Banks should rethink interest rate policies
Published 14/03/2016 | 02:30
All eyes were on Leinster House last Thursday as the TDs returned and made their first and unsuccessful stab at electing a new government. But that same day in Frankfurt, the European Central Bank took some decisions which will impact on all our futures.
The ECB has now fixed lending rates at 0pc and it is effectively charging banks to keep money on deposit with it. The move is designed to push money out into the markets and stimulate the economy by giving businesses access to credit at affordable rates.
But - yet again - there is a gap between the theory and the reality in Ireland. Today, we report that borrowers are in some cases paying almost four times the interest on loans, compared to their counterparts in neighbouring EU countries.
Interest rates are often above 12pc, in contrast to lows of 3.3pc for comparable rates in Britain. At the same time, savings worth €95bn in Ireland attract interest rates below 1pc. It is not encouraging for savers and does not help to promote thrift.
The country has come a long way in the past five years. But we still have a long way to go in developing more jobs and growth. The lending institutions have a key role to play in this.