Written Answers Nos. 57-77
57. Deputy Thomas P. Broughan asked the Minister for Business, Enterprise and Innovation if he has satisfied himself that sufficient personnel and resources have been provided by the State to the Irish Auditing and Accounting Supervisory Authority; and if he will make a statement on the matter. [51381/17]
Amharc ar fhreagraThe Irish Auditing and Accounting Supervisory Authority (IAASA) currently has an approved staff complement of 43. At present, 24 staff are in place, with recruitment of additional staff underway and plans to commence a further recruitment campaign. Through these recruitment campaigns, the Authority is working towards having a full staff complement in situ at the earliest opportunity.
The Authority, in common with many other State organisations, faces significant challenges in the recruitment of high quality professional staff to deliver on its remit of supervising and promoting high quality financial reporting, auditing and effective regulation of the accounting profession.
IAASA has the necessary budget to meet all costs associated with the functions conferred on the Authority.
58. Deputy Brendan Howlin asked the Minister for Business, Enterprise and Innovation the reason for the delay in ratifying the Beijing Treaty which would provide economic rights in respect of intellectual property rights of persons in audiovisual performances; when the Treaty will be ratified; and if she will make a statement on the matter. [51414/17]
Amharc ar fhreagraThe World Intellectual Property Organisation’s (WIPO) Beijing Treaty on Audiovisual Performances was adopted by the Diplomatic Conference on the Protection of Audiovisual Performances, which took place in Beijing from June 20 to 26, 2012. The objective of the Treaty is to establish rules ensuring the adequate protection and remuneration of actors and allowing their performances to be made available, whether they are distributed on physical media (such as DVDs) or on the internet.
The Treaty will enter into force three months after 30 eligible parties have deposited their instruments of ratification or accession in WIPO. To date, 19 WIPO member states have ratified the Treaty. Ratification of the Treaty requires contracting parties to adopt national law provisions that permit the reproduction, distribution, rental and making available of recorded audiovisual performances; broadcasting, making available and fixation of live performances; as well as certain moral rights in relation to performances.
The text of the Treaty can be found on the WIPO website at the following link: http://www.wipo.int/wipolex/en/treaties/text.jsp?file_id=295838.
Ireland recognises the importance of the Beijing Treaty in strengthening the economic rights of performers in audiovisual recordings, granting moral rights to prevent lack of attribution or distortion of their performances, and in providing performers with protection in the digital environment. Ireland signed the Beijing Treaty on 19th June 2013 but has not ratified the Treaty itself, in line with normal protocol which requires Government approval for the ratification of international Treaties.
I would like to take the opportunity to highlight that, as it currently stands, Ireland’s existing legislation does provide for protection of a range of rights in relation to performances, and that the term of protection of those rights is 50 years for all performances created before 1st November 2013, and 70 years for all performances created since that date. This is a greater term of protection than is required to comply with the Treaty, which is “at least 50 years”.
My Department has been working on a number of important negotiations and amendments to Irish legislation to strengthen the protections of copyright and related rights in Ireland in recent years, many of which are expected to make a positive impact on the protection for audiovisual performances. Specifically in relation to the Beijing Treaty, my intention is to bring a Memo to Government in due course once analysis of the final adopted text of the Treaty and of the relevant Irish law is complete.
59. Deputy Mick Wallace asked the Minister for Finance his dealings to date with the EU director general for competition with regard to a State aid complaint regarding the use of the National Asset Management Agency funding for residential and commercial development; if his Department or NAMA has been in contact with the five developers that submitted the complaint; when a decision will issue from the director general on this issue; and if he will make a statement on the matter. [50871/17]
Amharc ar fhreagraIn late 2015, a complaint was submitted to the Competition Directorate of the European Commission (DG Comp) by a small number of property developers - including some former NAMA debtors - alleging that there may be State aid implications to NAMA's providing financing for the development of commercially viable residential projects by some of NAMA's debtors and receivers.
As the primary relationship with the Commission is held by the State, all responses and correspondence with DG Comp is conducted through the Department of Finance with the assistance of NAMA. NAMA and my Department have co-operated fully with the European Commission throughout their preliminary investigations and have addressed all queries and provided all information requested by DG Comp to date.
My officials, along with NAMA, have had extensive engagements with the European Commission in relation to the complaint via written submissions, telephone calls and meetings, often in response to specific information requests from the DG Comp Case Team resulting from allegations made by the complainants. I can confirm that neither NAMA nor my Department have communicated with the Complainants directly regarding this complaint as to do so would be inappropriate given the ongoing nature of the investigation. NAMA and/or Department officials have, on occasion, engaged with some of the Complainants, or their representatives, on other matters unrelated to the complaint over the past number of years.
