Irish Banking Reform


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On occasion it has been simplistically and incorrectly described as AIB selling off its customers' debts with little care for the consequences. It is very important that we set the logic behind the sale of non-performing loans. AIB has consistently pursued a strategy of working with customers to achieve positive outcomes to their financial difficulties on a case-by-case basis. Using a suite of different solutions, we have achieved over 90, customer solutions including 40, private dwelling houses.

AIB continues to provide solutions for an average of 1, loans per month. Recognising that many customers simply cannot repay all their loans or have inadequate security, the bank has also written off very significant amounts of bad debt to right-size loans to a sustainable level. We are still faced with a portion of impaired loans that remain high. For example, the portfolio that was sold by AIB last month was characterised by levels of deep long term arrears. Like every bank across the eurozone, AIB is required to create and hold provisions against bad or doubtful debt; the deeper the arrears, the higher the bank buffers required.

Our regulators in Europe are very concerned at the persistent level of non-performing exposures in Irish banks. In reality, all customers who meet their loan repayments are adversely impacted upon by those who do not repay. The Central Bank of Ireland has observed that a functioning secured lending market has to give meaning to security.

If that security is undermined, the costs to all other borrowers are impacted. Defaulting customers, and indeed the history of defaults, mean that we as a bank must hold additional capital but this inevitable additional cost is borne across all our customer base for many years. We are determined to push on with the case-by-case resolution process and continue to have 1, people working with customers in difficulty across the country. Our clear preference has always been to provide solutions on this individual basis to right-size customer debt to sustainable levels.

We must be realistic, however. While we have made great strides, we still have much to do. The progress that has been made to date in achieving a normalised banking system has been at times overshadowed by these issues but normalisation is happening, particularly against the backdrop of the improving Irish economy.

Leading indicators of activity remain strong, which points to continued good economic growth here. This should result in a further rise in new lending activity this year. While GDP growth is forecast at 4. The uncertainty regarding Brexit, the slowdown in UK economic activity and the strength of the euro against sterling obviously present potential headwinds. While many of our customers have been diversifying their export base quite significantly in recent years, the impact of a downturn in the UK would almost certainly impact their performance. We have 21 Brexit advisers across the bank who specifically help customers to work out alternative plans to mitigate exposure to Brexit-related risks.

However, given the openness of our economy, a deterioration of global economic conditions and adverse geopolitical developments, particularly in Europe and the US, would have a negative impact here. Some emerging markets have come under pressure this year while there is concern at recent moves towards more protectionist trade policies. The lack of housing supply in the major urban areas is clearly one of the main infrastructural difficulties facing the country from a social and economic viewpoint.

In helping to play our part in alleviating the current crisis, we have ramped up activity in the bank's development lending sector and we are the primary bank to many of the country's largest development groups. We have expanded our lending teams significantly over the last two years and established a group to support mid-sized development companies. Our focus is not just providing real estate finance, although this is critical, it is also on increasingly on facilitating social and affordable housing. We have already supported a very successful affordable housing scheme in Ballymun, with a view to funding more such projects.

AIB also launched an enhanced mortgage-to-rent scheme in conjunction with iCare Housing and the Irish Mortgage Holders Organisation and has offered a significant number of vacant residential properties to the Housing Agency for consideration. As I mentioned at the start, banking today operates to a different model to that which predated the financial crisis.

The consequences of banks' financial strategies must now be matched by responsibility for the social impact of their actions. Regulation has been brought to a new level involving intense supervision and resulted in a strengthening of our financial foundations. From my perspective, however, the really crucial element of a sustainable AIB is continuing to evolve our culture while rebuilding and maintaining high levels of trust and confidence among members of the public.

I know there is still much to do in this regard. Ultimately, the quality of AIB's service to its customers and communities will determine its long term sustainability. Our responsibilities extend to those customers, to Government, to our regulators, to shareholders and to the economy generally and we will continue to work to ensure our stewardship remains solid and deserving of that confidence. I thank the committee and look forward to any questions. I thank Mr. Byrne for his presentation.

