The sell-off of loans by Irish banks shouldn’t go ahead, Fianna Fáil has said as it gears up to introduce a Bill requiring the regulation of vulture funds by the Central Bank.
Michael McGrath, the party’s finance spokesman, told The Irish Times, “we don’t want loan sales to go ahead”, after being asked if he thought the legislation being proposed by his party would limit the pool of funds interested in buying distressed assets from Irish banks.
The main Opposition party is planning to introduce a Bill “in the next two weeks which will provide a way for these funds to be fully regulated”, Mr McGrath said.
At present, the intermediary service provider has to be regulated by the Central Bank, but not the funds that own the distressed assets. Mr McGrath contends there is a “real gap in consumer protection currently because those making the decisions are beyond the reach of the Central Bank”.
“The intermediary is a call centre,” he said before noting that major decisions as to whether to restructure a loan or change interest rates are ones made by the fund, and not the regulated intermediary.
He suggested the funds did not have any interest agreeing terms with people for mortgages over a 15- or 20-year period considering their investment horizon is much shorter.
“I would hope this will be supported by everyone including the government because they made a commitment in the confidence and supply agreement to strengthen protection for people whose mortgages are being sold to vulture funds,” he said, adding that as far as Fianna Fáil were concerned, this was an “emergency measure” that needed to be prioritised.
Asked why this was a priority for now, Mr McGrath suggested there hadn’t previously been an expectation that the major banks would embark on a large scale sell-off of both business and mortgage loans, including mortgages that, in some cases, were performing.
“This is a new departure for the main banks and State-owned banks selling off mortgages,” he said.
The move comes as Permanent TSB (PTSB) gears up to shift some of its non-performing loan book which is more than five times the EU average at 28 per cent of the €21 billion total loan book size. The bank moved last week to put up to €4 billion of non-performing loans, comprising both owner-occupier and buy-to-let mortgages, on the market.
Minister for Finance Paschal Donohoe flagged the move to his colleagues in Government earlier in the week and Mr McGrath is now calling for a political response to the potential sale, in addition to the legislative response.
“Our view is the Minister for Finance is entitled to take a view on the mortgage loan sale of PTSB and in our view he needs to revisit that [issue] because consumers will be very exposed,” he said.
Owen Callan, a banking analyst with Investec Ireland, said last week: “We have long believed that any attempts to dispose of large blocks of non-performing owner-occupier home loans to non-bank investors would meet with significant political and media pushback, as well as regulatory unease.”