Lane warns ‘No Consent, No Sale’ Bill would raise interest rates

Bill to stop banks selling off loans without permission would ‘damage resilience’

Central Bank governor Philip Lane said the No Consent, No Sale Bill would not bolster consumers’ protections. Photograph: Nick Bradshaw

Central Bank governor Philip Lane said the No Consent, No Sale Bill would not bolster consumers’ protections. Photograph: Nick Bradshaw


Central Bank governor Philip Lane has said he has “grave concerns” about Sinn Féin’s No Consent, No Sale Bill, which seeks to prevent banks from selling problem loans to investment funds without borrowers’ permission.

If enacted, the legislation would push up interest rates and weaken the resilience of the financial system, he told the Oireachtas Joint Committee on Finance, Public Expenditure and Reform.

Prof Lane also said the Bill would not bolster consumers’ protections, noting that existing legislation ensured that borrowers benefit from the same protections regardless of whether their loan is held by a bank or a non-bank.

“While these restrictions would be costly even under normal conditions and thereby raise the interest rates charged to households, their impact would be especially destabilising in a crisis environment, since the ability to restructure balance sheets and tap liquidity is essential to resilience under crisis conditions,” he said.

The Bill, brought forward by Sinn Féin’s Pearse Doherty, recently received parliamentary backing after Fianna Fáil supported it.

Mr Doherty said the Central Bank had repeatedly made the case that there was no difference between the banks and the vulture funds in terms of their treatment of distressed mortgage holders.

“If that’s the case then the borrowers will have no problem giving their consent, but the reality is there is a big difference,” he said, suggesting the funds did not offer distressed mortgage holders the same types of solutions and were operating here on a short-term basis.

Code of practice

But Prof Lane said there was no evidence of different outcomes for mortgage holders across banks and non-banks. Mr Doherty also insisted his Bill merely put the Central Bank’s own voluntary code of practice in relation to the sale of mortgages into law.

But Prof Lane said the code made exceptions for conditions of financial distress. Derville Rowland, the Central Bank’s head of regulation, also said the voluntary code dated from the 1980s when building society mortgages were potentially being securitised, which might have stripped members of their voting rights, and was not applicable to today’s financial environment.

Nonetheless, Mr Doherty said: “There is a bit of a trend here from the Central Bank, the ECB [European Central Bank] and the Department of Finance when members of this parliament, indeed this committee, bring forward legislation that we believe is in the interest of consumer protection: we have, what I would argue, is scaremongering.”

He noted that the Department of Finance previously warned the regulation of vulture funds would increase interest rates but there was no evidence that it had.

On Brexit, Prof Lane said the Central Bank continued to analyse and work to mitigate the risks posed to the Irish economy, consumers, the financial system and the regulatory environment.

“For the wider economy, the effects will be uneven, with indigenous sectors, such as agrifood, facing heightened risks of disruption to exports and supply chains,” he said.