Dáil Éireann Debate, Tuesday - 27 March 2018
64. Deputy Joan Burton asked the Minister for Finance his definition of non-performing loans, NPLs; if it includes loans that have been restructured and where the borrower has adhered to the conditions of the restructured loan; and if he will make a statement on the matter. [13673/18]
Amharc ar fhreagraWill the Minister for Finance tell the House his definition of NPLs and if this includes loans that have been restructured and where the borrower has adhered to the conditions of the restructuring, including part of the mortgage being warehoused? Is this an NPL in the Minister's view?
As the Deputy will be aware, the definition of what constitutes an NPL is not determined by me but rather by the relevant accounting standards and regulatory bodies, including the Single Supervisory Mechanism, SSM, and the European Banking Authority.
As the question specifically relates to the treatment of restructured loans, I shall repeat the context I provided in respect of this matter earlier. During the height of the financial crisis, a focus of authorities was on stabilising and reducing mortgage arrears. This led to the introduction of targets and a process then followed that included the provision and availability of split mortgage solutions or part capital and interest solutions that met certain criteria. These measures were accepted by the Central Bank of Ireland as being sustainable for the purposes of these targets.
Since the establishment of the SSM, the focus has shifted from reducing mortgage arrears levels to reducing non-performing loans. This has been accompanied by a new strict definition, which is Europe-wide, of what constitutes an NPL by the European Banking Authority. This means that certain restructures are deemed to be non-performing loans even if customers are meeting the revised payment schedule.
Officials in my Department met with staff of the SSM at the highest level on two separate occasions. We have outlined the background to the restructuring efforts in Ireland and have questioned the logic of now classifying some types of restructured loans, including certain split mortgages, as NPLs indefinitely. While my Department has been informed that the SSM is looking into the regulatory treatment of split mortgages across a number of European member states, I have no evidence at this point that this categorisation is going to change.
I draw the Minister's attention to the case of a family in my constituency that I have dealt with for some years. The family has been in torment because of the relationship with the Permanent TSB since they restructured their mortgage four years ago. It is a family of five; two adults and three children, one of whom has a severe range of disabilities and requires constant care and attention.
Two years ago, along with the Money Advice & Budgeting Service, MABS, I fought Permanent TSB to ensure that the child's domiciliary care payment was not taken into account as part of the household income being assessed towards ability to service a mortgage. After great difficulty, Permanent TSB relented and allowed the family to split the mortgage and warehouse a section of it. Since then, the family has never actually missed a payment. Both parents are working as well as looking after three children, one of whom has a high level of disability. Now the family has gone back into all the uncertainty and a hellish situation about what is the future of their home because it appears that Permanent TSB may sell their loan over their heads, effectively to a fund. We do not know what approach the fund will take or if the family could potentially end up homeless. This would be an incredible cost to the State but especially to the family in light of their particular circumstances.
This is just one of many cases. As the Minister is aware, the thousands of people in this type of situation are extremely worried about what will be their fate. He cannot stand idly by and wash his hands of the situation.
It is appalling that anybody who is dealing with a family facing such pressures would seek to treat domiciliary care allowance and its payment in the same way as they would other income streams into the home. I am aware that access to that payment is based on severe need. I also know, from ample experience, that the payment is used to help families get by in supporting loved ones that have great need.
On the broad point put to me by Deputy Burton, I have outlined what I and my Department have done in respect of this matter in the immediate past on this current classification. I am absolutely aware of the level of concern these particular loan owners have about the potential sale.
During my time in the Department of Social Protection, I invited the Vincentian Partnership for Social Justice to calculate separately the minimum amounts a family needed to live on, including the retention of special social welfare allowances, which many banks initially wanted to reduce or relieve families of in their entirety. I am glad the Minister agrees.
In an earlier reply, the Minister referred to the arrangements for Anglo Irish Bank whereby the €3 billion annual payment was changed overnight. He was not a member of the Cabinet at the time but he was a member of Fine Gael, which took the courageous action to which I refer and which did not meet with a great reception from Brussels. As a result of that action, we actually resolved that problem. It was one of the key things that allowed Ireland to kick-start its economy. I understand all the difficulties outlined by the Minister but there comes a point when one cannot stand aside. He must make a decision in favour of the mortagees who are so indebted and who are facing such great difficulties.
Deputy Michael McGrath has a quick point to add.
In an effort to be constructive, I wish to add to what I said earlier. Will the Minister ask the officials in his Department's shareholder management unit to examine the transcript of the proceedings of last Thursday's meeting of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, and focus, in particular, on the issue I raised earlier about the different classifications by AIB and Permanent TSB of split mortgages as being NPLs and not NPLs? Could the unit and the Department be of assistance to Permanent TSB to resolve this issue? There was a clear conflict of evidence and it must be resolved. The Department of Finance can play a very useful role in this and it would be a help to these mortgage holders.
I have spoken to both banks at length about this issue. I agree with Deputy Michael McGrath's suggestion but I do not believe there is a conflict in the evidence; the evidence is the reality. The reality is that Permanent TSB made a mess of its split mortgages. As a result of the way in which it restructured them, all 6,300 have been deemed non-performing. AIB's 3,800 split mortgages are either deemed to be performing or have the potential to become performing. It is mind-blowing that Permanent TSB does not know how AIB was able to do this. These are two State-owned banks with thousands of split mortgages. One bank has managed its split mortgages into performing loans, under the same rules, while the other has deemed thousands of its mortgages to be non-performing. There needs to be an intervention. Who is left carrying the can? It is the people who did nothing wrong and who have performing mortgages but because these are deemed to be non-performing, they are, in Permanent TSB's case, being sold off as part of Project Glas. There needs to be an intervention. The fact that the management of Permanent TSB does not know how AIB did what Permanent TSB is supposed to do is just mind-blowing. We are paying these people hundreds of thousands of euro and they cannot get to grips with this. They told us that they wrote to the SSM last year and they are still awaiting a response.
Several points have been put to me. First, I am aware of the differing testimonies given by both banks in recent weeks. While there is no need to do so, we will, of course, look at the transcripts. We were aware of what was said during the questions put to the banks by members of the joint committee.
I am aware of how this matter was handled by the different banks. I have outlined what we have done about it and our engagement with the Single Supervisory Mechanism on this matter. I am very much aware of the worry of citizens who restructured their mortgages and tried to honour their terms and now find themselves potentially part of a loan book sale. I do, however, have to respect the work of an independent regulator and the decisions it may make. It is important that our banks can perform independently in responding to needs and guidance issued by the regulator.
In response to Deputy Burton's call for me to be courageous in this matter and to use the Anglo Irish Bank piece as a springboard for that, the difference here is that this is a bank that I want to be a part of the future of Irish banking. It has 1 million customers, €21 billion of mortgage loans and €17 billion of deposits. The Deputy was part of the decisions that were made that night and I need not tell her the direction of Anglo Irish Bank that night and afterwards was fundamentally different from the journey we want Permanent TSB to go on.
I have to say-----
Sorry, the Deputy's time is up.
I want to say briefly-----
Sorry, Deputy Burton, you are going to say that I am picking on you again. I am already five minutes over time on this question and people who go over time exclude at least one question by another Deputy who would like to be heard, probably Question No. 68. We will probably only get to Question No. 67. The time is up.
