that decision is not objectively justifiable, shareholders would have a right of action against the directors concerned for a breach of their fiduciary duty. As things stand, this duty to the company is a common law one, but with the proposed commencement of the Companies Act 2014 on 1 June 2015, section 228 makes this a statutory duty.
Finally, where an action by a director or employee of a Bank constitutes fraud or offence, they are subject to the rigour of criminal law.
12. Deputy Sean Fleming asked the Minister for Finance his plans for the wind-down of the National Asset Management Agency; and if he will make a statement on the matter. [17545/15]
Amharc ar fhreagraI am advised that the NAMA Chief Executive, in his opening address to the Public Accounts Committee on 18 December 2014, stated that NAMA is aiming to redeem a cumulative 80% (€24 billion) of its senior debt by the end of 2016 and that it hopes that it will have redeemed all of it by the end of 2018. He stated that those targets were predicated on conditions in the Irish market remaining favourable and on NAMA being in a position to retain sufficient specialist staff to enable it to generate the optimal financial return from the realisation of its residual loan portfolio.
The Deputy may be aware that in July 2014 the NAMA Board also undertook to facilitate the timely and coherent delivery of key Grade A office space, retail and residential space within the Dublin Docklands strategic development zone and Dublin's Central Business District and to maximise the delivery of residential housing units in areas of most need.
So while we have increasing visibility regarding the elimination of the State's contingent liability through the accelerated redemption of NAMA's government guaranteed senior notes, it is too early to speculate as what date in the future NAMA will have made sufficient progress on its objectives as to warrant consideration of its dissolution.
13. Deputy Sean Fleming asked the Minister for Finance his views on whether there is an excessive regulatory burden on credit unions in respect of making loans of up to €1,000 to customers; and if he will make a statement on the matter. [17544/15]
Amharc ar fhreagraThe Registrar of Credit Unions at the Central Bank is the independent regulator for credit unions. Within her independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members.
My role as Minister for Finance is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions.
I have been informed by the Central Bank that while the important role of credit unions within their communities and, of course, that many members have a demand for credit is fully accepted, from a regulatory perspective it is important that credit unions are prudent in how they lend money, particularly as it is the money of the saving members of credit unions that is ultimately lent to borrowing members. Ensuring that those borrowers can repay is paramount in the protection of those savings. There are also EU Regulations in place in relation to Consumer Credit Agreements, the scope of which includes credit agreements where the loan amounts are between €200 and €75,000. Part 2 of these regulations focuses on the obligations to assess creditworthiness of consumers based on information provided in support of a loan. The Central Bank further informs me that it expects credit unions to apply prudent lending standards to the granting of all new loans or top-ups of existing loans and to have systems in place to ensure that such applications are fully assessed to confirm the member's creditworthiness.
The safety of members' savings and the security of the credit union sector as a whole are priorities for this Government and I have, on a number of occasions, highlighted the Governments' recognition of the important role of credit unions as a volunteer co-operative movement in this country and also the importance of getting lending going in the economy. However, the issue of lending needs to be constructively considered in order to ensure a viable credit union sector into the future.
14. Deputy Denis Naughten asked the Minister for Finance his plans for the expansion of the international banking sector outside of the greater Dublin region; and if he will make a statement on the matter. [17378/15]
Amharc ar fhreagraI should point out that significant numbers, almost 12,000, are employed in international services related roles outside the greater Dublin region in locations such as Kerry, Cork, Donegal, Limerick, Kilkenny, Waterford and Shannon. As part of the implementation of the IFS 2020 strategy for the financial services sector more investment and employment will be located outside the greater Dublin region.
The Government launched IFS 2020 on 11 March 2015 which is the new strategy for Ireland's international financial services sector. The new strategy is an action oriented approach to growing and developing the financial services industry in Ireland. The aim is to improve the level of foreign financial services investment and to encourage the growth of more domestic financial services companies including those providing financial technology services. The new strategy was developed to cope with a changing financial services and technological environment, greater international competition and changing consumer preferences in the delivery of financial services products. The five priority areas identified
- promotion and branding
- improving the competitive environment
- supporting research, innovation and entrepreneurship (particularly Fin Tech)
- exploring the emerging sector opportunities and
- the implementation process
are I believe key to the success of the strategy. Clearly the ultimate point of the strategy is job creation. Working with the IDA and Enterprise Ireland the aim is to create an additional 10,000 jobs in IFS firms over the lifetime of the strategy. I consider this is achievable over the lifetime of IFS 2020. It is expected that those jobs in turn will create a virtuous circle, underlining Ireland's attractiveness to the financial services sector, and contributing to the wider recovery now under way.
