Sunday 11 December 2016

Noonan under fire over claim that FF bill hit bank shares

FF says minister is playing 'fast and loose with the truth'

Niall O'Connor, Charlie Weston, Cormac McQuinn and Kevin Doyle

Published 19/05/2016 | 02:30

Fine Gael's Michael Noonan Photo: Tom Burke
Fine Gael's Michael Noonan Photo: Tom Burke
Fianna Fáil's Michael McGrath Photo: Tom Burke

Fianna Fáil has accused Finance Minister Michael Noonan of "playing fast and loose with the truth" in a major escalation in the row over mortgages.

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The political agreement struck between the two parties has already come under strain, after Mr Noonan blamed Fianna Fáil's decision to push through a bill on variable rates for a drop in bank share prices.

Mr Noonan says the publication of the bill, which grants fresh powers to the Central Bank, resulted in a scenario where "Irish bank shares went down by 10pc across the line".

The Fine Gael politician stood by the claim last night, providing the Irish Independent with a spreadsheet that shows drops in the share price of Bank of Ireland and Permanent TSB over an 11-day period between May 6 and May 17.

Mr Noonan's spokesman said the Fianna Fáil bill, which was published on May 9, generated significant publicity.

"Therefore you can see that the publicising and publication of the Fianna Fáil Private Members Bill correlates with a fall in the aggregate value of those banks by 10pc to the time of the minister's speech last night," the spokesman added.

But Fianna Fáil's finance spokesperson Michael McGrath completely rejected the claims - which he described as being "disingenuous".

Mr McGrath pointed out that PTSB published a trading report during this period which was followed by the fall in share prices.

"The reality is the minister is playing fast and loose with the truth regarding the factors which have influenced bank shares," Mr McGrath told the Irish Independent.

"As he well knows, Permanent TSB provided a trading update on May 11 which caused an 11pc fall in its share price. In the statement that bank warned of 'challenges ahead' from rising regulatory costs, the low interest rate environment and having to hold its residual UK mortgage book for longer than expected. It made absolutely no mention of political action in relation to standard variable rates.

"It is therefore entirely disingenuous for the minister to claim that the publication of our bill was the determining factor in the fall in value of the state's holding in the banks.

"The reality is the minister is playing fast and loose with the truth regarding the factors which have influenced bank shares."

When it was suggested that other factors may have played a part in the fall in share prices, Mr Noonan's spokesman replied: "I think I've given you the data that shows a correlation that backs up the minister's statement."

Mr McGrath's bill, which gives additional powers to the Central Bank to regulate the mortgage market, was last night passed by the Dáil without a vote after Mr Noonan said the Government was not pressing its proposed amendment. The bill now goes to the committee stage.

But banking analysts have warned that introducing legislation to force down high variable mortgage rates will stop new entrants coming into the market and stymie competition.

Davy Stockbrokers claimed in a note to investors that legislation limiting overcharging on variable rates would make it more difficult to sell the State's stakes in the banks.

And analysts at specialist bank Investec said any powers to allow the Central Bank intervene in the setting of mortgage prices would likely require the support of the European Central Bank Governing Council - and any such process is likely to be long and arduous.

Davy Stockbrokers argued that legislation on mortgage rates would not help consumers in the long term. Analysts Diarmaid Sheridan and Conall MacCoille said the bill may be unconstitutional, as it would override clauses in pre-existing mortgage contracts.

While Fine Gael is in Government, it does not have the majority required to block divisive legislation.

However, Taoiseach Enda Kenny yesterday indicated that attempts by Fianna Fáil to embarrass the Government with a series of motions on issues such as variable mortgage rates could be blocked in future.

Speaking in Washington, Mr Kenny said the Central Bank does not want the new powers.

"We have agreements with Fianna Fáil in terms of confidence and budgetary matters and so on. Minority governments cannot work in a majority way. On occasions there will be defeats for the government," he said.

"I wrote as Taoiseach on a couple of occasions to the Central Bank asking them if they wanted to have the powers to deal with variable mortgage interest rates and they said they did not need those powers and didn't wish to have them."

Irish Independent

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