IBF welcomes establishment by Government of expert group on consumer debt

The Irish Banking Federation (IBF) welcomes the establishment by Government of an expert group to examine the issue of mortgage and consumer debt and to make appropriate policy recommendations.

The IBF also welcomes the opportunity to participate directly in the work of the group and looks forward to doing this in a positive and constructive manner. IBF already has a long-standing working relationship with a range of stakeholders in the development of debt management solutions for consumers. The positive output of this is most recently reflected in the following:

The IBF Pledge to Homeowners makes clear that legal action to repossess a home will not be commenced by IBF creditors provided the customer talks with the lender at the earliest opportunity so that a mutually-acceptable arrangement can be agreed, maintained and reviewed thereafter on a regular basis. An Oversight Committee involving representatives of MABS and IBF under the independent chairmanship of Prof. Martin O’Donoghue is monitoring the application of this Pledge.
The IBF/MABS Protocol on Debt Management enables IBF creditors and MABS money advisers to work together effectively to help personal customers to address and manage debt problems and, wherever possible, to formulate a mutually-acceptable, affordable and sustainable repayment plan.

The IBF supports key recommendations in the Law Reform Commission’s “Consultation Paper on Personal Debt Management and Debt Enforcement”, including:
The development of an effective alternative to imprisonment for those who are unable to pay fines and civil debt
The development of a non-court-based system for dealing with personal debt
The regulation of debt collection agencies and of commercial debt advice agencies.

“These and other initiatives are helping tens of thousands of consumers to work with their lenders in managing their mortgage and other debt repayments through these very challenging times. And we are fully committed to working with all key stakeholders in continuing to make this happen”, states Pat Farrell, IBF Chief Executive.

Note: Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Contact: Felix O’Regan, IBF Head of PR and Public Affairs, tel. 6715311, 087 6481644

Home purchasers to the fore in the mortgage market

  • Total of 46,000 mortgages issued in 2009
  • First-time buyers now the largest market segment
  • 70% of all mortgage credit going to home purchasers

The IBF/PwC Mortgage Market Profile published today shows that close on 10,000 new mortgages to the value of €1.76 billion were issued during the fourth quarter of 2009.

This brings to some 46,000 the total number of new mortgages issued in 2009 at a value of over €8 billion; and the overall mortgage book now stands at €148 billion.

The volume of new lending in Q4 2009 is down 18% compared to the previous quarter and is down 47% year on year – a trend clearly reflecting the general economic environment. However, the year-on-year decline in lending eased again in this latest quarter.

The following are among the key features of the Q4 data:

First-time buyers (FTBs) have continued to increase their share of the overall market – albeit a smaller market. They are now the single largest segment of the market by volume at 35% and by value at 41%.
The key home purchaser segments of the market – FTBs and Mover Purchasers – together now account for 70% of the market by value and 57% by volume. This means that nearly three-quarters of all mortgage credit issued and more than half of all new mortgages now go to the home purchasing segment.

The average values of mortgages issued are back to levels last seen in early 2005.
Commenting on the data, IBF Chief Executive, Pat Farrell, stated:

“The data illustrates how difficult a period 2009 was for the mortgage market, but there have also been some reassuring signs of late: most notably, the ever-increasing share of the overall market accounted for by home purchasers; and the moderation evident over recent quarters in the overall rate of decline in market activity. The general economic situation, consumer confidence, the unsold housing stock and house price movements will be among the factors to influence market activity in 2010. Meanwhile, our sector continues to do everything possible to support homeowners who are experiencing difficulties.”
The IBF/PwC Mortgage Market Profile can be viewed on the web here.

Note: Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Further Information: Felix O’Regan, Head of PR and Public Affairs, IBF, tel. 6715311, 087 6481644

Banks supporting homeowners and SMEs

Pat Farrell 
Chief Executive
Irish Banking Federation
Speech to Leinster Society, Chartered Accountants Ireland

Wednesday, February 10th, 2010
Last December 31st very few people were sorry to see the end of 2009. The year started badly – following the turmoil of late 2008 – and went downhill from there. Emergency budgets, rising unemployment, and cutbacks – there was talk of little else.

In short, it was a year of immense pressure and extraordinary pain: for the economy, for industry but – most importantly – for the people of this country.
2009 will be remembered as the year of bad news. Long-accepted wisdoms – about money, the generation of wealth, and even the basis of our economic growth – were turned on their head. And when they turned – and tumbled – they highlighted the fragility of our economy.

Long after our memories of the better times at the start of this decade have faded, our recollections of the recent 18 months will remain sharp.

However, we cannot become trapped in the past. What is important is that we learn lessons from our mistakes, and that we rebuild what has been broken. If 2008 was the year that things started to go wrong, and 2009 was the year of bad news, then 2010 must be the year that we start to put things right again.

That will mean different things for different sectors. For us in the banking sector, putting things right means getting back to the real business of banking.