At the outset, I wish to ask about the implications for AIB of the Nadine Thompson case yesterday whereby the bank was found to have failed to notify her that her debt had been transferred to a separate entity in This relates to the transfer of loans between AIB and our mortgage bank. In her commentary yesterday, the judge was just giving an update in respect of some previous commentary or a decision that she had made which clarified some of the position in that regard.

That is something we are considering at this point in time but the outcome of the update and commentary has not caused a problem from our perspective in terms of the transfer of those loans.

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O'Keeffe is not at all concerned that there might be wider implications in the context of other people who were not notified about the transfer of their loans. I am sure we will talk about it again at a later date.

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On what date did the bank accept that the EBS cohort was affected by the tracker mortgage situation? I do not know the exact date offhand. It was certainly in the past couple of months. I do not know if Mr. Kinsella knows the exact date. Again, I do not know the precise date but we would have received communication on that issue, as I am sure others did.

Let us move on with it. We were very familiar with the issues associated with that particular cohort. We have even discussed our position and thoughts on this grouping in this room. It was not some completely new set of facts that emerged in respect of this particular issue. We felt the situation in respect of this grouping was reasonably conclusive based on the contractual position and what the individual customers had signed, which, effectively, was a waiver form which acknowledged that in the event of them swapping off tracker rates, they would have no entitlement to trackers.

We were in discussions with the Central Bank which felt that we should give more weight to issues around marketing materials and other correspondence and to some ambiguities associated with language. These ambiguities were in other materials, not in the contracts. We gave that a lot of consideration and ultimately determined that we would include that group. It was not, therefore, a new consideration or issue from that point of view. We were aware of the grouping. This is one of the issues which we refer to as finely balanced. Some of these issues are finely balanced in terms of how it is decided to go in any particular direction.

Is it not because of the cases of so many determined families and advocates such as Padraic Kissane that this was exposed? The Central Bank ultimately determined the final matter. It was not just a matter of AIB working through all this and making decisions. If it was not for those determined families and advocates such as Padraic Kissane, this would never have come to the fore.

It would be honest of Mr. Byrne to accept the role that the families and these people have played in bringing this issue to light and in bringing AIB reluctantly to the point at which the cases are being considered. From our point of view, the correct interpretation is that, as part of the Central Bank's programme - which has running for a long period - a very detailed and procedural set of work needed to take place.

We completed our work and KPMG completed its work. That is the basis on which decisions are made. It is not on the basis of extraneous issues or the extent to which those issues are brought to bear by others. Perhaps they are of relevance but our process is based on the Central Bank review. We comply with that process. I would say that the families and the people who were impacted upon are extremely relevant. We will agree to disagree on that.

I know we are very limited on time, but who was responsible for the scandal in AIB? The Senator asked me that question on the previous occasion. I am happy to repeat the conversation. What we said the last time was that, based on the investigations we have carried out and on a review of the issue, this situation dates back to when the tracker mortgage product was withdrawn.

That was a period in which there was very significant turbulence in the financial markets generally and there was dislocation in terms of the funding cost. That was the reason the tracker product was withdrawn. Based on what we could see, it was withdrawn from the marketplace.

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Is Mr. Is he not really concerned? We have a different perspective on this. The Senator is of the view that there was an individual or a set of people who consciously chose to do this. Our perspective is very different. We believe this issue arose as a result of the withdrawal of a product. People did not consider the implications. No person was taken off a tracker. Some , customers remained on trackers at that point in time.

There was not a set of people taken off trackers. The issue related to what would happen in the future with regard to further reversionary issues. That is why it has taken the path it has taken. That is of concern to every Irish citizen. It will continue to be a concern. I understand the rationale for that but, given the nature of our island economy, using the maximum available stress rate is a step too far.

I should note that other banks do not even entertain applications in sterling so it is welcome that AIB does, but many cross-Border workers are affected. Will Mr. Byrne look at this issue which affects Irish citizens living in the South? We keep all of these things under review. Unfortunately, this is a practical reality if one looks at what has happened to exchange rates over the past 18 months. I said that we always keep these things under review. However, it is a requirement for us to consider the stress associated with such applications. We have disclosed that.

