Tánaiste sends warning to BoI on refusal to cut interest rates
Published 25/05/2015 | 02:30
Tánaiste Joan Burton has lashed out at Bank of Ireland's decision not to cut variable interest rates despite the threat of a penal levy from the Government.
Finance Minister Michael Noonan outlined on Friday that the State's six main banks would face the prospect of a fine and possible intervention from the Central Bank if they fail to reduce their mortgage rates.
Bank of Ireland chief Richie Boucher met with Mr Noonan last Thursday to discuss the prospect of slashing interest rates.
But according to a report in the 'Sunday Independent', a spokesperson for the bank made it clear that it would not bow to pressure.
The spokesperson said the talks had focussed on the bank's efforts to encourage customers to avail of fixed rates as opposed to any cut in variable rates.
"The meeting was a constructive and professional one," the representative said.
"The bank outlined its strategy and focus on fixed-rate offerings which mitigate interest rate risk for customers and the bank, the availability of the bank's fixed-rate offers to all Irish SVR (Standard Variable Rate) customers, and the savings to the bank's Irish SVR customers from the bank's fixed-rate offers."
Bank of Ireland is confident that its focus on fixed rates as opposed to variable rates will be sufficient to satisfy Mr Noonan's demands.
But when asked about Bank of Ireland's stance, the Tánaiste said that the banks won't be allowed get off lightly.
"The banks seem to have a short-term memory loss in respect of all that taxpayers in Ireland did," Ms Burton said at an event in Farmleigh Estate in Dublin.
"If they are charging excessive rates and they fail to respond to that, then there are other mechanisms down the road that can be used to address that series of issues."
Ms Burton added that the discussions are ongoing with the different banks and that the matter is firmly on the Finance Minister's agenda.
The Dublin West TD has consistently threatened the prospect of imposing a levy on the banks if they fail to follow through with rate cuts.
Mr Noonan admitted last week that such a manoeuvre would be open to him in October's Budget.
Government sources, however, are adamant that all banks must pass on rate reductions to their customers, including Bank of Ireland.
Mr Boucher previously outlined that the institution's intention was to encourage its customers to avail of fixed-rate mortgages to avoid the risk posed by future interest rate increases.
Campaigner for lower variable rates for mortgage-holders Brendan Burgess said legislation should still be brought in to deal with the issue and force the banks to comply.
He said that he feared that the impetus for such legislation would be lost if the banks cut their interest rates in response to the Finance Minister's request.
"I think it would be better if the Central Bank met the banks rather than the Finance Minister, and it would be better if [the Central Bank governor] had the power to direct them to change interest rates. The conversations would be more meaningful," he said.