Monday 29 May 2017

Simplistic demands for banks to slash their rates are just early election stunts

Teacher's cartoon
Teacher's cartoon
Martina Devlin

Martina Devlin

The Wetherspoon's Principle has leapfrogged from the pub industry to the banking sector, and is currently being applied to Irish banks in State hands.

Here's how the principle works. If a market proves lucrative, outside competition will arrive to share in those profits, which is good for consumers because prices fall, while less good for indigenous companies whose margins shrink. But cheaper alcohol is the result - or in the case of the banking sector, cheaper loans.

Which brings me to the vexed question of standard variable mortgages set at an uncompetitive and unfair mark-up, as practised by Permanent TSB, among other providers. Applying the Wetherspoon's Principle, Central Bank Governor Patrick Honohan seems disinclined to intervene.

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