Brendan Burgess
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Governor Central Bank scheduled for 26 March
BOI scheduled 4 April
PTSB scheduled 9 April
AIB scheduled 11 April
Brendan
BOI scheduled 4 April
PTSB scheduled 9 April
AIB scheduled 11 April
Brendan
Dates for the next Finance Committee meetings with the banks
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SaySomething
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Any word on UB or KBC please Brendan?
Brendan Burgess
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That is what I got.
I have emailed both Michael McGrath and Peter Burke about the Variable base rate cohorts issues and have asked them to question AIB on them on April 11th. They escaped last time they were in regarding this issue so the more people that get in touch with committee members the better on their differing issues.
I got this response to my email to Michael McGrath a couple of weeks back
"
I am very familiar with this issue.
On behalf of the party, I have been liaising with the group of affected customers which has been formed on this issue. I imagine XXXXX is aware of the group.
I have raised this issue on many occasions with the Minister, the bank and the Central Bank. It seems to me that the Central Bank is currently backing the bank’s interpretation of this issue.
AIB and the Central Bank will be before the Finance Committee in the next month and I will be pressing them on this again. "
"
I am very familiar with this issue.
On behalf of the party, I have been liaising with the group of affected customers which has been formed on this issue. I imagine XXXXX is aware of the group.
I have raised this issue on many occasions with the Minister, the bank and the Central Bank. It seems to me that the Central Bank is currently backing the bank’s interpretation of this issue.
AIB and the Central Bank will be before the Finance Committee in the next month and I will be pressing them on this again. "
Brendan Burgess
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The Central Bank is on tomorrow at 2 pm.
Brendan
Brendan
Didn't they get two bank bosses to promise something that helped a load of people in the last year. I like the FC holding people to account in public.
SaySomething
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Central Bank is in Committee Room 3. The meeting has commenced however they are in private session so the cameras and microphones are muted. You can expect it to start public broadcast in the next 15-20 mins or so I'd expect.
Brendan Burgess
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You can watch the proceedings live here - starting in a few minutes
https://www.oireachtas.ie/en/oireachtas-tv/cr3-live/
https://www.oireachtas.ie/en/oireachtas-tv/cr3-live/
Brendan Burgess
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Full statement attached
Governor Lane
Derville Rowland - Director of Enforcement
Ed Sibley - Deputy Governor
Strengthening Consumer Protection a high priority for us - embedded in everything we do.
Our mortgage limits protects borrowers from excessive debts.
Trackers
40,000 - the same as at December
Cost is up to €665m (?)
300 yet to be paid
We are towards the end stage.
As indicated, this is largely completed.
We expect to conclude the investigation in a few weeks and issue a report thereafter.
When we say "this is near a conclusion" that is the project .But other groups may emerge.
The sanctions investigation will continue.
PCPs
70,000 outstanding contracts
€1.2 billion
From June our CRR will collect information
Non performing loans
Our priority is that the financial system is resilient
Capital Requirements - position of banks has improved by a factor of 3 since 2007
Primary funding base much improved
Mortgage Rules
Dual role - protects borrowers and banks from excessive lending
Counter cyclical buffer comes into effect on 1 July
Prevailing mortgage rates
Historical default rates
level of NPLs today
The typical mortgage has a high LTV compared to europe
The reality is small scale market with a high fixed cost base
Low levels of mortgage switching
Limit number of banks lead to less competition
non performing loans
Stock down by 79% since 2013
Restructuring has been the way of dealing with NPLs - 110,000 at the end of last year, with 87% performing.
Repossession must be an option - there must be a risk of loss of ownership.
Sales of non performing loans
This is valid
It cuts the national risk. In the event of a downturn, the funds will share the losses.
We have grave concerns about the no- consent, no sale bill.
It would damage resilience
Important for securisation and collateral provision
Anyway the vulture funds treat the borrowers the same as the lenders
Resilience in the Credit Union sector
We want to see strong CUs in safe hands and in conditions of well-being
We see strong reserves and a continued reduction in arrears.
Challenges remain
High cost income ratio
Low return on asset
28% loans to assets (11% to 73% range)
Governor Lane
Derville Rowland - Director of Enforcement
Ed Sibley - Deputy Governor
Strengthening Consumer Protection a high priority for us - embedded in everything we do.
Our mortgage limits protects borrowers from excessive debts.
Trackers
40,000 - the same as at December
Cost is up to €665m (?)
300 yet to be paid
We are towards the end stage.
As indicated, this is largely completed.
We expect to conclude the investigation in a few weeks and issue a report thereafter.
When we say "this is near a conclusion" that is the project .But other groups may emerge.