Banking is many things. We have a diversity of expertise and experience within our sector. However, when I say that we need to return to the real business of banking this means a renewed focus on two key areas – working with SMEs and supporting homeowners.

SMEs are the backbone of our economy – they are productive, generate employment, drive exports and offer services in all parts of Ireland. And, with their range of activities, SMEs are a vital part of the banking business in this country.

The issue of credit for SMEs has received some considerable attention recently. Throughout 2009 there was a drop in demand for credit from SMEs – in the nine month period to last September there was a decline of 23% in applications for credit. However, during the same time period at least three-quarters of all SME applications for credit were approved by Irish banks, notwithstanding the serious contraction which had taken place in the Irish economy.

That equals 70,000 approved credit applications and a drawdown of more than €2.6 billion in loans, finance and leasing in that period.

At an overall level the recently published independent Mazars report clearly highlighted that there is a very substantial €32.7 billion in total credit outstanding to SMEs which again reflects the sector’s view that we see SMEs as vital in driving future growth in our economy.

The IBF supports the independent Credit Review Process, established recently by Government. We welcome any fair and independent assessment of the supply of credit to SMEs and, indeed, the facts and figures regarding the viability and repayment capacity of business proposals from SMEs. The more transparency and scrutiny that exists in this key area the more likely we are to quickly rebuild trust which is vital to an effective working relationship.

The IBF also supports the concept of a Government-backed SME loan guarantee scheme and the role it can play in helping to underpin small businesses as they seek to manage their way through the current turbulence. The reality is that SMEs are vital in driving future economic growth in our economy, and the banking sector and Government have a responsibility to assist SMEs in this regard.

In addition, Ireland’s banks are working with homeowners who are in difficulty. Today, approximately 30,000 mortgage holders are being accommodated by their lenders in some form. All of the members of the Irish Banking Federation are working with their customers to stabilise the effects of 2009 and to rebuild in 2010.

We currently have various initiatives from Government and the Regulator and of course the sector itself which has committed not to take legal action where homeowners engage with their financial provider.

We in Ireland’s banking sector recognise that we need to look after people who have problems whilst retaining a pragmatic and sensible approach to our business. We will engage constructively and proactively – with the Minister and with other stakeholders – to develop solutions that are socially and economically responsible and which assist in the overall goal of economic recovery.

In these ways the banking sector is appropriately shouldering some of the burden. We’re working – with our partners, our customers, and the Government – to help the economy to move and flow, to support homeowners in difficulty, and to develop a stronger, better banking sector for Ireland as a whole.

However, just as we cannot become trapped in the past, we also cannot live entirely in the present. We also need to focus on the future.
For this future all sectors of the economy will have to adapt to our changed reality – banking is no exception.

From the outset, this means that Irish banking needs to seriously assess the model by which it operates, and from this assessment develop a new set of values – values that reflect that we appreciate the impact of our actions: not only on the bottom line, but on taxpayers, families, consumers and broader society.

At its heart, this means that the banking sector needs to be more caring of the consequences of its activities. This – undoubtedly – is new language for banking, but it is appropriate language. And, moving beyond language, it is already informing our actions – today and for the future.

We must also recognise that Irish banks – and our international counterparts – are now operating in a changed world.

The remarkable levels of growth that this country enjoyed in the earlier years of this decade were fuelled on the easy availability of cheap credit. This has changed – credit will never be as cheap again. And, along with requirements on the banks to hold more capital, this will impact on how we live in the years ahead.

Ireland will return to growth; however, for the future, we will have to get used to lower rates of growth. The circumstances – and the fuel – which drove the turbo-charged growth of our recent past no longer exist.

This needs to be understood – by us, by our partners and customers, by the Government and within the real economy.

In addition, I believe that Ireland now needs to seriously consider how to proceed in terms of our deeply-held obsession with property. There is no better time than now to raise this issue.

Ireland’s construction sector will never again – and must never again – make up a quarter of our economy. The extraordinary extent to which our economy was supported by the property sector has made the recent decline all the more serious. This has to call into question the level of funding that will be available for development in the future.

To be clear, it must be recognised that supporting home ownership is a fundamental part of the banking business and will remain so. However, lending for second, third or fourth properties will have to be scrutinised to a far greater extent, and negative responses to requests for credit in these circumstances may be the norm – not the exception.

This, of course, will be in stark contrast to how these matters were dealt with in the recent past. However, it is also clear that the level to which the banking sector had invested in property in recent years has added considerably to the difficulties that Irish banks now face.

This is where a new approach to regulation has a real role to play.

It is very important that the key focuses for the new regulatory mandate are financial stability, effective prudential and market supervision, and consumer protection. Each of these must be delivered through a regulatory approach that fosters a competitive domestic economy and underpins the reputation of Ireland as an attractive international financial services centre.

The IBF broadly supports the new regulatory structure being developed at national level. The appointments of both Patrick Honohan and Matthew Elderfield are both welcome, as is the decision to move the role of information and education for the public to the National Consumer Agency.

