Dáil Éireann Debate, Wednesday - 24 March 2021
433. Deputy Neasa Hourigan asked the Minister for Finance if the transfer of loans from a bank (details supplied) to a domestic or non-domestic financial institution will require his approval; and if he will make a statement on the matter. [14140/21]
Amharc ar fhreagra434. Deputy Neasa Hourigan asked the Minister for Finance the nature of the process of due diligence for his Department in taking a position on the transfer of loans from a bank (details supplied) to a domestic or non-domestic financial institution; and if he will make a statement on the matter. [14141/21]
Amharc ar fhreagraI propose to take Questions Nos. 433 and 434 together.
First of all, it is important to highlight that, as Minister for Finance, I have no direct role to play in the strategic decisions made by any corporate entity, including those relating to acquisitions and disposals of entire businesses or individual business units. Decisions in such matters are the sole responsibility of the boards and management of the entities.
This extends to the banks in which the State has a shareholding, which are run on an independent and commercial basis. The independence of these banks is protected by Relationship Frameworks which are legally binding documents and which cannot be changed unilaterally. These frameworks, which are publicly available, were insisted upon by the European Commission to protect competition in the Irish market.
Under section 33 of the Central Bank Act, 1971, as amended, the Minister for Finance must give his approval for any transfer of authorised banking business in the State.
A guidance note on the process has been published on the Department’s website and is available at the link below.
https://www.gov.ie/en/publication/a5f5b3-transfer-of-banking-business-guidance-note/
A key consideration when reviewing proposals to transfer banking business is that in promoting the industry it is important that there is fair entry to and exit from the financial services sector in Ireland, and the Government has no desire to cause undue difficulty to firms wishing to enter or withdraw from the market. Moreover, we recognise that mergers and acquisitions play an important role in the growth of firms, and transfers of banking business often take place in such a context. Also, as banks with a global footprint enter the Irish market using branch or subsidiary structures, when there is a restructuring at group level, it may be necessary for the bank to transfer its business internally from one part of the group to another.
It is not in the spirit of the legislation to prohibit any transfer of banking business, unless there were serious concerns about the regulatory or prudential impact of a proposed transfer, or it would be likely to have a significant negative impact on the Irish economy or financial stability.
With regard to Ulster Bank’s withdrawal from the Irish market, it is anticipated that this will take place over a number of years and I would expect that matters such as the transfer of loans will be addressed in due course. It should be noted that NatWest has committed to seeking solutions where:
- Customers and colleagues are well supported;
- Job losses are minimised with no new compulsory redundancy departures this year;
- Stability is maintained in the sector; and
- NatWest’s withdrawal from the Irish banking sector is achieved in an orderly manner.
As part of this process, NatWest confirmed that it is negotiations with Permanent TSB (PTSB) and other strategic banking partners in relation to certain retail and SME assets, liabilities and operations. NatWest is also in negotiation with AIB in relation to the sale of a c. €4bn portfolio of performing commercial loans, and that staff wholly or mainly assigned to this loan book will transfer with the loan book. NatWest and AIB have signed a Memorandum of Understanding in this regard.
These announcements signal a potentially important development for the Irish banking sector. However, NatWest highlighted that, at this stage, these discussions have some way to go before final transactions are agreed. NatWest, PTSB and AIB have confirmed that they will provide further updates to the market as negotiations progress in this regard.
If a successful proposal emerges from these discussions and is put to me that requires the Irish Government’s backing as shareholder then:
- Given the likely monetary size off a transaction, and the public interest, I would anticipate that any transaction involving PTSB or AIB, would require consultation with me in line with the Relationship Frameworks. Should this be the case, the consultation process would take place in advance of any binding contract being signed.
- It is important to note the consultation process gives me the opportunity to express my views, but I have no right of veto.
I am advised by the Central Bank of Ireland that Ulster Bank’s withdrawal from the Irish market must be undertaken in accordance with the provisions of Irish financial services legislation, including the Central Bank of Ireland’s codes of conduct.
The Central Bank of Ireland has clear requirements that apply when firms cease operations or transfer operations to another entity. Customers must be informed about these decisions and given at least two months’ notice to move to alternative providers. If their loans are transferred, they must be given full details of the arrangements.
Where a loan is sold or transferred to another regulated entity, the protections that were available to borrowers prior to the transaction continue to be in place with the new owner. There is a strong consumer protection framework in place for mortgage borrowers which provides the same protections for borrowers regardless of the regulated entity with whom they are dealing, be that a bank, retail credit firm or credit servicing firm.
Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018, if a loan is transferred or sold, the holder of the legal title to the credit must be authorised by the Central Bank and must comply with the Irish financial services law applicable to regulated financial service providers. This ensures that borrowers whose loans are sold or transferred, maintain the same regulatory protections, including under the various Central Bank’s statutory codes of conduct, such as the Consumer Protection Code 2012 and the Code of Conduct on Mortgage Arrears 2013 (CCMA).