We do not think that is unreasonable at this point on the basis of where things stand. However, we keep it under review. I ask that Mr. Byrne ensures that it is because he owes a debt of gratitude to all of the citizens on this island. That would be one way to facilitate people and not to mitigate against people who work on the other side of the Border, which should not be there.

I ask Mr. He must have considered this. The answer is that we do not definitively know because it is a calculation based on profitability at any point in time. What we gave was a set of estimates based on a prediction of future profitability. That gives an estimate. If one applies a similar number, the projection ends up being somewhere around 17 to 18 years, but it is a projection based on a set of assumptions that will ultimately vary depending on the actual financial performance of the bank.

Does Mr. Byrne understand why ordinary workers would not understand why his bank is paying no tax while making billions of euros in profit? Again, this is a topic we have talked about before. The bailout was reduced by that amount. It was part of that original consideration. The value of the bank's total assets already include a deferred tax assets. That is realised as the State sells down its share holding. I know the mechanics of it, I am talking about the morality.

People who are struggling to pay their mortgages are paying a huge amount of tax. I would argue that the mechanics and the morality make up the same point, which is the question of when the State wants to get its cash back. It is a matter of tax fairness and tax justice. That is what Irish people want.

In terms of the sales to the vulture funds and the buy-to-lets, what is the average write-down AIB gives when it is selling off packages of loans? We do not disclose average write-downs. I might ask Mr. O'Keeffe if he wants to make any additional comments. Outside of that, we do not disclose any details in respect of the loans because, against that, we are carrying provisions at any point. I will finish with this.

I find it very difficult to make sense of the fact that AIB has such a write-down for a bunch of funds that will then flip the portfolio over in the short term, will make huge profits but will pay no tax on it, when a restructuring could possibly be done. My concern is that ultimately, tenants in those properties will be turfed out or their rents will be hiked. I think it is important that we look at the portfolio we are talking about.

The ideal scenario is that we can engage and restructure. We agree on that. When we end up in this scenario, we are talking about non-engagement or non-presentation of solutions. Would AIB consider somebody just paying interest only as being a performing or a non-performing loan? It depends on the circumstances and the debt. There are some cases where that is an agreed position and there are others where it is not. It could be part of a wider connection where there are other difficulties. However, to add to the point on the discounts that are taken when this happens, those discounts are made available to customers every day by the 1, people we have deployed to this.


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Had those loans not been restructured, they would have formed part of that sale. As we went through that process those loans also received write-downs and write-offs. Those write-downs, write-offs and discounts are provided on a daily basis to customers with whom we are working.

I would like to welcome Mr. Byrne and his colleagues this morning. I thank them for their opening statement and questionnaire in advance. It is composed of customer connections involving 3, assets. My understanding is that customer connections could involve a multiple of that number in actual distinct customers. The witnesses have said the assets are underpinned by investment properties. Can they give us a description of what is involved the portfolio?

Is it principally buy-to-let residential properties? Moreover, what is involved in the portfolio where going concern businesses are concerned? The key point about the portfolio is that it is heavily underpinned by investment assets. The connection has a very significant proportion of investment assets. That means either investment buy-to-lets, commercial real estate or land and development of some nature. They are the main assets that form part of the 3, assets the Deputy has referred to.

That was the key driver in that portfolio. We discussed this previously when we discussed the portfolio. As the Deputy says, the wider connection relating to that investment debt forms part of it. I am interested in the amount of going concern businesses that are part of the process that have connections or assets which are being sold on. Has Mr. O'Keeffe any estimate of the number of actual businesses whose loans are being sold? We have not discussed or disclosed information about the portfolio in more detail than what I have just outlined.

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However, where there were going concerns in the portfolio, that is one of the key restructuring pieces that we do as part of our normal restructuring. We work to deal with the investment assets through a sales process. We typically arrange a bridge to sale to sell those down in order that we can protect the underlying trading business if there is one. The portfolio was predominantly driven by an investment assets.