I understand the DG Comp Case Team continue to consider all submissions and evidence provided and a preliminary finding has not yet been determined. The Case Team may seek further information from my Department in the course of their deliberations and my Department and NAMA will of course provide whatever information and assistance is required by the Case Team. Senior Department officials maintain an open dialogue with DG Comp as they progress their work. I do not have a timeframe for a decision on the case, though I understand the Commission's work is well advanced.
Furthermore, while it would not be appropriate for me to comment in detail on what is an ongoing DG Comp investigation, I would point out that NAMA lends money to willing NAMA debtors and receivers on commercial arms-length terms only where there is an expectation that such financing will enhance NAMA's recovery of the money owed to NAMA by its debtor.
To be clear, NAMA is lending money to existing NAMA debtors to allow the debtor to enhance the value of the collateral securing that debtor's original loan owed to NAMA in order to not only pay back the additional lending with interest but, importantly, to pay back a greater proportion of the total debt owed to NAMA.
NAMA requires that the projected return resulting from the provision of additional funding must be the value maximising strategy for the asset and this is fully in accordance with Section 10 of the NAMA Act. This means NAMA will facilitate the funding of development of only those sites that are commercially viable and where site development will deliver a better recovery than the sale of the undeveloped site.
In addition, where NAMA provides funding to facilitate development by its debtors or receivers, it is provided at appropriate market rates of interest. The clear intention of NAMA's residential funding initiative is to enhance the returns to NAMA over and above any other viable strategy, provide funding on market terms and ensure there is no impact on competition more generally.
60. Deputy Mick Wallace asked the Minister for Finance his plans to revise the State's policy of adhering to EU fiscal rules under the stability and growth pact due to the urgent need for infrastructure investment throughout the State; if his Department has examined cases throughout the EU in which member states have broken the fiscal rules; the reason for same; and if he will make a statement on the matter. [50872/17]
Amharc ar fhreagraThe fiscal rules are designed to promote budgetary discipline and underpin sustainable economic growth. While Ireland's economy is growing and debt is on a downward trajectory, the debt level is still comparably high and caution must be exercised due to rollover risk related to possible interest rate increases. We are a small and very open economy in a world that has more risks than usual. Compliance with the fiscal rules underpins the Government’s objective of maintaining sound public finances.
Furthermore, compliance with the fiscal rules is not only a matter of policy. The fiscal rules to which Ireland is subject to have direct application through a number of EU regulations as well as domestically via the Fiscal Responsibility Act 2012.
I am aware of the Commission's assessments of other EU Member States’ compliance with the rules; these are regularly discussed at the monthly Eurogroup and Ecofin meetings which I attend on behalf of the Government.
The issue of facilitating greater flexibility within the application of the fiscal rules has received significant focus at European level and framed discussions on the establishment of the structural reform and investment clauses, which were codified by the Commission in November 2015. Specifically these provisions allow for temporary deviations from the required structural budgetary adjustment, subject to strict conditions.
Furthermore there is existing flexibility within the expenditure benchmark whereby public investment increases are smoothed over four years with the result that only one quarter of the increase in public investment must be funded in the first year from within the fiscal space. This provision, which means increases in capital spending for housing and other purposes can be front-loaded within the EU rules, has been utilised in Ireland's budgetary plans.
Finally, I would point out that any decision to increase capital expenditure over and above already planned levels would need to balance the danger of potentially over-heating in the economy with the need to address infrastructure priorities and risks such as Brexit. I will not adopt pro-cyclical budgetary policies that jeopardise our future living standards.
In summary, therefore, I have no plans to revise policy regarding adherence to the fiscal rules.
61. Deputy Fergus O'Dowd asked the Minister for Finance the details of the proposed Home Building Finance Ireland fund of €750 million announced in budget 2018; when it will open to persons; and if he will make a statement on the matter. [51287/17]
Amharc ar fhreagraAs announced in my Budget speech on 10 October 2017, it is my intention to establish Home Building Finance Ireland (HBFI) to provide funding on market terms to viable residential development projects which are experiencing difficulty in obtaining debt funding. HBFI will be a standalone entity which will provide funding directly into the market.
HBFI will be designed to leverage off the extensive experience already available to the State to deliver this initiative and as such existing NAMA staff skills and expertise will be utilised to deliver this funding. However any lending provided in due course will be provided by HBFI which will be fully separate and will not impact NAMA's existing objectives or its Board’s strategic wind down plans. The exact staffing and servicing arrangements are currently being devised by my officials and NAMA and will be confirmed in due course.
I would be hopeful of bringing the establishing legislation to the Houses of the Oireachtas for approval in early 2018, with a view to HBFI commencing operations later in 2018. It is not expected that HBFI will have an indefinite lifespan but it is too early to speculate on how long it may operate as this will depend on the availability of funding in the market to meet demand for homes in the coming years.
