Éamon Ó Cuív challenges minister on COVID-19 payment breaks

Minister, the reclassification of future COVID-19 related payment breaks as non-performing loans could have serious consequences. Could you outline the effect it will have on the capitalisation requirements of the banks and subsequently their ability to lend money at competitive rates? Payment breaks have provided very substantial and rapid relief to allow homes and businesses to absorb the shock and the impact of COVID-19. The expiry of the guidelines do not prevent banks from engaging with customers who continue to experience difficulty beyond the deadline and all applicable consumer protections remain in place. Borrowers who cannot return to full repayments following the conclusion of their payment break should engage with their lender as early as possible. The central bank expects lenders to take a consumer-focused approach at this worrying time. The longer-term impact of COVID-19 on bank capital levels will take, however, some time to materialise. However, some increase in non-performing loans is to be expected. However, as against that, it is important to note the efforts undertaken by the Central Bank of Ireland and the EU institutions to ensure that banks can absorb losses and continue to lend into the economy. The central bank has reduced the counter-cyclical capital buffer from 1% to 0%, and they estimate that this will free up about €940 million of capital across Irish retail banks to facilitate lending or help banks absorb losses. At an EU level, a number of support measures have already been brought in place. The European Central Bank announced that banks can temporarily operate below the capital conservation buffer. And member states have also passed a package of temporary measures, which are designed to reduce the economic consequences of COVID-19 and our banking system, and to ensure that the banks do have sufficient capacity to lend. So, the issue that Deputy O'Cueve is raising is a very important one, but measures have been taken to try to ensure that banks do have the ability to continue to lend across this very important time. And, of course, our banks, due to measures that have been taken in the past to deal with and reduce non-performing loans, do have funding on their balance sheet to deal with the issue the Deputy is referring to. Mr. Minister, I would like to thank you for the reply. Now, you might explain to me, if you had extended the payment break before the 30th of this month for a further six months, would that have prevented the reclassification of these loans as non-performing arrears under the rules? And, as a consequence, you would have divided the capitalisation problems that you have just outlined to me, and you still would have had the EU money and all the other money you have provided for. And can you confirm whether other EU countries did extend the break for a further six months? And did you examine the reasons why they did so? And I would be interested to know what other countries did, in the euro, did extend the payment breaks? Well, so the guidance from the regulator in relation to this matter, from the European Banking Authority, is their guidance was that economy-wide payment breaks should not be extended. I am not aware, as of yet, if other governments have decided, or indeed other regulators have decided to further extend the measures that they do have in place. But if you compare where we are versus other countries, other countries have put in place very different arrangements to us, and while superficially they may in some ways look more attractive, they are more limited, and in many cases they have not had the breadth that the measures that we have brought in have had here in Ireland. In relation to potential capital consequences in the future, the way in which they can be avoided, Deputy O'Keeve, on a bank-by-bank basis, is for engagement to take place between customers and between banks. If engagement does take place, and if agreement is reached in relation to a restructured loan, and then that restructured loan is then honoured in the future, that is one of the most important ways in which the issue that you are referring to can be avoided. MrATHER TRANFenko Jon-Lapur PM Mr Slavik Lor Coast Minister, can you explain to me that it is referencing all those who are going to be re-classified, as non-performing loans. Mr. Does it allow the Cum Laus 1952 ποι Now when loans become non-performing must Kongle City of Bank of Bank of Bank's Balance Sheet, we know that the next temptation of selling them off in tranches to vulture funded funds. As you know the consequence, as you, as we know, cont��ing your condition, and everybody who has dealt with people who are in the hands of vulture funds know the consequences of having your loan transferred to a vulture fund. Can you confirm that once they become non-performing loans, if people haven't got employment because of the pandemic, that this risk is higher? And the second thing is, I was contacted by a person and they told me that their repayment per month has gone up quite considerably, which will have future consequences for them because they have a non-performing loan, because they are unemployed. And this will have something like an extra cost of €10,000 over 20 years compared to what the previous arrangement that we had, that is the mortgage break for six months, had on their mortgage. That is the difference between what you have done and allowed happen and the original arrangement of six months. Minister, you said that the EBA guidelines suggest not to extend. That is not what the EBA guidelines allow for. The EBA guidelines allow for any bank, any extension to take place, but it has to be announced and applied for before tomorrow, and that is where you failed to deal with this. Deputy O'Keefe is completely right. If this was done, banks would not have to hold additional capital. These loans, which cannot go back to full repayment of capital and interest rate, would not be classified as non-performing. And crucially, these SMEs and consumers or mortgage holders would not be deemed by the credit register to have a negative rating, which is going to impact them for the next number of years in relation to future lending. And that is the consequences of, unfortunately. Minister, you are inaction. Well, Deputy Doherty is referring to alleged inaction. And as I explained earlier on and pointed out to him, it is because of action that has been taken that the payment breaks were made available in the first place, that have made a huge help to so many families and to so many businesses at a time they were needed. We have seen the number of people who do need these payment breaks begin to reduce over time, and in a number of banks begin to reduce quite considerably. In order to reduce and eliminate and reduce the risk of loans becoming non-performing in the future, the key thing that needs to happen is that engagement happens between those who have a loan and a lender. If a restructured agreement can be put in place, and I believe it will be possible to put it in place for many of the loans that we are referring to, and I hope all, that is the best way of reducing the risk of a loan being classified as a non-performing loan, and in turn creating the kind of vista that Deputy O'Keeve has referred to. I would make the point, though, that this is an issue that is now developing in many countries at the same point in time, and it does point to the need for this to be dealt with in a coordinated way across Europe to avoid creating a further risk in trying to get countries and people back to work across the coming months and next year. Thank you very much.