Written Answers Nos. 138 - 150
138. Deputy Róisín Shortall asked the Minister for Finance the way in which the change to the TBE rules have added to GDP and GNP in 2016 and his Department's estimate of the likely influence they will have in 2017 on both GNP and GDP; and if he will make a statement on the matter. [15965/17]
Amharc ar fhreagraThe new EU VAT rules relating to the supply of telecommunications, broadcasting and electronic (TBE) services were introduced by Council Directive 2008/8/EC and Council Implementing Regulation (EU) No 1042/2013 and took effect from 1 January 2015. Under the new regulation, the applicable VAT rules on the supply of TBE services in intra-EU transactions are those in the Member State where the consumer resides.
The publication of National Accounts data, including GDP and GNP, is the responsibility of the Central Statistics Office (CSO). Assessing the impact of the new rules on GDP is complex given the wide range of services covered by the regulation, the need to account for the impact on Irish suppliers as well as Irish consumers and the fact that there are different VAT regimes across the EU. However, it is likely that the ultimate impact on GDP would be negligible as a number of these factors would net off. The initial estimates of 2016 GDP and GNP data were published by the CSO in the quarterly national accounts for the fourth quarter of 2016 earlier this month. These showed GDP growth of 5.2 per cent and GNP growth of 9.0 per cent. The final figure for 2016 will be published with the National Income and Expenditure data for 2016 due in June.
The most recent assessment of the economic outlook was published as part of the Economic and Fiscal Outlook in Budget 2017. At that time, my department was forecasting real GDP growth of 3.5 per cent this year and real GNP growth of 3.3 per cent. A revised set of macroeconomic forecasts will be published as part of the Stability Programme Update in April.
139. Deputy Michael McGrath asked the Minister for Finance the number of affected mortgage accounts under the Central Bank's tracker mortgage examination, by lender; the number of mortgage accounts with interest rates rectified broken down by lender; the average interest rates of those accounts rectified; the number of PDH and BTL mortgage accounts that have received compensation by lender; the average compensation rate by lender, in tabular form; and if he will make a statement on the matter. [15966/17]
Amharc ar fhreagraThe Central Bank of Ireland published a report providing a further update on the Examination of Tracker Mortgage Related Issues on 23 March. The report is the latest in a series of status updates since the Examination commenced and sets out the progress being made by lenders in completing the review. The report also sets out information on the Central Bank's enforcement powers and activity in response to the tracker mortgage issues identified to date. The Examination Framework, the Principles for Redress and the Appeals Process set out by the Central Bank have also been published, in conjunction with the report.
In all, approximately 9,900 customer accounts have been identified as impacted by lenders, as part of the Examination, as at end February 2017. The Central Bank also identified 7,100 accounts where a tracker-related issue was resolved before the commencement of the system-wide Tracker Mortgage Examination. Lenders have commenced contacting impacted customers identified as at end February 2017 and have rectified the interest rates applied to such impacted customers' accounts, thus stopping further detriment. As at the date of the Report, interest rates have been rectified on more than 90% of the accounts that require such rectification.
To end February 2017, approximately €78m has been paid in redress and compensation to approximately 2,600 impacted customers identified as part of the Examination.
Due to statutory confidentiality requirements, the Central Bank has advised me that it may not publicly disclose much of its supervisory engagement with individual firms. In particular, the Central Bank can, generally speaking, only disclose such information in summary or aggregate form so that individual firms cannot be identified. The Central Bank has to be careful that any public disclosures made by it do not breach its statutory confidentiality requirements or prejudice any ongoing or possible future supervisory or enforcement actions.
140. Deputy Michael McGrath asked the Minister for Finance the methodologies used by each lender under the Central Bank's tracker mortgage examination to arrive at a redress rate of interest and compensation; the way in which the Central Bank determines such methodologies to be appropriate; and if he will make a statement on the matter. [15967/17]
Amharc ar fhreagraIt is important to note that the Central Bank does not have the statutory power to compel lenders to implement redress and compensation programmes in respect of failures that occurred prior to the introduction of the Central Bank (Supervision and Enforcement) Act 2013. However, where customer detriment is identified, the Central Bank has advised that it has clearly articulated its expectations of lenders to provide appropriate redress and compensation to impacted customers in line with prescribed Principles for Redress.