With a proposed allocation of up to €750m, it is estimated that HBFI could have capacity to fund about 6,000 homes in the coming years. The current estimated shortfall in residential supply is 15,000 – 20,000 units per annum and, accordingly, HBFI, with an annual average delivery of 2,000 homes, could help reduce this shortfall by about 10% (assuming a three year horizon). This would be a significant contribution but it would not make HBFI a dominant player in the residential funding market and it would clearly leave room for banks and other finance providers to increase their contribution to funding much-needed residential development.
In relation to the products that will be offered by HBFI, the fund will be designed to focus on the provision of debt funding to viable residential development projects. This funding will mirror the type of lending which NAMA has provided to its debtors in recent years. As the Deputy will be aware, the State is already providing a number of alternative supports into this market, including equity finance, through the ISIF’s existing residential development funding platforms.
In relation to the specific product terms and conditions that will attach to this lending, I am not in a position to provide detail at this time. I can confirm that HBFI will be lending on commercial, market-equivalent terms and conditions, which would depend on the risk profile of each individual project, the quality of collateral and the creditworthiness of the borrower. The specifics parameters for this will be set by the board of HBFI in due course having regard to the nature of the project and market conditions at that time.
62. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which his Department has put in place appropriate measures to minimise the impact of Brexit on the financial services here and the economy in general; and if he will make a statement on the matter. [51310/17]
Amharc ar fhreagraThe Department has been assessing and preparing for the impact of Brexit since well before the UK referendum in June 2016, with this work now intensified. The Department’s preparation and contingency work is ongoing and continues to examine all possible scenarios and challenges, and is a key input into the whole of Government approach.
Regarding the economic impact, we know from our own published research that the potential impact on the Irish economy is significant. In that regard, the Government has taken a number of important steps to prepare our economy for the challenges of Brexit, including in Budgets 2017 and 2018, the Action Plan for Jobs and our Trade and Investment Strategy. A new 10-year Capital Plan is also in preparation.
The best and most immediate policy under the Government's control to counter the likely negative economic impacts of Brexit is to prudently manage the public finances in order to ensure that Ireland's economy continues to remain competitive in the face of future economic headwinds. In that context, on the fiscal side, the Government has continued its policy focus of enhancing the resilience of our public finances to any Brexit-related shock. Specifically, it is projected that Ireland will achieve its medium-term budgetary objective of a balanced budget next year. Linked to this, over the forecast horizon, it is projected that the General Government Debt-to-GDP ratio will continue on a downward trajectory, reaching the Stability and Growth Pact (SGP) 60 per cent threshold in the early part of the next decade and continuing to improve thereafter. Whilst not complacent to potential challenges, including our currently elevated debt level, these developments will help provide fiscal capacity in the event of Brexit. Complementing this, Budget 2018 further established the ‘Rainy Day Fund’, which provides an additional counter-cyclical buffer, and represents an important measure to strengthen the shock absorption capacity of the national finances to such external risks.
As part of its contingency planning, the Department is engaged on an ongoing basis in examining the potential impacts of Brexit on the financial services sector and potential mitigations. As part of this work the Department liaises with other Government Departments and Agencies who have responsibilities in this area, including Enterprise Ireland and the IDA. The Department also engages closely, via the Financial Stability Group with the Central Bank of Ireland, which has the statutory responsibility for financial stability. Brexit is a standing item on the Group’s agenda. In undertaking its statutory role, the Central Bank continues to engage with financial firms to ensure that appropriate contingency measures are in place to address issues relating to Brexit and to set out the responsibility on firms to take preparatory actions in advance of Brexit.
Additionally, the Government’s strategy to mitigate the impact of Brexit includes fully exploiting opportunities arising. With regard to the Financial Services sector, Brexit will provide opportunities for Ireland to increase its share of financial services based inward investment. In that regard, Minister of State Michael D’Arcy T.D. has responsibility for Financial Services, including the implementation of the IFS2020 Strategy for driving growth in the financial services sector.
63. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied that this economy remains competitive in all aspects; and if he will make a statement on the matter. [51311/17]
Amharc ar fhreagra64. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he expects the State's economic performance to continue; and if he will make a statement on the matter. [51312/17]
Amharc ar fhreagra65. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied that all fundamental economic indicators remain positive with particular reference to future growth prospects; and if he will make a statement on the matter. [51313/17]
Amharc ar fhreagra66. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied that the State's competitiveness will remain intact globally; and if he will make a statement on the matter. [51314/17]
Amharc ar fhreagra67. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he and his Department continue to monitor the impact of Brexit on all aspects of this economy; and if he will make a statement on the matter. [51315/17]
Amharc ar fhreagra68. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which his Department continues to monitor all aspects of the economy with a view to identifying those areas coming under pressure from Brexit or other influences; if particular measures are required in these circumstances; and if he will make a statement on the matter. [51316/17]
Amharc ar fhreagraI propose to take Questions Nos. 63 to 68, inclusive, together.
