Banks to exit state guarantee scheme early next year, says Moran

The head of the Department of Finance said banks will exit the State’s guarantee scheme early next year. However, he expressed disappointment with their level of progress with distressed mortgage holders.

Department secretary general John Moran also said any downward pressure on the economy could lead to an upward assessment of the €3.5bn adjustment needed in the budget next month.

He told the Oireachtas finance committee that considerable challenges remained in his department and progress on Ireland’s finances was dependent on external factors, such as the state of US economy.

There was some stability in the banks and he expected all of them would leave the State’s deposit guarantee scheme early next year. The loss of the €1bn in bank guarantee fees would not affect next year’s spending, he said.

Each bank would decide for itself if it wanted to exit the guarantee scheme and there was a “need to move forward and with business models”.

Mr Moran also reiterated comments he made at a recent conference where he said some mortgage borrowers’ inability to repay loans was not only bad for banks but bad for the economy.

The reaction by banks in dealing with individual distressed borrowers had been “disappointing”, he told the committee.

“Banks have been slow gearing up to and dealing with that.”

It was preferable, he said, to see quicker action with borrowers being taken.

Fianna Fáil’s Michael McGrath argued there was an “unwillingness” by banks to do a write down on debts with borrowers. Mr Moran replied he would like to see more “progress” and that banks had started to rein in loans that could be repaid.

He also conceded further downward pressure on growth in the economy could see a readjustment of the €3.5bn in savings needed in next month’s budget.

The finance committee also agreed to request the minutes of future meetings of a body representing the Irish financial services sector and Government departments.