Key elements of the Central Bank's expectations in respect of redress and compensation for impacted customers include:
- any harm is stopped at the earliest possible time after each group of impacted customers is identified;
- the interest rates applied to impacted customers' accounts revert to the appropriate tracker interest rate or impacted customers are given the opportunity to revert to such a rate where relevant;
- redress will be provided to impacted customers to return them to the position they would have been in had lenders' failures not occurred;
- reasonable compensation, that reflects the detriment suffered by individual customers, is provided;
- redress and compensation is to be paid to impacted customers up front at the point of offer and compensation cannot be reduced by virtue of a customer lodging an appeal;
- an additional payment is to be provided to impacted customers at the point of offer to enable them to take independent professional advice regarding the redress and compensation offers made to them;
- an independent appeals process is to be established to address complaints from customers who are dissatisfied with any aspect of the redress and compensation package that they receive from lenders; and
- lenders will undertake not to raise any time limit defences that may otherwise apply if impacted customers make complaints to the Financial Services Ombudsman (the "FSO") or initiate proceedings before the courts.
The Principles for Redress are designed to ensure that impacted customers receive appropriate redress and compensation in a timely manner. The appeals element of the Principles for Redress ensures that customers have an option to challenge any aspect of the redress and compensation package, which is additional to the options of bringing a complaint to the FSO or initiating court proceedings.
141. Deputy Michael McGrath asked the Minister for Finance if timelines have been set for the completion of each of the four phases in the Central Bank's tracker mortgage examination; if lenders will be penalised for not completing these phases on time; and if he will make a statement on the matter. [15968/17]
Amharc ar fhreagraThe Central Bank has advised that it requires lenders to complete the Examination in four phases as follows:
- Phase 1: Development and Submission of Detailed Plan;
- Phase 2: Information Gathering/Review/Report Submission;
- Phase 3: Calculation of Redress and Compensation (where relevant); and
- Phase 4: Implementation of Redress Programme (where relevant).
Phase 1 of the Examination is now complete.
Phase 2 of the Examination is on-going. As at December 2016, nine lenders have submitted Phase 2 reports. The remainder are still engaged in their Phase 2 reviews and interim reports/status updates have been provided as appropriate. The Central Bank invoked its powers under Section 22 of the Central Bank (Supervision and Enforcement) Act 2013 to set specific timelines for lenders to complete Phase 2 of the Examination, the last of which will be completed by no later than end September 2017. By this date, the Central Bank expects all lenders to have identified all impacted accounts and have commenced engagement with most impacted customers. The Central Bank will be rigorously monitoring the completion of this work.
While the Central Bank expects that Phase 2 will be completed by end September 2017, payment of redress and compensation by the lenders and the Central Bank's assurance work will continue beyond this point for some lenders. The Central Bank expects lenders to commence Phases 3 and 4 as impacted customers are identified. It is important to note that Phases 3 and 4 (calculation of redress and compensation and implementation of the redress programme) can run concurrently with Phase 2.
The Central Bank will take appropriate supervisory action, up to and including enforcement action where necessary, in order to ensure lenders deliver fair outcomes for impacted customers. Enforcement activity will be influenced by the outcome of the reviews currently being conducted as part of the Examination.
142. Deputy Michael McGrath asked the Minister for Finance further to Parliamentary Question No. 76 of 29 September 2016, if he will clarify the meanings when he states that no concrete business model development proposals have been received; if proposals, concrete or otherwise, have been made; if any of these proposals requested a change to current regulations; if so, the outcome of these proposals; and if he will make a statement on the matter. [15969/17]
Amharc ar fhreagraI have been informed by the Central Bank that it engages with credit unions wishing to expand the range of products and services they provide to their members but that it is clear that the ownership of business model development in credit unions rests with individual credit unions themselves. This engagement is framed in the context of the Credit Union legislation. The majority of products and services that credit unions wish to offer are accommodated within that legislation and require no additional approval from the Registry. However if approval is required it is a matter for the Registrar of Credit Union at the Central Bank. The important considerations for credit unions are that they understand the nature of the risks involved in any new product or business line, the financial implications in terms of overall return on assets and product investment, that they have the necessary control and governance framework to oversee their business. The Registry of Credit Unions does not publish details of bilateral applications.
