Fine Gael policy on the banks

Key Messages on Fine Gael Banking Policy

Key proposals of our banking policy include:

• Increasing mortgage interest relief for the negative equity generation;
• Cutting bank costs to avoid interest rate hikes for the consumer;
• Introducing a partial loan guarantee scheme for small and medium businesses;
• Ensuring that fraudulent bankers are pursued for their crimes and face the law;
• Halting future asset transfers to NAMA from Bank of Ireland, AIB and EBS;
• Making bond-holders share the burden of the debts of insolvent financial institutions. This can be done unilaterally for the most junior bondholders, but should be extended – ideally as part of a European-wide framework – for senior debt for insolvent institutions like Anglo Irish and Irish Nationwide that no longer have any systemic economic importance;
• Supporting the sale of AIB and the EBS;
• Diversifying sources of funding for our financial system to avoid being wholly dependent on European Central Bank funding;
• Shrinking the size of the bank loan books to that they are largely financed by domestic deposits.

A key aim of a Fine Gael Government will be to establish a well regulated, competitive, profitable, and privately-owned banking system.

FG Record
Fine Gael was right on the banks before. Almost two years ago, we set out an alternative banking policy that would have used the period of stability provided by the Guarantee to restructure the banks and, where appropriate, impose losses on the banks’ investors and bondholders.

FF / Green Record
Failed Government policies have landed the public with €100 billion bill for the banks.

Labour Record
Nationalising the entire banking system as proposed by Labour would have landed all the losses of the banks onto the public which would have been as bad as current Government policies.

The Fine Gael banking plan is based on five pillars:
1. Sharing the burden of bank bailouts;
2. Creating a competitive, functioning, and privately-owned banking system;
3. Supporting families and businesses in debt trouble;
4. Making NAMA work for the national interest;
5. Making sure the current crisis never happens again.

1. Sharing the burden of bank bailouts

• Europe needs to quickly put in place agreed procedures to restructure the debts of banks that have become insolvent such as Anglo Irish Bank and Irish Nationwide. Irish and other European taxpayers can no longer be expected to carry the can for reckless lending between Irish and other European banks.
• Fine Gael in Government is committed to forcing certain classes of bond-holders share in the cost of recapitalising troubled financial institutions. This can be done unilaterally for the most junior bondholders but should be extended – ideally as part of a European-wide framework – for senior debt for institutions like Anglo Irish and Irish Nationwide that no longer have any systemic economic importance.
• We will seek to diversify sources of funding for our financial system to avoid being wholly dependent on European Central Bank funding.
• Depending on access to cheaper European finance we will shrink the size of Irish banks’ loan books, and thus their exposure to risk, through measures such as transferring solid loans such as tracker mortgages into specially constructed companies.
• Should some credible options prove not be available from Europe, the next Irish Government would – in order to restore its own credit worthiness – be left with little choice but to unilaterally restructure of the private debts of those Irish banks in greatest need of recapitalisation.

2. Creating a competitive, functioning, and privately-owned banking system

• We will replace all bank directors that were in place before the bank guarantee.
• We will force cost cutting in banks to limit interest rate increases.
• To return banks to the private sector asap in order to get more credit flowing we support selling AIB for a large foreign owned bank and EBS to a new owner to become a new third force in Irish banking.
• Using the experience of Canada we will introduce new negative equity insurance to stablise the Irish housing marking.
• We will establish a SME partial loan guarantee scheme and a micro business start up fund to get credit to business, and encourage greater venture capital investment in Irish business.

3. Supporting families and businesses in debt trouble:

• We will help families by increasing mortgage interest debt relief for the ‘negative equity generation’, banning penalties on mortgage restructuring, introducing a deferred interest scheme for distressed home owners, using pension savings to ease debt distress, allow strictly regulated negative equity mortgages to allow families to trade homes.
• To aid business we will completely overhaul outdated bankruptcy policy and commercial debt restructuring for small and medium sized businesses.

4. Making NAMA work for the national interest

• We will stop future asset transfers to NAMA from Bank of Ireland, AIB and EBS.
• We will get new private sector capital back into the property market.
• We will open NAMA to far more public scrutiny.

5. Making sure the current crisis never happens again.

• We will introduce new tougher penalties on white collar crime, enact anti-corruption law and introduce new regulations that make banks safer for deposits and savings.
• We will also introduce great scrutiny on the clique of accountants, professional advisors and layers and bankers who oversee the financial operations of the banks.