Central Bank 'not fulfilling role of consumer protection on mortgages' - McGrath
Fianna Fáil finance spokesman Michael McGrath has dismissed the finance minister's claims as nonsense that the publication of his Variable Rate Mortgages bill caused bank shares to fall by as much as 10pc.
Mr McGrath was speaking at a Finance, Public Expenditure and Reform committee meeting where he said the Central Bank is “not properly fulfilling its role of consumer protection” and that it was putting a greater emphasis on the regulation side of its duties.
The bill was devised to help tackle high variable interest rates in the Irish mortgage market, where around 300,000 homeowners are paying 1.5pc higher than other Eurozone countries.
“In response to fall in bank shares, there is no evidence whatsoever to suggest the bill caused the fall off.
“There was a trading statement issued by Permanent TSB on May 11 that caused an 11pc drop in share price and it did not refer to variable rate mortgage pricing,” Mr McGrath said at the committee’s pre-legislative scrutiny of the bill.
Minister Noonan said the bill posed a threat to banks’ profitability in interest rates and that shareholders would sell “as quick as lightening” if they saw the bank losing profitability.
Fianna Fáil had the bill passed through the Dáil in May without a vote after it was supported by Sinn Féin, Labour, People Before Profit-AAA, the Social Democrats, and a number of Independents.
Minister Noonan said the bank shares were hit across the board over an 11-day period between May 6 and May 17.
One of the main tenants of the legislation is to give the Central Bank the power to control variable interest rates.
Minister Noonan said both he and his department would help the bill through various amendments but was wary of It removing the incentive for new lenders to enter the market.
“Consideration needs to be given to whether there are unintended consequences to this Bill such as acting as a deterrent to new entrants to the Irish market and thus ensuring that there is less choice available to consumers,” he said.
The committee has also sought the views of the European Central Bank before it brings it forward for further consideration in the Oireachtas.
Sinn Féin’s Pearse Doherty accused Mr Noonan of not having “any meat” on the concerns he raised, which included constitutional worries.
“It’s not a committee stage, if it was I would be coming forward with detailed recommendations for amendments. I don’t think it’s fair to comment that I should come in with a lot of detail today, it’s not my bill,” the minister said in return.
Anti-Austerity TD Paul Murphy said his party supported the bill due to the relief it could provide to mortgage holders. However, he said the proposal was “nowhere near radical enough”.
“The approach of the bill is to say it is market failure, where I would say the failure is the market.
“Is the alternative approach not to say that we should have publically owned banking with a democratically controlled central bank and banks, you can then direct credit to different areas of society,” Mr Murphy said.
Brendan Burgess of the Fair Mortgage Rates Campaign said it was pertinent that section seven of the bill is pushed through.
Section seven ensures lenders must offer the same rates and incentives to existing customers that are being offered to existing customers.