The potential sale of 18,000 PTSB mortgages to vulture funds has been the subject of much controversy, with opposition parties calling for greater regulations of these funds.
PTSB intends to sell off €3.7bn in mortgages after being instructed by the ECB to bring down the level of distressed loans it has on its books.
Other banks are expected to follow suit in selling off loan portfolios.
However, Fianna Fáil finance spokesman Michael McGrath has said he received correspondence from the ECB which states the bank “has not expressed a preference for some non-performing loan [NPL] reduction tools rather than others”.
Responding, Mr McGrath said: “I think that dispels the myth that the ECB has instructed Permanent TSB or indeed any other bank in Ireland to sell loan portfolios, they have not issued such an instruction.
“In fact if you read through the detailed guidance paper that was issued by the ECB in 2017, it’s clear that there are a range of solutions that the banks should be working through, including forbearance, including writing off loans that are not recoverable and, after all, they have been very well recapitalised by the Irish State to deal with their non-performing loans.
“I think certainly the impression has been given that the banks have no choice but to sell on their non-performing loan portfolio. That is simply not the case.”
A Fianna Fáil bill to ensure so-called vulture funds come under Irish Central Bank regulations was debated in the Dáil last night. Finance Minister Paschal Donohoe has indicated that Government will accept the bill, but will seek to make some amendments.
Mr Donohoe also instructed the Central Bank to review its code of conduct on mortgages that are in arrears.
Speaking ahead of the debate, Mr McGrath said: “These vulture funds have been above the law for far too long, they have been untouchable, they have been beyond the reach of the central bank and, in many instances, they have been allowed to treat people disgracefully.”
He said his party has been “inundated” by people with personal stories which has only reiterated the importance of getting current regulations expanded to cover vulture funds.
Mr McGrath said Fianna Fáil has no difficulty in allowing amendments to their bill as long as changes to the regulation of vulture funds are immediately introduced.
“We need this law to become law and become law quickly,” said Mr McGrath.
However, he added that PTSB and other banks who sell off large numbers of mortgages are simply “taking the easy option”.
“I certainly do not believe that the banks have exhausted all of those options so far,” he said.
“The banks are outsourcing their dirty work. That’s what they are seeking to do. They shouldn’t be allowed to do it, it’s a cop out, it’s like the fire service outsourcing the work of putting out fires.
“Banks should be working through their loan books on a case by case basis, making decisions and dealing with their customers and that’s what we want to see happen.”
In the letter to Mr McGrath, the ECB warned that high levels of NPLs “pose a risk to the sound-ness of banks, with adverse implications for lending and hence also economic growth”.