Recent developments in business model evolution are social housing investments which requires amendment to Regulations as provided for under Section 43 (2)(c). The Central Bank will shortly issue a consultation paper on proposed changes to the regulations expanding the list of eligible investments.
Longer term lending engagement has centered around mortgages and changes to longer term lending limits which would require amendement to Regulations. The Central Bank informs me that it has yet to receive any concrete proposals around such changes. The Central Bank has indicated it is prepared to review longer term lending limits and has highlighted asset and liability management, funding profile and funding sources as areas for consideration in developing such proposals. This review is in line with the Credit Union Advisory Committee (CUAC) recommendation of a full review of s35 lending limits and concentration limits. Further work is being undertaken in this area by the Implementation Group established to implement the CUAC recommendations.
Services or products not accommodated within the existing legislation and regulation can be applied for under the Additional Services Framework under sections 48 to 52 of the Credit Union Act 1997. In relation to current account services including payment instruments such as debit cards, the Registrar of Credit Unions recently approved six credit unions that applied for and were approved for this new business line. The Central Bank is currently reviewing a number of additional applications for this service.
143. Deputy Michael McGrath asked the Minister for Finance further to Parliamentary Question No. 77 of 29 September 2016, if decisions relating to requests for changes to regulations 2016 are appealable to the Irish Financial Services Appeals Tribunal; and if he will make a statement on the matter. [15970/17]
Amharc ar fhreagra144. Deputy Michael McGrath asked the Minister for Finance his views on whether it is necessary to expand the appealable decisions under the Irish Financial Services Appeals Tribunal to include the decisions relating to Regulations 2016 for credit unions; and if he will make a statement on the matter. [15971/17]
Amharc ar fhreagraI propose to take Questions Nos. 143 and 144 together.
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.
The 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.
Since 1 August 2013 Part VIIA of the Central Bank Act, 1942 has applied to credit unions. This provides credit unions with the right to appeal certain decisions of the Central Bank to IFSAT. Appealable decisions include:
- certain decisions in the Credit Union Act, 1997 (1997 Act)
- refusal of approval under the Central Bank Reform Act 2010
- findings or orders of an inquiry under the Administrative Sanctions Procedure.
Decisions in relation to requests for changes to Regulations 2016 are not appealable to the Irish Financial Services Appeals Tribunal.
However, under section 84A of the Credit Union Act, 1997 the Central Bank before making regulations is required to consult with:
- The Minister and the Credit Union Advisory Committee,
- Any other body that appears to the Bank to have expertise or knowledge of credit unions generally, and
- Any other body that the Bank considers appropriate to consult in the circumstances.
The Consultation Protocol for Credit Unions, published by the Central Bank in 2012, indicates that the Central Bank will consult on new regulations that will, in the view of the Central Bank, potentially have a significant impact on the business of credit unions. The consultation process for the 2016 Regulations (CP88) took place in 2015 and attracted 117 submissions from representative bodies, individual credit unions, credit union Chapters and from professional bodies, TD s and investment firms. The Central Bank published a Feedback Statement and all submissions received are available on the Central Bank's website.
Since the provision of new regulation making powers to the Central Bank, the Registry of Credit Unions is in a position to review and update the regulations as appropriate on a timely basis and following consultation. The Central Bank is keen to ensure that the regulations remain appropriate for the credit union sector and where credit unions set out a clear path on how they wish to develop, they will consider any amendments to the regulations that may be appropriate.
The Central Bank is in the process of reviewing investment regulations for credit unions considering a number of factors including expanding the permitted classes of investments. In line with the published consultation protocol, once the Central Bank have completed their review and analysis and developed proposals, they will undertake a consultation with credit unions and representative bodies and associations. This will be in the form of a public consultation on draft investment regulations, which will provide a framework for them to seek, receive, analyse and respond to feedback on their proposals prior to finalisation and publication.