The sanctions investigation will continue.
PCPs
70,000 outstanding contracts
€1.2 billion
From June our CRR will collect information
Non performing loans
Our priority is that the financial system is resilient
Capital Requirements - position of banks has improved by a factor of 3 since 2007
Primary funding base much improved
Mortgage Rules
Dual role - protects borrowers and banks from excessive lending
Counter cyclical buffer comes into effect on 1 July
Prevailing mortgage rates
Historical default rates
level of NPLs today
The typical mortgage has a high LTV compared to europe
The reality is small scale market with a high fixed cost base
Low levels of mortgage switching
Limit number of banks lead to less competition
non performing loans
Stock down by 79% since 2013
Restructuring has been the way of dealing with NPLs - 110,000 at the end of last year, with 87% performing.
Repossession must be an option - there must be a risk of loss of ownership.
Sales of non performing loans
This is valid
It cuts the national risk. In the event of a downturn, the funds will share the losses.
We have grave concerns about the no- consent, no sale bill.
It would damage resilience
Important for securisation and collateral provision
Anyway the vulture funds treat the borrowers the same as the lenders
Resilience in the Credit Union sector
We want to see strong CUs in safe hands and in conditions of well-being
We see strong reserves and a continued reduction in arrears.
Challenges remain
High cost income ratio
Low return on asset
28% loans to assets (11% to 73% range)
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SaySomething
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I think though he said that he expected the investigation to complete within the next number of weeks with the final report to follow. He didn't place an actual date/time limit on either. It could be as late as September before we see that report.
Brendan Burgess
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SS. Correct. I have edited my summary.
Here is the relevant full extract
The supervisory phase of the Tracker Mortgage Examination is now in the final stages. As of end-February 2019, lenders have identified nearly 40,000 customers who suffered unacceptable harm from tracker mortgages-related failures. This overall number is unchanged since our last update based on date at the end of December . Total redress and compensation paid has increased by €18 million since the end of December to €665 million now. By the end of this month, we expect the number of customer accounts awaiting redress to be down to about three hundred, which will be mostly paid in April.
In finalising our supervisory work, our focus at all times is to ensure that all affected groups of customers have been identified and remediated. This work has now been completed at the majority of lenders. In the case of the remaining lenders, we are working to ensure that these have addressed satisfactorily any remaining issues affecting groups of customers and all eligible groups of customers have been included for redress and compensation. We expect this work to conclude in the coming weeks, with a final report published thereafter. While the “project” phase of our supervisory work is nearing completion, any further individuals or groups that are identified will receive the same treatment under our standard supervisory approach.
Finally, our enforcement work is ongoing. These investigations are detailed and forensic, involving the scrutiny of thousands of documents and the conduct of interviews to establish the exact circumstances of matters under investigation, including the actions of regulated entities and individuals.
While we have a strong suite of existing powers, the findings of our Report into the Behaviour and Culture of the Irish Retail Banks last year set out additional reforms that include the proposed introduction of a new Individual Accountability Framework. This would ensure clearer lines of accountability within firms, as well as providing for an enhanced Fitness and Probity Regime and a unified enforcement process. I appreciate the Committee is holding separate hearings on these recommendations.
Here is the relevant full extract
The supervisory phase of the Tracker Mortgage Examination is now in the final stages. As of end-February 2019, lenders have identified nearly 40,000 customers who suffered unacceptable harm from tracker mortgages-related failures. This overall number is unchanged since our last update based on date at the end of December . Total redress and compensation paid has increased by €18 million since the end of December to €665 million now. By the end of this month, we expect the number of customer accounts awaiting redress to be down to about three hundred, which will be mostly paid in April.
In finalising our supervisory work, our focus at all times is to ensure that all affected groups of customers have been identified and remediated. This work has now been completed at the majority of lenders. In the case of the remaining lenders, we are working to ensure that these have addressed satisfactorily any remaining issues affecting groups of customers and all eligible groups of customers have been included for redress and compensation. We expect this work to conclude in the coming weeks, with a final report published thereafter. While the “project” phase of our supervisory work is nearing completion, any further individuals or groups that are identified will receive the same treatment under our standard supervisory approach.
Finally, our enforcement work is ongoing. These investigations are detailed and forensic, involving the scrutiny of thousands of documents and the conduct of interviews to establish the exact circumstances of matters under investigation, including the actions of regulated entities and individuals.
While we have a strong suite of existing powers, the findings of our Report into the Behaviour and Culture of the Irish Retail Banks last year set out additional reforms that include the proposed introduction of a new Individual Accountability Framework. This would ensure clearer lines of accountability within firms, as well as providing for an enhanced Fitness and Probity Regime and a unified enforcement process. I appreciate the Committee is holding separate hearings on these recommendations.
