Dáil Éireann Debate, Tuesday - 7 February 2017
166. Deputy Pearse Doherty asked the Minister for Finance if customers of a bank (details supplied) can be assured that their debts to the bank, mortgage or otherwise, will not be sold to vulture funds or third parties prior to any sale of a State stake in the bank; and if he will make a statement on the matter. [5384/17]
Amharc ar fhreagra176. Deputy Michael Healy-Rae asked the Minister for Finance the type of security measures which will be put in place if a bank (details supplied) is sold off to protect the persons that may have mortgages or loans with it from vulture funds which might purchase the loan book; the legislation in place to protect the public; and if he will make a statement on the matter. [5654/17]
Amharc ar fhreagraI propose to take Questions Nos. 166 and 176 together.
Deputies will be aware that there are substantial protections in place for customers in the event that a loan is sold from the original provider to a third party. The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 was enacted in July 2015 and is designed to protect borrowers in this situation. Under the Act, purchasers of loan books must either be regulated by the Central Bank themselves or else the loans must be serviced by a credit servicing firm who is regulated by the Central Bank.
Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 relevant borrowers, whose loans are sold to third parties, maintain the same regulatory protections they had prior to the sale, including under the various statutory codes (such as the Consumer Protection Code, Code of Conduct on Mortgage Arrears) issued by the Central Bank of Ireland and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015 which came into operation on 1 July 2016.
The sale of a loan from one entity to another does not change the terms of the contract or the borrower's rights and obligations under the original contract. My Department will continue to keep all relevant legislation under review in order to ensure that borrowers whose loans have been sold are properly protected and do not lose any protections which they previously enjoyed. In addition, the Department of Finance expect that the Central Bank as regulator of credit servicing firms, will be vigilant in this area and raise any specific instances where they have found consumers have not had their protections upheld or that their positions have been disadvantaged.
As the Deputy is aware non-performing loans (NPL's) remain at an elevated level across the European banking system and addressing this issue is one of the key priorities for the Single Supervisory Mechanism (SSM). In Ireland significant progress has been made across the banking sector in reducing the level of NPLs since the financial crisis. Despite this progress, the level of NPLs in the Irish banking sector remains well above the European average. Hence the SSM has tasked the management and board of each institution with developing and implementing a strategy to address this challenge. This challenge will have to be met whether or not the State has a shareholding in the bank concerned.
As the Deputy is aware, the relationship between the Minister for Finance and the banks in which the State is a shareholder are governed by a number of Relationship Framework Agreements, which in the case of AIB can be found here: http://www.finance.gov.ie/sites/default/files/Allied-Irish-Banks1.pdf. The Relationship Framework Agreements define the 'arms-length' nature of this relationship, allowing for oversight of significant actions taken while fully preserving the commercial independence of each bank, and the fiduciary responsibilities of their management and Board. The disposal of a loan or portfolio of loans is a commercial decision, and therefore a decision for the management and Board of each individual institution. Such a disposal is not subject to Ministerial consent but, if the value is greater than €100m in the case of AIB, is subject to Ministerial consultation.