Recent economic indicators have generally been positive, indicating that the recovery is continuing in a sustainable manner.
Real GDP grew by 5.8 per cent in the second quarter of this year on an annual basis. This follows annual growth of 5.2 per cent in the first quarter.
Growth is broad based with both underlying domestic demand – stripping out the volatile components of investment – and net exports contributing positively to growth this year.
The strength of underlying domestic demand is being felt in the labour market. Employment growth remains strong with an annual rate of 2.4 per cent recorded in the second quarter of 2017, representing the creation of over 48,000 additional jobs over the year. The increase in employment remains broad based with gains recorded in 11 of the 14 sectors reported by the CSO. Since the low-point in 2012 there are now an additional 230,000 people in employment.
Recent data published indicate that:
- The volume of retail sales increased by 4.5 per cent year-on-year in October 2017. Core sales (excluding motor trades) were up by 6.0 per cent over the same period.
- Expansion in the construction sector continued in October with the Purchasing Managers’ Index for the sector recording its fiftieth successive month of expansion.
- The Consumer Sentiment Index was 104.8 in October, well above its long run average.
- The seasonally-adjusted monthly unemployment rate for October was 6.0 per cent, down from 7.2 per cent in October 2015. As a result, the unemployment rate has fallen by more than half since its peak of over 15 per cent in early-2012.
As part of Budget 2018, my Department is forecasting real GDP growth of 3.5 per cent next year, following growth of 4.3 per cent this year. The strong performance of the labour market is set to continue in the short term, my Department is projecting that an additional 48,000 jobs will be created next year. Strong employment growth is expected to further reduce the unemployment rate, to around 5 ½ per cent by the end of next year.
However, there are a number of risks at present, principally the UK’s decision to exit the EU. In addition, the sharp appreciation of the euro-sterling rate is posing significant challenges, particularly for the traditional sector, tourism sector and areas sensitive to cross-border trade. Notwithstanding the magnitude of these challenges, the main macroeconomic impact of the appreciation of the euro-sterling rate so far has been on the nominal side of the economy, with inflation remaining subdued despite a pick-up in the rest of the euro area. In particular, export growth has held up well despite the appreciation of the euro. Importantly, the largely indigenous food and beverage sector, for which the UK is an important export market, has proven resilient this year with the value of exports up 13.5 per cent in the first three quarters of 2017 on an annual basis.
However, there is no room for complacency as the full impact of Brexit is only expected to materialise over time. The Government has already taken important steps to prepare the economy, including in Budget 2017 and 2018, the Action Plan for Jobs 2017, and our Trade and Investment Strategy.
Significant progress has also been made in recent years in improving Ireland's competitiveness. The latest figures from the Central Bank of Ireland show that Ireland's real harmonised competitiveness indicator (a widely used measure of competitiveness in Europe) has improved by over 20 per cent between its peak in 2008 and October 2017. However, the sharp appreciation of the euro-sterling bilateral rate is a reminder that forces beyond our control can turn against us. This is all the more reason why we must focus on the costs which we can influence.
In this regard, it is important that the public finances are managed in a prudent manner and that competitiveness-oriented policies are pursued so that the Irish economy is in the best possible position to weather economic shocks that may emerge.
In summary, I am satisfied that the economic indicators remain positive. However, the full impact of the UK’s decision is yet to be seen. I am also conscious that the level of uncertainty is elevated at present. In this regard, it is critical that appropriate polices are implemented and that is what the Government will continue to do.
69. Deputy Bernard J. Durkan asked the Minister for Finance when mortgage interest rates here might be aligned with those throughout Europe; the reason this has not been possible to date; and if he will make a statement on the matter. [51317/17]
Amharc ar fhreagraThe Central Bank has informed me that it does not have a statutory role to prescribe the rates that mortgage lenders charge on their loans.
A healthy commercial banking system that is in a position to provide finance to customers and is resilient to economic and financial market shocks, needs to be able to generate sustainable profits over the long term - for example, sufficient profit levels to absorb credit losses over the credit cycle while still generating capital. In Ireland, the mis-pricing of risks in historical lending continues to be a significant contributor to weak profitability, as evidenced by the continued high level of non-performing loans, prevalence of very low yielding tracker mortgages, and low net interest margins.
