Q&A: Why are we talking about Denis O’Brien’s interest rates?
Published 03/06/2015 | 02:30
A First off because we can. At the High Court yesterday Mr Justice Donald Binchy confirmed that the media can report last week's speech in the Dáil by Independent TD Catherine Murphy, when she said she was "lead to believe" that Mr O'Brien was charged an interest rate of 1.25pc on loans he had with the former Irish Bank Resolution Corporation, and when she described such a rate as "extremely favourable." Denis O'Brien had previously gone to the High Court to stop details of his banking relationships being published by RTÉ and has said that at least some of what Catherine Murphy said is incorrect.
Q: Does any of this matter to the man, or woman in the street?
A Interest rates charged by Irish banks, especially those that got bailouts, are certainly an issue of public controversy. Up to now the biggest financial story of the year was the battle to force mortgage banks to reduce the inflated interest rates being charged to customers with standard variable rate home loans. That issue - and the sense some borrowers were being treated unfairly - generated such a massive backlash that the Government finally, and belatedly, called big lenders to heel for the first time since the bailouts.
Q: What does that have to do with Denis O'Brien?
A Nothing directly. But Catherine Murphy's intervention in the Dáil took place against a background where the issue of whether rescued banks have treated all borrowers fairly is very much a live one. It also followed on from a controversy over IBRC's role in the 2012 sale of facilities company Siteserv to Mr O'Brien, a deal on which the bank realised a €100m loss.
IBRC's former managers, Alan Dukes and Mike Aynsley, who only took over after the former Anglo Irish Bank was already in state hands are adamant that on their watch all performing borrowers - those keeping up with their payments - were dealt with equally. Alan Dukes, a former Fine Gael leader and one time Minister for Finance said Mr O'Brien did not get any "special consideration or special deals."
Q: Can't we just compare the interest rate that Mr O'Brien was charged to the bank's standard rate?
A No. We don't know what interest rate Denis O'Brien or any one else was paying on IBRC loans, not withstanding what was said in the Dáil. Unlike the mortgage market, where rates while unpopular are standardised, even for smaller commercial borrowers, the rates banks charge their customers are often worked out on a case by case basis, something that rightly frustrates anyone trying to shop around for a deal.
For big borrowers, like Denis O'Brien, interest rates are worked out based on a mix of factors including the perceived repayment abilities of the borrower, the mix of security backing a loan and - as we saw with the standard variable rates issue - factors within a bank such as the lender's wish to maintain a steady income over time. All of which is to say that we don't know Denis O'Brien got a preferential rate, because we don't know for sure what he was charged, or what other similar customers were paying the bank.
Q: Would it matter if Denis O'Brien did get a cheap rate, isn't it just business to drive the best bargain?
A IBRC was state owned, so had a particularly strong duty both to act fairly towards customers and to recover the greatest amount possible from its loans.