The transfer date is 27 July Customers have been formally notified of that in writing since about the third week of May. Is it too late now for any further restructuring? Is the book closed? It is from our perspective but I should explain two aspects of it. The first is that while we were working through this, we continued to work with customers to restructure. At this point, we have a team that has been set up to work with customers if there are any proposals etc.

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The purchaser will consider proposals even at this point. Just to be clear, AIB cannot engage or enter into any new restructuring agreements in respect of loans that are being sold. They are actually being transferred on 27 July. Related to that, AIB wrote to customers who have an overdraft to notify them that it would be removed from 27 July because their loans are being transferred completely. AIB informed them in writing that the letter they received constituted formal demand for repayment of the debit balance, if any, and that any outstanding debt on the account is due for immediate payment on this date.

AIB has called in the overdrafts of those businesses that are part of this portfolio and have overdrafts with the bank. How will that work in practice for these businesses? If these businesses lose their overdrafts on that date and they are not provided with a corresponding one by the new loan owner, it could be the end of those businesses.

This was a part of working through this. I must give the context here all the time. These are very long-dated arrears where businesses with heavily connected investment debt have failed to engage with us to help us help them to protect the business over that period. What we did do, because we recognised that issue, is identify where people were using their overdraft and wrote to them. The letter was very clear. We dealt with the cashflow issue. We said to customers that at the end of July, their overdraft would complete and the balance would transfer at that point in time.

That gives them the opportunity, if they require the cashflow that is in that limit, to draw it down and use it on a normal credit current account basis. To be fair, that was the best solution we could consider to solve the cashflow problem in a different way before the loan transfers. In fact, we also identified the customers who we felt needed to be contacted and we tried to make contact with them. Unfortunately, due to the nature of the portfolio, again the engagement was difficult.

However, how that new loan owner regards that overdraft is entirely its own affair. Is that what he is saying? Just to be clear, this deals with a cashflow issue but the debt is still created. That is important. We are engaging with people and explaining the process to them, when we can talk to them, and we are very happy to do that during the process.

It becomes a loan. This could have implications for the business, but Mr. O'Keeffe is saying but they are on their own at that point. It is a matter between them and the new Just as an item of clarity, if they remained with us they would still be at the limit of their overdraft. It is an overdraft, but it is not a cashflow solution for them.

I understand but them being at the limit of their overdraft with AIB does not trigger any additional enforcement action from AIB's point of view. That is fine, I just wanted that clarity. I refer now to the tracker mortgage issue. The prevailing rate cohort constitutes about 5, customer accounts at this point. From AIB's point of view, is that matter closed? By Mr. Byrne's understanding of the position of the Central Bank, are there no outstanding matters for clarification or engagement with the Central Bank on that matter?

Obviously the cohort is included within the overall framework, so therefore anyone within that cohort has the rights to appeal and to effectively review that are provided for by that framework. As such, while we have made our determination in respect of the cohort, every individual within it has the ability to appeal through that process.

I notice that there have been appeals in that process and more than half have been either upheld or partly upheld. That is quite a significant turnaround. Have any prevailing rate customers been included in those appeals and gone through the system? The prevailing rate appeals have not been judged on yet by the appeals panel. There are about 22 appeals lodged but the appeals panel has not got to them yet. From the bank's point of view, the matter is closed and, with the exception of the appeals process If customers want to take it further, they have the appeals process, the ombudsman and then the court.

I suspect that is where this issue will end up and that it will go the distance. There is a legitimate issue there. It is down to interpretation and I think it is going to be decided in a court of law. It would have been far better if it could have been resolved to the customers' satisfaction at the level of the bank but that is not going to happen. We have discussed this and the committee has also discussed it with the Central Bank. Is that correct? That includes redress and compensation. Are the administrative costs to the bank included?

There are elements of that included but as the programme has gone on for a period of time, there are operational costs that we just deal with on an operational basis. It is predominantly for the items to which the Deputy referred. It is a separate bank issue. I want to ask Mr. Byrne about the EBS mortgage rates. Perhaps Mr. What is it as an independent entity and why is there a difference of more than 0. EBS is a separate licensed entity subject to full, separate regulation according to the Central Bank rules.