145. Deputy Michael McGrath asked the Minister for Finance his views on reports that a State owned bank expects to increase its share of the personal lending market by specifically targeting the business of credit unions in view of the regulatory curtailment in 2011; his further views on whether the actions of the bank is placing the credit unions at a disadvantage; and if he will make a statement on the matter. [15972/17]
Amharc ar fhreagraAs the Deputy is aware, notwithstanding the State's various shareholdings in the banking sector, the strategic and commercial direction taken by each bank is solely the responsibility of the management team and board of that institution. I have no role in their strategic decision making or indeed day to day operations.
The average Credit Union sector loan to asset ratio is currently c.27% reflecting low loan to asset ratios for the majority of credit unions, including those that do not have lending restrictions imposed by the Central Bank of Ireland.
The Central Bank has informed me that lending restrictions are imposed in the context of on-going matters of supervisory concern arising in individual credit unions. Currently c.24% of Credit Unions are operating under lending restrictions. For those credit unions where there is an individual loan size restriction in place, the level at which the limit is imposed ensures that the vast majority of those credit unions can continue to make loans significantly more than the average loan for the sector of just above €6,000. The Central Bank has advised me that that the Registry of Credit Unions has carefully calibrated the use of this regulatory tool to mitigate risk while also recognising the core business of credit unions to lend to their members
I have said before that open market competition between prudent, commercial lenders represents the best method of driving better rates, offers and choice in financial services for customers.
146. Deputy Michael McGrath asked the Minister for Finance further to Parliamentary Question No. 78 of 29 September 2016, if consideration has been given to increasing the oversight in view of the extent of powers devolved to the Central Bank in respect of credit unions; his views on whether a peer review every four years is sufficient oversight; and if he will make a statement on the matter. [15973/17]
Amharc ar fhreagra148. Deputy Michael McGrath asked the Minister for Finance if a review of the Central Bank's regulatory performance and any other relevant matter has been undertaken with regard to the Registrar of Credit Unions as stipulated by the Central Bank Reform Act 2010; if he will be examining this review; if he will publish this review; and if he will make a statement on the matter. [15975/17]
Amharc ar fhreagraI propose to take Questions Nos. 146 and 148 together.
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.
The 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.
The Central Bank is accountable through legislation as follows:
- the requirement to prepare a three-year strategic plan for submission to the Minister for Finance;
- preparation of a statement of the Central Bank's performance in regulating financial services which includes the annual report prepared by the Registrar of Credit Unions with respect to the activities of the Registrar of Credit Unions; and
- the requirement at least every four years to arrange for an international peer review of the Central Bank's regulatory performance.
In addition, the Registrar of Credit Unions appears before Oireachtas Committees when invited to do so.
Under section 32M of the Central Bank Act 1942, the Central Bank is required, at least every four years, to make arrangements for a peer review of the Central Bank's performance of its regulatory functions.
The first such peer review of the Central Bank's performance of its regulatory functions in relation to credit unions was undertaken in 2015 by the International Credit Union Regulators' Network (ICURN). The peer review report was published in September 2015. The basis for the peer review was the 'ICURN Guiding Principles for Effective Prudential Supervision of Cooperative Financial Institutions (2011)', which were developed using the Basel Committee on Banking Supervision's Core Principles for Effective Banking Supervision as a guide.
The overall finding in the peer review report was that the Central Bank effectively performs its functions in the regulation and supervision of the credit union sector in Ireland and had effectively undertaken the demanding task of introducing a comprehensive regulatory structure of credit unions. The report assessed the Central Bank's performance against twenty-three Guiding Principles with each one assessed using five grading categories. ICURN provided a rating of 'Compliant' for twenty Guiding Principles and 'Largely Compliant' for three Guiding Principles.
Guiding Principle 1 focused on the effectiveness of the legal framework, including powers for authorisation, supervision, powers to enforce compliance with relevant laws, safety and soundness and legal protection for supervisors. The ICURN review rated the Central Bank compliant for guiding principle 1.