Furthermore, the residential mortgage market comprises, inter alia, fixed interest rate, loan to value managed variable rate mortgages, trackers, restructured mortgages of various types, etc. Therefore, the residential mortgage market cannot be assessed by only looking at standard variable rate mortgages, and any assessment would need to consider the large number of different factors that influence interest rate pricing.
The legacy issues, together with other input costs to variable rate mortgage pricing were outlined in a paper provided by the Central Bank to the Minister for Finance in May 2015. These include higher costs from credit losses, higher funding costs, higher levels of capital resulting from regulatory changes, higher required capital per euro risk given the severe loss experience in the crisis, higher operating costs per euro of loans given falling balance sheets and the fixed costs base that comes with the infrastructure requirements of large retail banks.
The Central Bank requires that all mortgages are advertised and sold in accordance with the requirements of financial services legislation (including Central Bank Codes), and that consumers who choose a given mortgage product (or to switch to a new product) are treated in accordance with these requirements in the context of the product they have chosen.
Additionally, the Central Bank has carried out research which showed the scope for borrowers to save money by switching mortgages and the Competition and Consumer Protection Commission has launched a mortgage switching tool for consumers (which itself notes the findings of the Central Bank research of cases where borrowers could make savings).
The Central Bank releases monthly retail interest rate data (Tables B1.1 - B2.1). These statistics satisfy reporting requirements as laid down in Regulation (EC) No 1072/2013 of 24 September 2013 (ECB/2013/34)1 as amended by Regulation of the ECB of 8 July 2014 (ECB/2014/30), concerning statistics on interest rates applied by monetary financial institutions (MFIs) to deposits and loans vis-à-vis households and non-financial corporations. The most recent statistics are available on www.centralbank.ie .
In addition, following a public consultation process, on 21 July 2016, the Central Bank announced the introduction of a number of increased protections for variable rate mortgage holders. The enhanced measures, which are provided for in an Addendum to the Consumer Protection Code 2012, and became effective on 1 February 2017, require lenders to explain to borrowers how their variable interest rates have been set, including in the event of an increase. The measures also improve the level of information required to be provided to borrowers on variable rates about other mortgage products their lender provides which could provide savings for the borrower and signpost the borrower to the CCPC’s mortgage switching tool.
In late 2016, the Central Bank commissioned research into consumer perceptions and attitudes to mortgage switching, as well as the experience of those who had switched. The Central Bank conducted the research to help identify areas where further action by the Central Bank could assist borrowers who are considering switching their mortgage. The Central Bank published the report on the research findings in April 2017. The report contained several positive findings from consumers who had switched their mortgage. However, it also highlighted the need for greater transparency for consumers, both about the potential savings they could make by switching and the switching process itself.
In August 2017, the Central Bank published a Consultation Paper proposing new measures which would enhance the framework of protections for mortgage holders. In that consultation the Central Bank proposed new measures to require lenders to:
- inform consumers about other available mortgage options that could save them money and about the impact of mortgage-related incentives;
- help consumers to compare their existing mortgage to other mortgage options;
- provide consumers with standardised switching information; and
- follow a time-bound switching process.
The consultation period has now ended, and the Central Bank is analysing the responses it received and is considering next steps.
70. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which adequate working capital remains available to small and medium enterprises with particular reference to the need to ensure the protection of jobs in the indigenous sector; and if he will make a statement on the matter. [51318/17]
Amharc ar fhreagraAs the Deputy is aware, supporting SMEs and farm borrowers has been a cornerstone policy for Government in our efforts to rebuild the economy and bring back jobs. Government policy is focused on ensuring that all viable SMEs have access to an appropriate supply of credit from a diverse range of bank and non-bank sources. In this regard the Government has developed a number of initiatives to ensure that the supply of credit in the market is sufficient to meet the existing and future needs of SMEs.
In terms of monitoring the working capital requirements for SMEs, my Department commissions biannual surveys to ascertain the demand for credit by SMEs. I would draw the Deputy's attention to the most recently published Department of Finance SME Credit Demand Survey, covering the period October 2016 to March 2017, which can be found at www.finance.gov.ie .
The results of this survey show that, when pending applications are excluded, 88% of credit applications to banks were approved or partially approved. Working capital/cash flow requirements are provided as the main reason for applying for bank finance with 31% stating this is why they requested bank finance. Expansion requirements were provided as the second highest reason for applying for bank finance with 23% of respondents stating that they required finance for this purpose. When asked about sources of finance for working capital, internal funds/retained earnings were the main finance source of working capital with 78% of working capital coming from this source (up 5%). The survey also showed that the number of businesses reporting a profit has increased for the fourth year in a row, and a higher proportion of SMEs than ever are pursuing a growth strategy.
