The Governor of the Central Bank has said the bank has "grave concerns" about a proposed law which would prevent the sale by banks of loans to so-called vulture funds without the consent of the borrower.

Philip Lane made his comments in an address to the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and to the Taoiseach.

He warned the committee that the "No Consent, No Sale" bill would severely damage resilience of the financial system.

Professor Lane said that at the same time, the bill would not improve consumer safeguards.  

"Given that the consumer protection framework from a regulatory perspective is the same whether a loan is held by a bank or a non-bank, we do not see that the bill would add any extra regulatory protection for consumers," he told the committee. 

He also cautioned that Sinn Féin's proposed bill, which has already been passed by the Dáil, would limit the ability of banks to obtain liquidity from the inter-bank market or from the euro-system.  

Professor Lane said that while the restrictions would be costly even under normal conditions and the knock-on effect would be an increase in the interest rates charged to households, the impact would be especially de-stabilising in a crisis environment. 

Addressing the Central Bank's criticism of the bill, Sinn Féin's finance spokesman, Pearse Doherty, said what he had done was to take the bank's own voluntary code and put it on a statutory basis.

Mr Doherty said the first line of the code states that a loan secured by a mortgage on a residential property cannot be transferred without the permission of the borrower.

He said as far as he is concerned no bank has ever applied the voluntary code and the Central Bank has never asked a bank to apply it.

He said Mr Lane had painted a picture that its own code would create "a nightmare scenario" for the banks, for consumers and for the wider economy.

In response, Mr Lane said there is a difference between a voluntary code and a statutory code, because of the obvious differences in terms of compulsion and sanctions for not following the code.

He also made the point that the code includes an exception for conditions of financial distress. He said the Sinn Féin bill does have a financial distress provision, but it is too narrowly defined.

The Governor said the Central Bank's point and approach to the issue is that it is very important to pre-empt and anticipate financial distress, including, where it makes sense, by loan sales.

Mr Lane also said the sale of transferable loans in the financial system is so much more important than it was 30 years ago, including through securitisation and collateral.

He said leaving bad loans in the Irish banking system represents an excessive level of risk and it is important to reduce that risk.

Mr Doherty said there is a bit of a trend from the Central Bank, ECB and Department of Finance when members of the parliament bring forward legislation that they think is in the interest of consumer protection there is "scaremongering".  

Mr Lane, who is soon to leave the Central Bank to take up a position on the executive board of the European Central Bank, also revealed that the amount of redress and compensation paid by banks to victims of the tracker mortgage controversy has risen by €18m since the end of December. 

He said the told amount that has been paid over now stands at €665m. 

By the end of March, Mr Lane said the bank expects the number of customer accounts awaiting redress to be down to about 300.

The overall number of customers identified as being impacted by the controversy has not risen above the almost 40,000 at the end of last year, he added.

In the case of the remaining lenders, he said, the Central Bank is working to ensure that these have addressed any remaining issues affecting groups of customers and that all eligible groups of customers have been included for redress and compensation.

He added that he expects this work to conclude in the coming weeks.

Philip Lane said enforcement work in also continuing, with detailed and forensic investigations being carried out into the actions of entities and individuals.

Any form of Brexit will be damaging for Irish economy

On Brexit, Mr Lane said any form of Brexit would be damaging with a hard Brexit even more so. 

He outlined how in recent months the Central Bank has stepped up its work on mitigating the "cliff-edge" risks of a hard Brexit and said where possible the risks have been mitigated.

The work, he said, has sought to ensure that the financial system is resilient for a hard Brexit, as well as ensuring risks to consumers are mitigated. 

The Governor added that while a no-deal Brexit would constitute a severe economic and financial blow, the bank's work to improve resilience over the last decade means that the shock should not be made worse by fragility in the financial system. 

He also said it was correct to say that the impact of Brexit would vary across the country, as different sectors will be affected in different ways. 

He said everyone would have to be alert to how Brexit unfolds because if there is a no-deal then in the initial days and weeks there will be alot of disruption. 

But he added that there is a question then about how quickly that disruption will be managed by adaptation. 

Professor Lane said the country would have to be very alert to those short-term effects, but also to the fact that Brexit is a permanent disruption.

There would be challenges facing whole industries, individual firms and particular regions, and the Government has to think about all those factors, he added.

Lane echoes ECB concerns over proposed repossession laws

The Governor of the Central Bank has echoed European Central Bank concerns about proposed new repossession laws being put forward by the Government.

Mr Lane said the bank shares the concerns expressed in the opinion of the ECB that this would give rise to a lot of new issues in relation to how any troubled mortgage would be handled.

The Land and Conveyancing Law Reform (Amendment) Bill was first proposed by junior minister, Kevin Boxer Moran, and would require the courts to take into account a borrower's personal circumstances before issuing a repossession order.

At the weekend, The Sunday Business Post reported that the European Central Bank President, Mario Draghi, had expressed worries about the plan to the Government last month.

The newspaper reported that Mr Draghi had warned it could push up mortgage rates, cause an increase in bad loans clogging up the financial system and lead to moral hazard.

"A lot of specifications in the Bill would give rise to a lot of contestation in terms of a court process," said Mr Lane.

"It is basically asking a court to do a lot of work in terms of bringing in all sorts of extra information into how it should assess whether a repossession order should be granted.

"I think the ECB opinion is pretty comprehensive in laying out all the possible downsides to that approach. We would share those concerns," said Mr Lane.

The bill is due to be discussed by the Seanad tomorrow.