The review included some recommendations for refinements under the following three broad areas:
- Supervisory Approach;
- Communications and Guidance; and
- Resources.
I have been informed by the Central Bank that it has taken actions and initiatives to implement these recommendations. The full ICURN peer review report is available on the Central Bank's website.
Based on ICURN's overall finding in the 2015 peer review report that the Central Bank effectively performs its functions in the regulation and supervision of the credit union sector in Ireland and based on my Department's regular interaction with the Registry, I am satisfied that more regular reviews are not warranted.
147. Deputy Michael McGrath asked the Minister for Finance if the Central Bank has set up an advisory group to advise on the performance of its functions and the exercise of its powers in respect of credit unions as provided for under the Central Bank Reform Act 2010; if that group is the same as the credit union advisory committee; the number of times this advisory group has met since the powers to regulate credit unions were devolved to the Central Bank; and if he will make a statement on the matter. [15974/17]
Amharc ar fhreagraUnder section 18E (1)(b) of the Central Bank Act, 1942, the Central Bank shall establish an advisory group to advise the Central Bank, where the Bank requests, on the performance of its functions and the exercise of its powers in relation to credit unions.
I have been advised by the Central Bank that given the establishment of the Commission on Credit Unions (May 2011-March 2012), the Commission on Credit Unions Implementation Group (May 2012-May 2014) and the Implementation Group arising from the Credit Union Advisory Committee Review of Implementation of the Recommendations in the Commission on Credit Unions Report (established November 2016), the advisory group referred to in the question has not been established to date. The Central Bank further informs me that it will give consideration to the appropriate time frame for establishing a Credit Union Advisory Group taking account of other developments in the sector.
The Credit Union Advisory Committee (CUAC) is a committee established by the Minister for Finance, under section 180 of the of the Credit Union Act 1997 to provide advice to the Minister on credit union matters.
149. Deputy Michael McGrath asked the Minister for Finance if there is a mechanism in place whereby he can update or change the 2016 regulations with regard to credit unions; if legislation is required if such changes were to be made; and if he will make a statement on the matter. [15976/17]
Amharc ar fhreagraMy 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.
The 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.
The Report of the Commission on Credit Unions made a number of recommendations regarding the strengthening of the regulatory framework for credit unions and also recommended that regulation making powers be delegated to the Central Bank. This report was agreed by all stakeholders, including credit union representative bodies. Over 60 of these recommendations were reflected in the Credit Union and Co-operation with Overseas Regulators Act 2012 (2012 Act), which was enacted on 19 December 2012. The 2012 Act was commenced in tranches over a period of time with the last tranche commenced on 1 January 2016.
Those sections of the 2012 Act commenced on 1 January 2016, replaced, amended or supplemented sections of the Credit Union Act, 1997 and provided the Central Bank with the power to make regulations. Amendment of these regulations is a matter for the Central Bank.
In order to increase transparency and confidence in the regulation making process, consultation arrangements are provided for in 84A(2). The Consultation Protocol for Credit Unions, published by the Central Bank in 2012, indicates that the Central Bank will consult on new regulations that will, in the view of the Central Bank, potentially have a significant impact on the business of credit unions. Under section 84A of the Credit Union Act, 1997 the Central Bank before making regulations is required to consult with:
- The Minister and the Credit Union Advisory Committee,
- Any other body that appears to the Bank to have expertise or knowledge of credit unions generally, and
- Any other body that the Bank considers appropriate to consult in the circumstances.
150. Deputy Michael McGrath asked the Minister for Finance if the consumer advisory group attached to the consumer protection division of the Central Bank has expressed any concerns regarding the negative impact that the gradual diminution of products and services allowable by credit unions under current regulations might be having on consumers; and if he will make a statement on the matter. [15977/17]
Amharc ar fhreagraThe role of the Consumer Advisory Group ('CAG') is to advise the Central Bank on the performance of its functions in relation to protecting consumers. I understand from the Central Bank that the CAG has indicated that the matter raised by Deputy McGrath has not been discussed by the group.