Brendan Burgess
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Michael McGrath on trackers
Is it fair to say that there are no major outstanding cohorts
I am referring in particular to the 6,000 prevaiing and EBS "base rate" customers
Have you more or less signed off on these cohorts?
Derville Rowland
We are in the closing phases.
There are no big customer impact issues that we dispute
We started at 13,000 but the banks capitulated on most
We are still doing due diligence
It's possible that more customers
We are not in dispute
The AIB Group. They have now been included. They have the option of going to the Ombudsman or the Courts
There are some issues with the lenders.
We expect to close out our due diligence in the coming period
McGrath
Are you saying that you have made the call on these cohorts? There is not going to be any fundamental shift.
Rowland
Correct.
McGrath
Mortgage rates. A new entrant to the Irish market would have to use a very high capital requirement even for low LTV loans.
It's not likely that a new lender will enter the market , is it?
[Interrupted by a vote in the house]
Lane
Like it or not we had a big crisis.
Like it or not we have a big NPL problem
Any regulator would ask is it prudential to lend into Ireland
For non-banks, they have to raise money on the financial markets. And they are not coming in with super low mortgage pricing.
This is not the place to look got...
In time as the market stabilises
Sibley
We need to differentiate between a large bank which wants to set up in Ireland
On initial lending, they would need standardised lending
But that is not lower than the IRB models
They would need a period of time to develop their own risk rating
A start up bank would be on the standardised model for a longer time
McGrath
Do you still support cash-backs? Are consumer in the round, in the aggregate, well served by them? Have you come to a clear conclusion?
Derville
A competitive market which offers plenty of choice is in the best interest of consumers. As long as they are clear and properly sold, they have a role to play. If people switch after a couple of years, then cash backs can be the cheapest.
A lot of customers could save if they switched.
There would be no role for the Central Bank to intervene on cash backs.
Lane
We are neutral - we don't support one product over another.
It would take a lot to shut down an option. If the mis-selling risk is managed, these are commercial choices.
Sibley
I can understand the degree of impatience over mortgage rates. A lot of the dysfunction has been eliminated over the last few years. The lowest rate is 2.3% for a two year fixed. Switching is now up to 12% of transactions.
Is it fair to say that there are no major outstanding cohorts
I am referring in particular to the 6,000 prevaiing and EBS "base rate" customers
Have you more or less signed off on these cohorts?
Derville Rowland
We are in the closing phases.
There are no big customer impact issues that we dispute
We started at 13,000 but the banks capitulated on most
We are still doing due diligence
It's possible that more customers
We are not in dispute
The AIB Group. They have now been included. They have the option of going to the Ombudsman or the Courts
There are some issues with the lenders.
We expect to close out our due diligence in the coming period
McGrath
Are you saying that you have made the call on these cohorts? There is not going to be any fundamental shift.
Rowland
Correct.
McGrath
Mortgage rates. A new entrant to the Irish market would have to use a very high capital requirement even for low LTV loans.
It's not likely that a new lender will enter the market , is it?
[Interrupted by a vote in the house]
Lane
Like it or not we had a big crisis.
Like it or not we have a big NPL problem
Any regulator would ask is it prudential to lend into Ireland
For non-banks, they have to raise money on the financial markets. And they are not coming in with super low mortgage pricing.
This is not the place to look got...
In time as the market stabilises
Sibley
We need to differentiate between a large bank which wants to set up in Ireland
On initial lending, they would need standardised lending
But that is not lower than the IRB models
They would need a period of time to develop their own risk rating
A start up bank would be on the standardised model for a longer time
McGrath
Do you still support cash-backs? Are consumer in the round, in the aggregate, well served by them? Have you come to a clear conclusion?
Derville
A competitive market which offers plenty of choice is in the best interest of consumers. As long as they are clear and properly sold, they have a role to play. If people switch after a couple of years, then cash backs can be the cheapest.
A lot of customers could save if they switched.
There would be no role for the Central Bank to intervene on cash backs.
Lane
We are neutral - we don't support one product over another.
It would take a lot to shut down an option. If the mis-selling risk is managed, these are commercial choices.
Sibley
I can understand the degree of impatience over mortgage rates. A lot of the dysfunction has been eliminated over the last few years. The lowest rate is 2.3% for a two year fixed. Switching is now up to 12% of transactions.
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Brendan Burgess
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Pearse Doherty
Is the voluntary code on the sale of mortgages still in effect.
Lane: yes.