The approach being taken is welcome as it is seeking at the outset to get the balance right in managing what are competing concerns and mandates – market, prudential and conduct of business rules.

All of this is with a view to making sure that history does not repeat itself. The checks and balances that were missing or inadequate in recent years should be strengthened. Put simply, we need to make sure that we ask ourselves the tough questions when tough questions need to be asked – the type of questions that we didn’t ask during the boom.

This makes sense for all of us – the banking sector, the regulatory environment, and society as a whole.

Looking forward, the challenge for our country now is to create jobs. The extraordinary shocks that we have experienced in the recent 18 months have highlighted the weaknesses in our economic model, and have driven up unemployment. This has caused – and is causing – great hardship to many people in all parts of the country.

Banking has a real role to play in moving Ireland forward. A move away from property-based speculation will actually allow for us all – both the banking sector and the wider economy – to focus on new developments in the ‘smart’ and ‘green’ economy which could actually deliver sustainable, reasonable growth and the jobs we badly need – in the medium to long term.
Financial services itself is a key contributor in this regard. Ireland has had significant success with the IFSC model, but we now need to further develop the centre to meet the needs of a changed world. IBF is actively involved with other stakeholders in promoting Ireland’s place in the global economy and as an attractive location for new business opportunities in international financial services with the right skill sets to drive these out. In this regard we particularly welcome provisions in the Finance Bill for the development of Sharia-compliant financing activities and for enhancing the remittance scheme to attract highly skilled individuals.

However, to capitalise on opportunities like this we have to be focussed on the future. If we allow ourselves to be trapped in the past then this – and other developments that present Ireland with great opportunities for employment creation – will be snapped up by the financial and banking sectors in other countries.

We can’t be complacent and in reality we need to re-double our efforts to re-position the IFSC. In this context IBF are currently actively engaged with our key stakeholders to identify a suitable ambassador who would proactively champion the next phase of development of the IFSC in the key international markets.

Coping with the challenges of the year gone by has been the main focus of us all – that is easy to understand. However, the new challenge is how we move forward – how we rebuild and repair in a way that allows for responsible growth, stability and job creation.

To do this, everything must be on the table and open for discussion – the values by which we operate, the type of regulation that is put in place, and the direction in which we want to develop our banking sector and the entire economy.

For the future, I believe that the fundamentals of banking will return to our core functions – supporting SMEs and supporting home ownership. And, in addition, the role of the banking sector as innovators – and as a sector that can open up new opportunities for the economy as a whole – must be recast around the new needs of our changed world

IBF Account Switching Code makes account switching easy

Almost 70,000 account switches to date 
The Irish Banking Federation (IBF) today reminded consumers that switching accounts from one financial institution to another is easy and straightforward under the IBF Account Switching Code. The reminder comes at a time when a number of banks have announced their withdrawal from the personal banking services market including current accounts.

The Account Switching Code has been very successful since its introduction in 2005. It has directly facilitated the switching of 68,378 personal accounts up to end-December 2009. The Code has also acted as an important catalyst for account switching outside of the structured Code process and indeed for customer mobility right across the range of financial services; and it has acted as a model for the EU-wide switching framework.

Under the Code which covers current, deposit and savings accounts held by personal customers the country’s leading retail financial institutions commit to having step-by-step procedures that make it easier for personal customers to switch accounts from one financial institution to another; also to explain each of the steps involved in the process, who is responsible for them and how long they should take. The ease with which consumers can switch accounts under the Code is evident from the following:

The consumer simply chooses the bank to which the account is to be switched and obtains from the website or branch the Transfer of Account Form and other relevant material
Once the consumer completes and signs the Transfer of Account Form, the old bank will send details of direct debits and standing orders to the new bank and relevant creditors so that they can be set up on the new account
The balance on the old account can be forwarded to the new account
The consumer can choose to keep the old account open and close it at a later date if preferred.

The IBF Account Switching Code can be viewed at: http://bit.ly/ddsEcP

Background Notes 
1. Irish Banking Federation (IBF) and the country’s leading retail financial institutions developed the Personal Switching Code, which came into operation in February 2005, and the Business Switching Code which came into operation in July 2006. These Codes are designed to make switching personal and business bank accounts as quick and convenient as possible.

2. The procedures on account switching cover current, deposit and savings accounts held by personal and business customers that are not subject to advance notice of withdrawal or encumbered by debt, guarantees or other obligations.

3. The following retail banking institutions subscribe to the IBF Switching Codes:

AIB Bank
Anglo Irish Bank
Bank of Ireland
Halifax/Bank of Scotland (Ireland)
EBS Building Society*
First Active*
ICS Building Society
KBC Bank
Irish Nationwide Building Society*
National Irish Bank
Northern Rock
Ulster Bank
* These institutions subscribe only to the Personal Account Switching Code.

4. All financial institutions, including non-IBF members, are welcome to subscribe to these Codes.
The Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing some 80 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Further Information: Felix O’Regan, Head of PR and Public Affairs, IBF, tel. 6715311, 087 6481644