A key objective of the Strategic Banking Corporation of Ireland (SBCI) is to ensure that SMEs can access low cost flexible loans from a variety of sources. The SBCI channels its funds through lending partners known as on-lenders. The SBCI currently has three bank on-lending partners and four non-bank on-lending partners. To date the SBCI has supported over 21,000 SMEs lending a total of €855 million.
The Microenterprise Loan Fund, administered by Microfinance Ireland, is an additional source of credit that provides loans for up to €25,000 to start-up, newly established, or growing micro enterprises employing less than 10 people.
The Credit Review Office is another government initiative that helps SMEs who have had an application for credit of up to €3 million declined or reduced by the main banks, and who feel that they have a viable business proposition. This is a strictly confidential process between the business, the Credit Review Office and the bank. The Credit Review Office overturns more than 50% of lenders decisions in the appeals it receives.
The Government remains committed to the SME sector and sees it as the key engine of ongoing economic growth. I can assure the Deputy that my Department, working with other relevant Departments, Bodies and Agencies, such as the Credit Review Office, will continue to advance policies to ensure the availability of both bank and non-bank credit so as to ensure that viable Irish SMEs have sufficient access to finance.
71. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he continues to monitor the activities of unregulated third parties that have acquired distressed loans and mortgages from banks and building societies with particular reference to the urgent need to introduce a new code of conduct applicable to all that will give adequate protection to those borrowers that continue to make payments within their capacity and in line with pre-existing arrangements; and if he will make a statement on the matter. [51319/17]
Amharc ar fhreagraI have been informed by the Central Bank of Ireland (the Central Bank), that they have no jurisdiction over unregulated third parties and therefore it has no power to investigate the activities of such entities that have acquired distressed loans and mortgages from banks and building societies or to introduce any code of conduct applicable to such entities.
However, under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (2015 Act), if a firm who bought loans from an original lender is unregulated, then the loans must be serviced by a Credit Servicing Firm who is authorised and regulated by the Central Bank.
Credit servicing firms must comply with all relevant requirements of financial services legislation, including the regulatory requirements set out in the Central Bank’s existing codes of conduct and Regulations, i.e., the Consumer Protection Code 2012, the Code of Conduct for Mortgage Arrears 2013 and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Small and Medium-Sized Enterprises) Regulations 2015 (SME Regulations), including the arrears handling requirements. Credit servicing firms must also comply with Fitness and Probity Standards (including minimum competency requirements).
72. Deputy Bernard J. Durkan asked the Minister for Finance the steps likely to be taken to address the increasingly aggressive attitude of primary and secondary lenders to borrowers who have consistently met their payments to the best of their ability throughout the economic crisis and now face an increased threat of repossession, homelessness and the closing down of small business; and if he will make a statement on the matter. [51320/17]
Amharc ar fhreagraWithin the remit of the Central Bank’s responsibilities for safeguarding stability and protecting consumers, its approach to mortgage arrears resolution is focused on ensuring the fair treatment of borrowers through a strong consumer protection framework and ensuring that lenders have appropriate arrears resolution strategies and operations in place.
The type of consumer and the type of loan involved will determine which of the Central Bank’s Codes or Regulations are relevant to the particular case.
The Code of Conduct on Mortgage Arrears (CCMA) forms part of the Central Bank’s Consumer Protection Framework and is relevant for homeowners. The CCMA is a key part of the Central Bank’s mortgage arrears framework. The CCMA provides a strong consumer protection framework, aimed specifically at the process to be followed by relevant firms, to ensure borrowers in arrears or pre-arrears in respect of a mortgage loan secured on a primary residence are treated in a timely, transparent and fair manner.
Banks, retail credit firms and credit servicing firms servicing loans on behalf of unregulated loan owners are all required to comply with the CCMA. The overriding objective of the CCMA is to ensure the fair and transparent treatment of consumers in mortgage arrears or pre-arrears, and that due regard is had to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits. The CCMA recognises that it is in the interests of borrowers and regulated firms to address financial difficulties as speedily, effectively and sympathetically as circumstances allow. It sets out the MARP, a four-step process that regulated entities must follow:
Step 1: Communicate with borrower;
Step 2: Gather financial information;
Step 3: Assess the borrower’s circumstances; and
Step 4: Propose a resolution
Provision 22 of the CCMA requires that lenders ensure that the level of communications to a borrower is proportionate and not excessive, taking into account the circumstances of the borrower, and that communications with borrowers are not aggressive, intimidating or harassing.
Each regulated entity must consider the borrower’s situation in the context of the solutions they provide, which may differ from firm to firm. The CCMA does not prescribe the solution which must be offered. The CCMA includes requirements that arrangements be appropriate and sustainable and based on a full assessment of the individual circumstances of the borrower.