15. Deputy Ruth Coppinger asked the Minister for Finance if he will report on the recent sale of shares in Permanent TSB and the repayment of the Government’s contingency capital notes in the bank; and if he will make a statement on the matter. [17573/15]
Amharc ar fhreagraThe announcement by Permanent TSB (PTSB) that it has successfully completed a capital raise as part of its capital plan is a significant milestone in its recovery which gained momentum recently with the European Commission approval of its Restructuring Plan. PTSB has raised €525 million on new capital and through a series of transactions returned €539 million to the State.
The capital raise was required as a result of PTSB failing the SSM Adverse Stress Test, announced in late 2014. PTSB agreed a Capital Plan with the SSM which required them to raise €525 million of new capital - €400 million equity and €125 million Additional Tier 1.
As part of this transaction the State will recoup €509 million in capital receipts from the sale of shares and the repurchase of the Contingent Capital Notes (CoCos), bringing the total capital receipts to c €1.8 billion since our investment in 2011-2012. As a result of much hard work over 45% of the capital invested by the State will have been repaid before taking account of investment income, fees and our residual shareholding. The CoCos were repurchased at market value - a €10.5 million premium over par value.
As a result of PTSB moving to a main market listing in London and Dublin a minimum 25% free float is required. To enable that free float I was requested by the board of PTSB to sell €98 million or 22 million shares to reduce the State's shareholding to 75%. The move to the main markets in London and Dublin will be positive for PTSB and allows the State additional flexibility and liquidity to manage its sell down in due course.
Existing shareholders will be able to subscribe for new ordinary shares at the same price as was available to new investors in the Placing by way of an Open Offer which is being managed by PTSB.
Changes to the Relationship Framework were required in order to facilitate the migration to the main markets but will not alter the overall relationship between PTSB and the State which has been professional and constructive to date.
I am pleased that we have maintained a 75% shareholding in PTSB on behalf of the taxpayer and that high quality international institutional investors have joined us as shareholders - 83% of investors were from the UK or US. It is also noteworthy that the €125 million AT1 issuance is the first such issuance in Ireland.
While much work remains to be done I am satisfied with the continued progress and in particular the fact that the capital raise was completed without the need for investment from the State highlighting the progress that PTSB has made since 2011.
16. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he has had consultation with the various lenders, with a view to reducing interest rates to borrowers, having regard to the rate at which the lenders are currently borrowing, thereby alleviating the concerns of many borrowers; and if he will make a statement on the matter. [17516/15]
Amharc ar fhreagraAt the outset, I would like to confirm to the Deputy that the lending institutions in Ireland - including those in which the State has a significant shareholding - are independent commercial entities. I, as Minister for Finance, have no statutory role in relation to regulated financial institutions setting interest rates. The mortgage interest rates that financial institutions operating in Ireland charge to customers are determined as a result of a commercial decision by the institutions concerned.
Equally, the Central Bank has no statutory role in the setting of interest rates by regulated entities, apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997 and the requirement to be notified of penalty or surcharge interest imposed in respect of arrears.
Nonetheless, the issue of regulation of interest rates remains a policy area under active review. I discussed the issue of mortgage interest rates with the Governor of the Central Bank on 2 April. As a result of this meeting the Governor is currently reviewing the issue of the standard variable rates charged by the lenders. The Governor should be in a position to present this analysis to me in the coming days. I will then meet the six principal mortgage lenders in order to discuss this issue.
It should also be noted that there have been moves on interest rates. As the Deputy will be aware, on 1 May, AIB Group announced a number of reductions to its mortgage interest rates for owner occupier and buy-to-let mortgages.
A series of reductions over a fixed time frame would be acceptable to me and in that context I welcome AIB's announcement as a good first step. Competition between the banks will be crucial in ensuring that the price that the customers have to pay moves in the right direction.
17. Deputy Richard Boyd Barrett asked the Minister for Finance if he acknowledges, following the recent publication of The Sunday Times rich list, the TASC report, Cherishing All Equally: Economic Inequality in Ireland, and the Credit Suisse report on global wealth, that there is overwhelming evidence of a dramatic concentration and increase in the wealth of the very richest in Irish society; his views on whether a widening gap between rich and poor needs to be remedied with higher taxes on wealth, profits and very high incomes, not simply as a matter of fairness but also because such disparities of wealth represent a serious macroeconomic threat to the economy; and if he will make a statement on the matter. [17567/15]
Amharc ar fhreagraI am aware of the various reports and analyses referred to by the Deputy in his question.
