MINISTER FOR FINANCE Paschal Donohoe has said he “cannot mandate” how banks evaluate customers in receipt of the temporary wage subsidy scheme, amid reports that customers have had their mortgage approval pulled because they were on the scheme. 

Last month, TheJournal.ie reported that a number of couples who’d already been granted mortgage approval had had this approval placed on hold because one or both of them was in receipt of the wage subsidy scheme. 

Under that scheme, as part of the government’s actions to try keep people in employment during the Covid-19 crisis, businesses adversely affected by the pandemic could apply to have a large portion of their employees’ wages paid by the State.

For many people, their income will not have dropped under the scheme and the government has said the initiative was vital to keep people in a job where otherwise they might not have had one given the sharp, sudden shock of Covid-19 and the restrictions that followed. 

As of this week, 65,500 employers in Ireland have registered with Revenue for the scheme.  Over 550,000 people have received at least one payment on the scheme.

Furthermore, the Department of Social Protection said this week that 47,100 people who’ve closed their €350 pandemic unemployment payment and have returned to work are now on the wage susbidy scheme. 

Mortgage applicants, who are customers at a number of different banks, have told TheJournal.ie that they’ve been unable to draw down their mortgage because at least one of them is in receipt of the wage susbidy scheme. 

One woman told us that she received a call from her bank to inform her that her mortgage application was now on hold. 

“They just said ‘we can’t accept it’,” she said. “I couldn’t believe it. When I got the call, I broke down. I was in a bit of a state.

I’m feeling very down. What was all our hard work and savings for? The people who have mortgages – the banks said they can get a break. We’re here begging to pay, we want to give them money. They’re not letting us. I just don’t get it. 

The main banks had denied having a blanket ban on refusing or putting on hold applications from people in receipt of the wage subsidy. 

However, last week the Irish Times reported an internal document at AIB had said there was in fact a hold on such applications.

It reversed that decision last Wednesday, and said it will start accepting new mortgage applications from customers who are being paid. However, the bank added that it may still refuse to allow a mortgage to be drawn down if it finds a customer is unable to meet repayments. 

Sinn Féin’s finance spokesperson Pearse Doherty has written to the five main banks over the matter while Labour’s finance spokesperson Ged Nash had previously urged Minister Donohoe to take action on the matter.

In response to a recent parliamentary question in the Dáil, the minister for finance said there was little he could do to tell banks – even those in State ownership – who to lend to. 

Donohoe said: “The Wage Subsidy Scheme is one of the main tools with which we are protecting the income of employees who otherwise would not be working and it is hoped that it will be a major boost in saving the businesses for which they work.

Whilst I completely acknowledge the seriousness of the issue you have raised and its impact on those affected, what I cannot do is mandate how temporary payments received under the Wage Subsidy Scheme are treated in lending sustainability evaluations by regulators and lenders. 

The minister said the banking crisis of the last decade had been fuelled by “unsustainable lending”.

He said far more robust regulatory controls are in place as a result, and cited comments from the Central Bank governor that if a borrower’s circumstances have changed to such an extent to cast a doubt over whether they can repay it in future then it’s in the “best interests” of both sides to review the matter. 

Donohoe added: “Furthermore as Minister for Finance I cannot mandate or overrule the internal risk assessment processes in any bank, even one in which the State has a shareholding.

Decisions in this regard are the sole responsibility of the board and management of the banks which must be run on an independent and commercial basis. The independence of banks in which the state has a shareholding is protected by Relationship Frameworks which are legally binding documents that cannot be changed unilaterally.

The minister also said he and his officials would continue to engage with the Banking and Payments Federation and the banks directly on issues related to Covid-19 going forward.