The CCMA also requires regulated entities to have an appeals process in place to enable a borrower appeal a decision by a regulated entity, including where the borrower is not willing to enter into an alternative repayment arrangement or where the regulated entity declines to offer an alternative repayment arrangement. The appeals procedure must inform the borrower of his/her right to refer the matter to the Financial Services Ombudsman.
Provision 56 of the CCMA provides that a lender may only commence legal proceedings for repossession of a borrower’s primary residence where the lender has made every reasonable effort under the CCMA to agree an alternative repayment arrangement with the borrower or his/her nominated representative, and the specific timeframes set out in the CCMA have been adhered to or the borrower has been classified as not co-operating and notified in accordance with the CCMA.
In June 2015, the Central Bank published the outcome of a themed inspection of lenders’ compliance with the CCMA. This is available on the Central Banks website -
http://www.centralbank.ie/press-area/press-releases/Pages/CentralBanksthemedinspectionidentifies weaknessesinlenderscompliancewiththeCodeofConduct onMortgageArrears.aspx.
The arrears handling provisions in Chapter 8 of the Consumer Protection Code (the Code) apply when the loan is not a mortgage loan to which the CCMA applies. The Code requires that regulated entities have in place written procedures for the handling of arrears.
Where an account is in arrears, a regulated entity must seek to agree an approach that will assist the personal consumer in resolving the arrears. Specified information in relation to arrears must be made available to personal consumers, including general information to encourage the consumer to deal with arrears and stating the benefits of dealing with arrears. Where an account remains in arrears for 31 calendar days after the arrears first arose, a regulated entity must, inter alia, inform the consumer of the status of the account and the importance of the personal consumer engaging with the regulated entity in order to address the arrears. This must be updated every three months, where the arrears persist.
In respect of a mortgage, the Code provides that where a third full or partial repayment is missed and remains outstanding and alternative repayment arrangement has not been put in place, a lender must notify the personal consumer of the potential for legal proceedings and proceedings for repossession of the property, together with an estimate of the costs to the personal consumer of such proceedings. The lender must notify the personal consumer of the importance of seeking independent advice and that, irrespective of how the property is repossessed and disposed of, the personal consumer will remain liable for the outstanding debt, including accrued interest, charges, legal, selling and other related costs, if this is the case.
The Code also requires that a lender must ensure that the level of contact and communications with a personal consumer in arrears is proportionate and not excessive. Each calendar month, a lender must not initiate more than three unsolicited communications, by whatever means, to a personal consumer in respect of arrears.
In December 2015, the Central Bank published new regulations for firms lending to small and medium enterprises (SME Regulations), with which regulated lenders (other than credit unions) have been required to comply with since 1 July 2016, and in the case of credit unions, from 1 January 2017.
The SME Regulations aim to strengthen protections for SMEs when borrowing from regulated lenders while also facilitating access to credit. They also set out a framework which regulated entities must comply with when dealing with SME borrowers in arrears and financial difficulties. The SME Regulations require regulated entities to establish and maintain in writing policies and procedures for dealing with borrowers in financial difficulties. Regulated entities must make available to borrowers an information booklet, to include:
- a statement emphasising that it is in the borrower’s interest to engage with the regulated entity about arrears or financial difficulties;
- a statement that the financial difficulties may impact on the borrower’s credit rating;
- the option of an immediate review of the borrower’s credit facilities.
Within 10 working days of a borrower entering financial difficulties, a regulated entity must inform the borrower of, among other things:
- the status of the account;
- the applicability of the SME Regulations;
- the availability of the information booklet referred to above; and
- that it is in the borrower’s interest to engage with the regulated entity about arrears or financial difficulties
Where a regulated entity offers an alternative arrangement to an SME borrower, the regulated entity must provide certain information in writing to the borrower including how the alternative arrangement will be reported by the regulated entity to a relevant credit reference agency or credit register and that it may impact on the borrower’s credit rating.
When contacting borrowers that are micro and small enterprises in financial difficulties, a lender must ensure that the level of contact and communications with the borrower is proportionate and not excessive, taking into account the particular circumstances of the borrower, and that communications with the borrower are not aggressive, intimidating or harassing.
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.
73. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he expects the EU to support the State's strategy in relation to the repayment of debt and loans outstanding from the economic crisis; and if he will make a statement on the matter. [51321/17]
Amharc ar fhreagraAs I announced on 7 September 2017, Ireland intends to repay early and in full the outstanding Programme loans from the IMF (circa €4.6 billion), Sweden (€0.6bn) and Denmark (€0.4bn).