We have discussed here before that the main offering from a mortgage customer point of view that we have in the AIB group is in AIB, which dominates in terms of our market share. We use EBS as a challenger brand, and the proposition from EBS is consistent with how others are positioned in the market.


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The offer from EBS is effectively a competitive offering relative to other players in the market that have cash-back type offers as their predominant feature. AIB offers a standard variable rate mortgage predominantly while that from EBS is effectively a cash-back offer with a standard variable rate. The incremental cost, as we have touched on before, reflects the change and difference between the propositions by EBS and AIB. We have Haven as well, which is a broker brand, which would bring it up to the low 30s. I want to focus on the tracker scandal. Byrne has said that he recognises that the bank failed in its responsibility to provide proper levels of transparency and information and that now it has implemented fair settlements for everybody affected.

Would he accept that, in its assessment of the problem and implementation of fair settlements, the bank has taken the narrowest possible view of who those affected are? I do not think that has been the case. Collective thinking changes on this over time. Views and positions change. At the beginning, as we have said before, we accept that we were being quite legalistic and bank-centric in interpretation.

Some of the original issues that may have emerged back in and , the issues that would have gone to the ombudsman etc. What we are saying is that it has evolved and now there is a broader perspective taken in respect of looking at all of the issues associated with it to see on balance where that gets to and I think the position has to balance on the other side. The fiduciary responsibilities to the operation of the bank, the shareholders and the State are associated with getting the balance right between all customers and all the stakeholders. I do not think it is a single issue on which we can ever be absolutely definitive but definitely the approach is much more focused on the overall position as opposed to a strict interpretation.

Let us take a very large cohort of people. Byrne might be able to tell me how many people this is in terms of AIB and EBS - those who were on a fixed rate, came off it at a time at which tracker mortgages were available, but were not offered a tracker mortgage at that stage. Byrne is saying those people are not entitled to compensation.

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Bank Bailout Aug 14th , PM. Banking Jul 30th , AM. Deleted 1. Substituted 1. The relationship framework shall at all times comply with regulatory requirements. However, a person who is, at the commencement of this Act, liable to pay to Anglo Irish Bank an amount due in respect of any of those shares remains so liable notwithstanding anything in this subsection. Such resolution has full force and effect from the date of the resolution notwithstanding anything in the Companies Acts or the memorandum or articles of the company concerned. If the Assessor requires evidence in support of such a claim, he or she is not obliged to consider the claim if no evidence, or incomplete or insufficient evidence, is provided.

I there are substantial reasons why the application was not made within that period, and. II it is just, in all the circumstances to grant leave, having regard to the interests of other affected persons, and. The expenses and other costs incurred by the Minister for Finance in connection with or arising out of those transactions shall be charged on the Central Fund or the growing produce thereof. Anglo Irish Bank Corporation Act The whole Act, other than section 2. Section 22 6. Assessor may require persons to give evidence or produce documents.

Offence of failing to appear before Assessor. Offence of failing to produce document. Conduct of proceedings under this Schedule. Proceedings normally to be in private. Offence of refusing to be sworn or answer question. Protection, etc. Subject to this Schedule , a person who appears before the Assessor in compliance with a requirement made under paragraph 1 has the same protection and privileges and is, in addition to the offences under this Schedule , subject to the same liabilities as a witness in proceedings in the High Court.

Payment of allowances and expenses to persons who appear before Assessor. Annotations This Revised Act is annotated and includes textual and non-textual amendments, statutory instruments made pursuant to the Act and previous affecting provisions. An explanation of how to read annotations is available at www. Material not updated in this revision Where other legislation is amended by this Act, those amendments may have been superseded by other amendments in other legislation, or the amended legislation may have been repealed or revoked.

A list of legislative changes to any Act, and to statutory instruments from , may be found linked from the page of the Act or statutory instrument at www. Annotations: Editorial Notes: E1 Act, other than s.

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Annotations: Amendments: F1 Deleted 1. F2 Deleted 1. Annotations: Amendments: F3 Substituted 1. F4 Deleted 1. Annotations: Amendments: F5 Deleted 1. F6 Deleted 1.

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