The TASC report found that market income inequality (i.e. income before taxes and transfers) is relatively high in Ireland and has increased since the recession. However, more importantly, recent data and research from the Central Statistics Office (CSO) and the Economic and Social Research Institute (ESRI) respectively, indicate that disposable income inequality over the period 2004-2013 has remained broadly stable. These patterns reflect the efficacy of the Irish tax and social welfare system in reducing market income inequality and the Organisation for Economic Cooperation and Development (OECD) has shown the Irish system to be one of the most effective of all OECD countries in this respect.
The fact that this Government has maintained such a progressive and redistributive tax and social welfare system during one of the most difficult fiscal consolidations in the history of the State demonstrates its commitment to equality and fairness. ESRI research shows that Budgets 2009-2015 had neither a progressive nor a regressive pattern and that losses due to budgetary policy were highest for those in the top ten percent of the income distribution followed by those in the bottom ten percent.
With respect to wealth inequality, comprehensive data on household wealth in Ireland, including assets and liabilities, has been published for the first time by the CSO. Crucially, these data have been collected across the entire eurozone according to a standardised methodology. These data indicate that wealth inequality in Ireland for 2013, as measured by the Gini Coefficient, is lower than the eurozone average. The results also show that wealth is less concentrated at the top of the distribution here than the eurozone average. Central Bank analysis of these data also indicates that while wealth inequality has increased since 2011, it is actually lower than in 2006, the earliest period for which data are available.
I am aware that some recent economic research, including by the OECD, has indicated that there may be a negative relationship between inequality and growth. However, their analysis suggests that this negative relationship did not apply in the case of Ireland. Given this, and the fact that Ireland's income and wealth inequality levels are around the EU and eurozone average, I do not consider Ireland's level of inequality to constitute a macroeconomic threat.
18. Deputy Jim Daly asked the Minister for Finance his plans to assist struggling mortgage holders who want to retain their home; and if he will make a statement on the matter. [17380/15]
Amharc ar fhreagraThe Government has put in place a broad strategy to address the problem of mortgage arrears and family home repossessions. This has included an extensive suite of interventions designed to address the problem including specific Central Bank targets for the banks through the Mortgage Arrears Resolution Targets (MART), the Code of Conduct on Mortgage Arrears (CCMA), extensive recasting of the personal insolvency legislation, the provision of advice through Department of Social Protection-led initiatives and the mortgage to rent scheme which is designed to assist borrowers in an unsustainable mortgage position to remain in their homes through the involvement of social housing agencies.
The CCMA sets out requirements for mortgage lenders dealing with borrowers facing or in mortgage arrears on their primary residence and provides a strong consumer protection framework to ensure that borrowers struggling to keep up mortgage repayments are treated in a fair and transparent manner by their lender, and that long term resolution is sought by lenders with each of their borrowers. The CCMA provides that a lender may only commence legal proceedings for repossession where the lender has made every reasonable effort to agree an alternative repayment arrangement with the borrower or his/her nominated representative, and where the specific timeframes set out in the CCMA have been adhered to, or where the borrower has been classified as not co-operating.
Where a borrower engages with his lender, a restructure arrangement to address his/her mortgage arrears situation, is agreed in the majority of cases. The Central Bank's most recent quarterly release on Residential Mortgage arrears and Repossessions (Q4 2014) indicates that almost 115,000 restructure arrangements have been put in place.
Where a mortgage in arrears is deemed to be unsustainable by the lender the mortgage to rent scheme, administered by my colleague, Alan Kelly, TD, Minister for Environment, Community and Local Government may be a viable alternative which will keep families in their family home.
The effective management of the mortgage arrears issue is an area that remains under continuous review. More and concerted action can be undertaken by the banks to assist customers in arrears. As the Deputy is aware the Taoiseach has previously announced that the Government is considering a range of options to support the existing framework and to improve the uptake of personal insolvency solutions. Given the importance of the issue, his Department is co-ordinating the response across the various Government Departments and agencies and I anticipate that a detailed announcement will be forthcoming shortly.
