EAMON QUINN: Central Bank concern on lending rules

A number of members of the Central Bank Commission have questioned whether house prices would rise as it loosened mortgage lending rules, minutes of its late November meeting published yesterday revealed.

The identity of some of the 11-strong governing board who raised concerns ahead of the official unveiling of the measures was not revealed though the commission went on to approve “by consensus” the new rules, according to the minutes.

One member questioned moving the loan-to-value limit to 90%, saying a lower limit would be more appropriate.

Central Bank governor Philip Lane told the meeting the number of houses changing hands was “still below normal levels” and the regulator would act if “there was evidence of house prices growing more quickly than anticipated”.

Following the decision of Finance Minister Michael Noonan in his October budget to offer tax incentives to first-time buyers, many analysts have said that the Government’s and Central Bank’s measures will only increase house prices.

The Oireachtas Public Accounts Committee had written to Mr Lane on concerns by the Department of Social Protection over negative interest rates for government deposits, the commission also heard.

It heard the Central Bank was recruiting 129 extra staff for a head count of 1,620 at the end of this month.

Approving a budget of €283m for 2017, the Central Bank plans to increase spending from €223m this year. Commission members and officials at the November 23 meeting included Mr Lane, Alan Ahearne, Patricia Byron, Blanaid Clarke, Sharon Donnery, John FitzGerald, Derek Moran, Des Geraghty, Cyril Roux and Michael Soden.

Fianna Fáil finance spokesperson Michael McGrath has said the Central Bank has no record of the number of SME loans sold to vulture funds by Nama or by other Government-controlled lenders.

“We know a very significant number of SME business loans have been sold on by banks, the IBRC special liquidator and Nama in recent years and these have generally been bought by private equity funds or so-called vulture funds,” he said.

The dynamic of the lender-borrower relationship changes when the loan is owned by a fund as opposed to a bank.

Typically, these funds adopt a shorter time horizon when making decisions and may well be more inclined to move on the borrower in order to get control of the business or the underlying assets,” Mr McGrath said.

“It is vital the Central Bank collates this information so we can measure the outcomes when loans are sold in this way.”


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