Doherty: I have taken your code and put it into the proposed legislation
Now you say your own code will create a nightmare
Lane
1) There is a difference between the volutnary code and a compulsory code
2) The code does make an exception for financial distress - your bill does but it's too narrowly defined
3) The code was developed 30 years ago in a different market
Derville
It arose in 1989 when the CB took over Building Society regulation.
It was to protect members of the Building Society so that they would not lose their voting rights.
We would never now issue a voluntary code
This proposal does not give any additional rights to customers
Lane
The loan sales are important from a national point of view. It's an excessive level of risk.
Pearse
There is a trend here. The ECB, Central Bank and Dept of Fiance come out with scaremongering. We had it with mortgage rate bill. We also had it with the vulture funds bill. But that bill has passed and interest rates have not gone up.
It is not the intent to stop passive securitisation. It is about giving the power to the borrower to stop the sale to a vulture fund, if they want to stop it.
Borrowers are always better off with a bank than a vulture fund.
The regulation is the same but the funds don't offer the same restructuring options.
Lane
OK, so are the outcomes different between a bank and a vulture fund. We don't see a systemic issue.
Pearse
No, debt advocates will tell you that they treat customers differently from lenders.
Lane
Your supposition is that a bank with its long term commitment will treat customers better.
But vulture funds buy at a discount and don't have the same capital requirements.
I don't agree with your hypothesis that banks treat people better.
Pearse
But the debt advocates tell a different story. You looked at only a very small sample.
AIB's Project Beech. How many private homes are in that sale?
Sibley
What are the wider implications of this intervention? It will push up interest rates.
Up to 40% of loans have been securitised. It's down to 23% now.
Pearse
AIB has said that there are no private homes, but there will be some in the 8,000 loans sold. Do you know how many?
Sibley
We can't get into the specifics. In the past, home loans were sold when there were connections to commercial property.
Is the voluntary code on the sale of mortgages still in effect.
Lane: yes.
Doherty: I have taken your code and put it into the proposed legislation
Now you say your own code will create a nightmare
Lane
1) There is a difference between the volutnary code and a compulsory code
2) The code does make an exception for financial distress - your bill does but it's too narrowly defined
3) The code was developed 30 years ago in a different market
Derville
It arose in 1989 when the CB took over Building Society regulation.
It was to protect members of the Building Society so that they would not lose their voting rights.
We would never now issue a voluntary code
This proposal does not give any additional rights to customers
Lane
The loan sales are important from a national point of view. It's an excessive level of risk.
Pearse
There is a trend here. The ECB, Central Bank and Dept of Fiance come out with scaremongering. We had it with mortgage rate bill. We also had it with the vulture funds bill. But that bill has passed and interest rates have not gone up.
It is not the intent to stop passive securitisation. It is about giving the power to the borrower to stop the sale to a vulture fund, if they want to stop it.
Borrowers are always better off with a bank than a vulture fund.
The regulation is the same but the funds don't offer the same restructuring options.
Lane
OK, so are the outcomes different between a bank and a vulture fund. We don't see a systemic issue.
Pearse
No, debt advocates will tell you that they treat customers differently from lenders.
Lane
Your supposition is that a bank with its long term commitment will treat customers better.
But vulture funds buy at a discount and don't have the same capital requirements.
I don't agree with your hypothesis that banks treat people better.
Pearse
But the debt advocates tell a different story. You looked at only a very small sample.
AIB's Project Beech. How many private homes are in that sale?
Sibley
What are the wider implications of this intervention? It will push up interest rates.
Up to 40% of loans have been securitised. It's down to 23% now.
Pearse
AIB has said that there are no private homes, but there will be some in the 8,000 loans sold. Do you know how many?
Sibley
We can't get into the specifics. In the past, home loans were sold when there were connections to commercial property.
Brendan, could you clarify please as I didn't see this. Are the CB saying that there are no new cohorts? Or are they saying the EBS Variable Rate are excluded from redress? Are they saying that the only option is to go to the Ombudsman or the Courts? Thank you.
Brendan Burgess
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It's very hard to clarify anything that the Central Bank says.
But it's seems clear that they have signed off on the major cohorts. So I would not expect them to bring the EBS group into the redress scheme.
Brendan
But it's seems clear that they have signed off on the major cohorts. So I would not expect them to bring the EBS group into the redress scheme.
Brendan
SaySomething
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What she said was that the AIB group were considered impacted by the investigation. That the banks decision on rolling back onto a tracker was open to appeal, Ombudsman, and Courts. Basically the central bank seem to be at a roadblock with the bank and they expect the account holders to challenge them further on the rate they should be on now.
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