Sinn Féin - On Your Side

Terms and conditions provide no return for taxpayers

17 October, 2008


Speaking during today's Dáil debate on the terms of the Credit Institutions Scheme Sinn Féin Finance Spokesperson Arthur Morgan TD outlined the failure of the terms and conditions to provide a real return for the taxpayer. He also highlighted that there are no new provisions in the scheme to address the increasing number of home repossessions going through the courts stating "A panel is being set up to monitor the banks' practice, surely an arbitration committee could have been set up immediately to make sure banks are doing everything possible to refrain from repossessing, even if it is offering interest only repayments in the current climate."

Speaking from Leinster House the Louth TD said:

"When the Credit Institutions Bill came before this house two weeks ago, the Sinn Féin party supported it. We did so because we believed that it was entirely necessary to stabilize the state's banking system and we believe that our read of that situation has been proven correct. Since its implementation we have neither lost a bank or been forced into bailing out a bank with hard cash.

"However Sinn Féin stated that we had a number of reservations regarding the ambiguity over the guarantee's terms and conditions. I met with Finance Minister Brian Lenihan to express Sinn Féin's concerns and was reassured that the taxpayer would see adequate remuneration for their insurance scheme for the banking sector.

"When Sinn Féin received this document on Wednesday night, we examined it on its own merits, leaving aside our reservations about supporting anything produced by the Government in the wake of Tuesday's savage Budget. Sinn Féin wanted to see terms that included a windfall payment to the state, the introduction of a bank levy and an onus on banks to negotiate as much as possible with homeowners facing repossession.

"There is in fact no real return whatsoever for the taxpayer arising from this document. The financial remuneration only accounts for the estimated increase in debt funding costs arising as a result of the guarantee. If you buy a car for €30,000, your average insurance broker will charge you €600 per annum to insure it - approximately 2% of its value. This is the very least in terms of commercial interest rates that should have been applied to the banks for this guarantee, regardless of whether or not money had to be drawn down from the scheme.

"Furthermore, the only sanctions that appear to be in place for the banks who abuse the guarantee, is expulsion from the scheme, and even then only after 90 days notice. There is no mention of fines for banks who take gambles with the taxpayers' money, let alone provision for the state to take legal action against such an institution. We witnessed within days of this guarantee being announced, conduct unbecoming in one of the banks to be covered. Are we to accept that if such an event were to happen again that the worst punishment the bank would receive would be its removal from the scheme?

"Sinn Féin cannot accept that the only provision applying to hard-pressed home owners is the reference to the banks complying with the IBF's voluntary code of practice on mortgage arrears. This Code represents what the lender will endeavour to do in normal circumstances however these are not normal circumstances.

"There were almost 50 repossessions in the courts last week. A panel is being set up to monitor the banks' practice, surely an arbitration committee could have been set up immediately to make sure banks are doing everything possible to refrain from repossessing, even if it is offering interest only repayments in the current climate.

"While I recognise the legal necessities surrounding mortgage contracts and the fact that not every home owner can be given license to withhold mortgage payments, it does not sit well with me that while we can throw away the rule book to guarantee banks that are clearly guilty of unprofessional practice, we cannot simultaneously provide some level of insurance for under pressure homeowners.

"There is much that is welcome in this document regarding transparency and enforcement, but again, much that is lacking in terms of follow through on banks that do not adhere. In addition, much of this rests with the Financial Regulator, the same regulator who has failed so spectacularly in his job to date.

"Sinn Féin's decision to support the Credit Institutions Bill was not taken lightly, but we did it in the interests of the people of this state and we were right to do so. We would like to support this document; however, it requires a huge number of amendments. The terms and conditions of the Scheme as they stand are inadequate and Sinn Féin cannot support them." ENDS

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