19. Deputy Jim Daly asked the Minister for Finance his plans to reduce the emergency tax known as the universal social charge, which was imposed on working people here in a time of financial crisis, noting that the country's financial position has stabilised; and if he will make a statement on the matter. [17379/15]
Amharc ar fhreagraI would first like to make the point that the Universal Social Charge (USC) was introduced in Budget 2011 to replace two other taxes, namely, the Income Levy and the Health Levy. At the time it was introduced, the expected yield from the USC in its first year, in 2011, was to be equivalent to that raised under the two taxes which it replaced, with an additional estimated yield of €420 million in a full year.
The USC was a necessary measure to widen the tax base, remove poverty traps and maintain revenue to reduce the budget deficit. It is a more sustainable charge than those it replaced and is applied at a low rate on a wide base. It was designed and incorporated in to the Irish taxation system as part of its permanent structure and the revenues collected play a vital part in meeting the many expenditure demands placed on the Exchequer. It is also a fair tax in that income cannot, in general, be sheltered from the charge through the use of tax reliefs. I am cognisant of how unpopular the USC is but given that it raises over €4 billion per annum for the Exchequer, it is difficult to see how it could be abolished without the imposition of additional taxation elsewhere or through equivalent cuts in expenditure.
Notwithstanding the above, the Government has sought to ensure that the impact of the charge on those with the lowest incomes is minimised. In Budget 2012, I increased the threshold at which the charge becomes payable from just over €4,000 to just over €10,000, which removed approximately 330,000 individuals from the scope of USC. A further 87,000 individuals were removed from the scope of the charge in Budget 2015 when I further increased the threshold to just over €12,000, as well as reducing the lower rates of USC and increasing the bands. The Government has indicated that it will continue to adjust the USC in a similar manner to the changes introduced in the last Budget. I would hope to be in a position to be able to further increase the threshold for USC to remove a further 90,000 individuals from the scope of the charge. However, changes to the income tax and USC will be considered in the round as part of my deliberations for the Budget. Therefore it is not possible to indicate at this stage the precise adjustments that will be made. As the Deputy will be aware, much will depend on the fiscal space available to the Government and the exact position will become clearer as the year progresses.
20. Deputy Terence Flanagan asked the Minister for Finance his plans to encourage competition in the banking sector to drive down variable mortgage interest rates; and if he will make a statement on the matter. [17381/15]
Amharc ar fhreagraThe lending institutions in Ireland - including those in which the State has a significant shareholding - are independent commercial entities. I, as Minister for Finance, have no statutory role in relation to regulated financial institutions setting interest rates. This is a commercial decision for the institutions concerned.
Equally, the Central Bank has no statutory role in the setting of interest rates by regulated entities, apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997 and the requirement to be notified of penalty or surcharge interest imposed in respect of arrears.
The Deputy should be aware that the Governor of the Central Bank, Patrick Honohan, in his opening statement to the Oireachtas Joint Committee on Finance, Public Expenditure and Reform last November stated that in Ireland, as in most advanced economies, it has long been understood that tight administrative control over the rates charged by banks would be counterproductive in ensuring a sufficient flow of properly priced credit on a lasting basis. Such control would strongly discourage new entrants when, in fact, ongoing competition in the banking sector will be crucial in ensuring that the economy is provided with efficient and cost effective banking services.
In this regard, there have been some movements on mortgage interest rates of late by a number of institutions which suggest that the market may be entering a new and more competitive phase.
Furthermore, the Central Bank (Supervision and Enforcement Act) 2013 introduced changes to Section 149 of the Consumer Credit Act 1995 which regulates fees and charges in order to attract new entrants to the Irish banking sector. There is some evidence of improvements in the banking sector with a number of institutions introducing new products and adapting their business model. In the last 12 months there have been a number of new entrants to the Irish mortgage market bringing additional and welcome competition to this sector.
Nonetheless, the issue of regulation of interest rates remains a policy area under active review. I discussed the issue of mortgage interest rates with the Governor of the Central Bank on 2 April. As a result of this meeting the Governor is currently reviewing the issue of the standard variable rates charged by the lenders. The Governor should be in a position to present this analysis to me in the coming days. I will then meet the six principal Mortgage Lenders in order to discuss this issue.
A series of reductions in interest rates over a fixed time frame would be acceptable to me and in that context I welcome AIB's announcement of a reduction in interest rates as a good first step. Competition between the banks will be crucial in ensuring that the price that the customers have to pay moves in the right direction.