Early repayment of the loans requires agreement from the remaining Programme lenders – the European Financial Stabilisation Mechanism (EFSM), the European Financial Stability Facility (EFSF) and the UK - to waive the proportionate early repayment clauses in their respective loan agreements.
On 27 November 2017, the European Commission and the European Financial Stability Facility (EFSF) adopted decisions to approve Ireland’s request for waivers from the proportionate early repayment clauses. The UK has issued a waiver of its rights to proportionate early repayment.
I greatly appreciate the cooperation of our Programme partners in facilitating this early repayment. The interest savings to the Exchequer from these early repayments are estimated to be of the order of €150m over the remaining life of the loans. This puts Ireland in a strong financial position for the future and ensures we are making further sustainable progress in reducing our national debt.
74. Deputy Michael McGrath asked the Minister for Finance the projected figures for net fiscal space in each of the years 2019 to 2023, inclusive; and if he will make a statement on the matter. [51339/17]
Amharc ar fhreagraProjections for fiscal space beyond 2021 have not been compiled or published by my Department.
The current estimates of net fiscal space for the years 2019 – 2021 are set out below. These are the figures set out in the 2017 Summer Economic Statement and adjusted to take into account the arithmetic set out in the recent Budget. It is important to stress that the figures, as always, are work-in-progress estimates and will evolve over time. The detailed calculations of gross and net fiscal space will be updated in the 2018 Summer Economic Statement following the publication by the European Commission of the reference rate, convergence margin and GDP deflator to be used for the calculations in relation to 2019.
|
|
2019 |
2020 |
2021 |
|
Net fiscal space* (€billions) |
3.2 |
3.5 |
3.6 |
*This includes the rainy day fund contributions as well as previous allocations of fiscal space.
I also wish to highlight that the economy is now on a path towards full-employment. In these circumstances, I will not jeopardise our recovery by adopting pro-cyclical fiscal policies that overheat the economy and put our future livelihoods at risk. Instead, I will focus on the appropriate stance of fiscal policy.
In other words, I will focus on what is right for the economy and not on what is legally permissible under the rules.
Steady, incremental and sustainable budgetary policy is the way to improve our living standards and that is how the Government intends to decide and implement policy.
75. Deputy Michael McGrath asked the Minister for Finance the first and full-year cost of increasing the year limit for the special assignee relief programme from five to ten years; and if he will make a statement on the matter. [51340/17]
Amharc ar fhreagra76. Deputy Michael McGrath asked the Minister for Finance the first and full-year cost of reducing the €75,000 limit to €60,000, to €50,000 and to €40,000, respectively, for the special assignee relief programme; and if he will make a statement on the matter. [51341/17]
Amharc ar fhreagra77. Deputy Michael McGrath asked the Minister for Finance his plans to extend the special assignee relief programme to employees employed from outside the organisation rather than restricting it to employees moving within an organisation; the cost of increasing the scope of SARP; and if he will make a statement on the matter. [51342/17]
Amharc ar fhreagraI propose to take Questions Nos. 75 to 77, inclusive, together.
In relation to increasing the eligibility criteria for Special Assignee Relief Programme (SARP) from five years to ten years, I am advised by Revenue that there are no data on which to estimate the potential impact to the Exchequer of increasing the claim period in this manner. The data on numbers availing of SARP are compiled on a year-by-year basis. Data on the duration each claimant has been claiming for is not readily available, nor is it possible to estimate the number of claimants who would continue to claim relief beyond five years should SARP be extended, therefore it is not possible to estimate a cost to the Exchequer for this proposal.
In relation to the cost of reducing the limits, Revenue further advises me that, without taking account of the potential new employees that may qualify for the scheme as a result of the reduced limits, it tentatively estimates that the first and full year cost of the measures outlined by the deputy are as outlined in the table below.
|
Proposed Limit (€) |
First Year Cost (€ millions) |
Full Year Cost (€ millions) |
|
60,000 |
1.06 |
1.1 |
|
50,000 |
1.7 |
1.8 |
|
40,000 |
2.4 |
2.5 |
SARP is aimed at reducing the cost to employers of assigning key individuals already employed by their companies from abroad to take up positions in the Irish based operations of the employer. The intention is that the recipients of SARP will assist with the establishment of additional functions for their companies in Ireland and, due to a transfer of skills, these functions will be able to operate without the assistance of SARP after a period. The existing SARP scheme is limited to existing overseas employees of companies and is not available to newly-recruited individuals.
As part of the SARP review in 2014, the proposal to include non-resident recruits rather than restricting it to employees moving within an organisation was considered. However, the review found that to apply the scheme to such hirees could result in individuals from outside the state being cheaper to employ than Irish residents, thereby resulting in the potential displacement of employment for Irish residents in favour of non-resident job-seekers.
