Government not to oppose Fianna Fáil’s Bill to regulate vulture funds

The Government will not oppose Fianna Fáil’s proposed Bill to regulate so-called vulture funds when it comes before the Dáil next week.

Senior Government sources said Minister for Finance Paschal Donohoe was open to progressing the proposals made by Fianna Fáil finance spokesman Michael McGrath, albeit with some reservations about the risks involved.

The main Opposition party will use Private Members’ time next week to bring forward a short Bill which will provide that all home loans are fully regulated.

Vulture funds are international financial companies which have bought up distressed Irish assets, including non-performing mortgages. They are not subject to the same regulation from the Central Bank as indigenous banks and other home-lenders.

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However, home-owners retain the same legal protections from the courts in respect of their properties, irrespective of the status of the company which controls the mortgage loan.

Fianna Fáíl has been finalising the drafting of the Bill this week in the wake of the disclosure that Permanent TSB is to put a €3.7 billion portfolio of non-performing loans on the market. Some 14,000 home loans are included, classed as non-performing even though some customers are now making regular payments after coming to an arrangement with the bank, which is majority State owned.

Risks involved

It is understood the Government does have issues with some of the technical aspects of the Bill, and it will also be pointing to some of the risks involved in the Dáil next week.

One of the risks is that PTSB might not be in a position to sell the portfolio if the Bill becomes law, leaving it with a top-heavy proportion of non-performing loans.

If the Bill passes Second Stage in the Dáil next week, it is expected the Government will seek to make several significant amendments at Committee Stage.

Mr McGrath said it was quite possible that other institutions including Irish banks would be willing to purchase the loan book or portions of it.

“Our preference is that the PTSB work its own way through its loan book through entering agreements with customers, or restructuring loans.”

Difficult decisions

He said that banks already had tools to address such loans, and it was “no accident” that Bank of Ireland had a much lower level of non-performing mortgage loans.

“At times it involves difficult decisions. The banks need to evaluate each loan on a case-by-case basis. That might involve write-downs and, as a very last resort, there is always the option of seeking a repossession order.”