21. Deputy Denis Naughten asked the Minister for Finance his plans to review the home renovation incentive scheme; and if he will make a statement on the matter. [17377/15]
Amharc ar fhreagraAs previously outlined to the Deputy in written answers to his parliamentary questions in this matter, the Home Renovation Incentive (HRI) was introduced in Budget 2014 and will run until the end of December this year. The incentive provides tax relief for homeowners by way of a tax credit at 13.5% of qualifying expenditure incurred on repair, renovation or improvement work carried out on a principal private residence. In the last Budget I extended the scheme to include rental properties, whose owners are subject to income tax.
The Home Renovation Incentive has been very successful to date with works on just over 19,257 homes notified to the Revenue HRI online system as of 23 April 2015. This represents more than €403 million worth of works involving some 4,869 contractors.
The tax credit is only available to the homeowner and not to children or other individuals who may fund the works. However, the Deputy will be aware that a Housing Adaptation Grant for People with a Disability is available from local authorities. That scheme provides grant aid to applicants to assist in the carrying out of works that are reasonably necessary for the purposes of rendering a house more suitable for the accommodation needs of a person with a disability. The grant can assist with changes and adaptations to a home such as making it wheelchair accessible, extending it to create more space, adding a ground floor bathroom or toilet or installing a stair lift. The grant, which is means tested, can cover up to 95% of the cost of works carried out, which is far more generous than the relief available under the Home Renovation Incentive.
Works which are grant-aided also qualify for the Home Renovation Incentive. Three times the value of the grant is deducted from overall expenditure, with any remainder attracting the tax credit of 13.5%. This is good fiscal practice in that relief is not provided twice for the same expenditure. It is worth noting that the deduction in respect of grant-aided work is not taken into consideration for the purposes of reaching the minimum spend threshold of €4,405, excluding VAT.
As with all tax incentives and reliefs, it will be reviewed in the context of my deliberations for the Budget.
22. Deputy Ruth Coppinger asked the Minister for Finance the projected cost of debt service on the national debt; the interest and repayments for each year from 2015 to 2020; and the projected increases in public spending for each of these years. [17574/15]
Amharc ar fhreagraThe most recent forecasts of both National Debt interest and General Government interest expenditure for the period 2015 to 2020 are contained in the draft Stability Programme Update (SPU), published on the 28th of April by my Department. The relevant information is contained in Table A3 in Annex 1 of this publication, which is provided for convenience.
|
€ million |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
|
National Debt Interest |
7,142 |
7,194 |
6,941 |
7,050 |
7,008 |
6,879 |
|
General Government Interest |
6,861 |
6,751 |
6,891 |
6,951 |
6,889 |
6,679 |
National debt interest is the projected cash interest cost of the National debt. The General Government interest figures are prepared on an ESA10 accrual basis and represent the projected interest cost of the wider General Government measure of debt.
Regarding debt repayments over the period 2015 to 2020, a comprehensive chart was included in the SPU detailing the maturity profile of long-term marketable and official debt as at end March 2015. A summary of the data behind the chart for the period 2015-2020 is shown in the table.
|
€ million |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
|
Long-term marketable & official debt* |
4,868 |
8,021 |
6,280 |
13,118 |
16,301 |
22,300 |
Source: NTMA
Note that these figures are unaudited and include the effect of currency hedging transactions. Rounding can affect totals.
*Long-term marketable & official debt includes Irish Government Bonds (including Amortising Bonds) and EU/IMF & Bilateral facilities. The figures reflect the EFSF maturity extensions agreed in June 2013. EFSM loans are also subject to a seven year extension. It is not expected that Ireland will have to refinance any of its EFSM loans before 2027. However, the revised maturity dates of individual EFSM loans will only be determined as they approach their original maturity dates. The original EFSM maturities of €5 billion in 2015 and €3.9 billion in 2018 are reflected in the table above.
On the subject of public spending for 2015 to 2020, general government expenditure is forecast to increase from €72.3 billion in 2014 to €73.8 billion over the forecast horizon. More specifically, a forecast for gross voted expenditure for each of the specified years is included in table 10 on page 18 of the SPU. It should be noted that the gross current voted expenditure figures include a provision of €300 million per annum for demographic costs beyond 2016. The relevant figures are shown in the table.
|
€ million |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
|
Gross Voted Current Expenditure |
49,715 |
50,045 |
50,345 |
50,645 |
50,945 |
51,245 |
|
Gross Voted Capital Expenditure |
3,670 |
3,690 |
3,785 |
3,785 |
3,785 |
3,785 |
