Terms and conditions provide no return for taxpayers
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