Troika talks on tracker mortgages continue

The Government continues to have discussions with the troika about solutions for the tracker mortgage problem, “but it would be too strong a description to say they are under negotiation,” Minister for Finance Michael Noonan told the Oireachtas Finance Committee.

Mostly loss-making tracker mortgages continue to weigh on the

profitability of the banks. The Government had proposed to “warehouse” the trackers in a special asset management unit, which would be funded by the ECB.

Mr Noonan noted there was a similar proposal outlined in a German newspaper last week.

“It is an option we will continue to explore.”

Mr Noonan appeared before the committee to brief members ahead of the meeting of eurozone economic and finance (EcoFin) ministers next tuesday. Top of the agenda will be proposals for a banking union.

Fianna Fáil TD Michael McGrath wanted to know how proposals for a common resolution regime would impact on Irish banks.

The minister said a lot of details still have to be agreed. But he wants Tuesday’s meeting to improve the seniority of depositors in the event that a bank’s creditors are bailed in.

The plan would be for ordinary shareholders to get hit first, then junior bondholders followed by senior debt and then depositors, he added.

The minister drew a distinction between insolvent banks and banks that would need to be recapitalised following a stress test. Rules on whether and when a bank could be recapitalised through the ESM or a common resolution fund still had to be agreed and how that would apply to the Irish banks.

Replying to a question by Fine Gael TD Peter Mathews, Mr Noonan said no date had yet been agreed for the stress tests. However, the banks are very well provisioned for bad debts and he did not believe that they would have to be further recapitalised.

The extension on the EU loans as part of the bailout programme, agreed at the informal EcoFin meeting in Dublin last month, will be formally ratified at the EcoFin meeting in June. The NTMA will have to “sit down with the relevant funds” to work out a reprofiling of the debt.

Senator Sean Barrett wanted to know was there any link between the proposed financial transaction tax and the exodus of some banks from the IFSC. Mr Noonan said there was no link.

Over the past few years the pendulum may have swung from regulation being too light-touch to being too onerous for the IFSC.

“I don’t believe that it has, but I will ask the Central Bank to look into it.”