Thursday 19 April 2018

Former Regulator backs banks on variable rate mortgages

Fiona Muldoon. Photo: Collins
Fiona Muldoon. Photo: Collins
Gavin McLoughlin

Gavin McLoughlin

High-profile former Central Bank director of credit institutions and insurance supervision Fiona Muldoon has backed bankers' decisions to set variable mortgage rates based on the profit motive.

Irish banks have been coming under pressure over standard variable rates that are twice the eurozone average, but most of the major lenders have thus far resisted calls for cuts. "I think banks have to make money," Muldoon told the Sunday Independent.

"I think this is one where it gets difficult, the same as in insurance. You want to put through a rate increase, you want to make a profit. It's the same with the banks.

"They have to, I think, make their decisions based on returning to profitability. I think that's in everybody's interest. They start lending again at a rate that is a margin that returns to all their stakeholders...and that requires profit. That's the system we're in."

Muldoon, who joined struggling insurance company FBD Holdings as finance director in January, refused to say whether she's interested in replacing outgoing Central Bank Governor Patrick Honohan, who's retiring from the post this year.

"I'm just three months into this job and that's my focus. I wish Governor Honohan well and I certainly enjoyed working with him, but my focus is on FBD now.

"I think that everybody knows I've joined FBD as financial director, I really haven't given {the governorship] much thought, to be honest with you.

"That is a really important role for the country and I think there are lots of people who are suitably qualified, there's a lot of people working in there who I remain very friendly with and people in there who I admire and I hope that they pick a candidate who is up to the job.

"It's a big role, and I hope they go and get the best candidate, whether that's here at home or internationally.

"I'm not in the business of speculating about who might be on the shortlist. I think it just will run its course," she added.

Muldoon made headlines in 2012 for a hard-hitting speech on mortgage arrears in which she likened banks to unruly teenagers. "The relationship between banking and the regulator has too often felt like a parent/child dialogue and you know what, this will not move banking out of its current difficulties," she told the Irish Banking Federation National Conference. "Stuck in stasis but at least hunting with the pack, I see too much 'activity' and not enough 'outcome'. I see too much lip service to 'progress' and 'meaningful resolution' and not enough to 'reality'. I see too much 'give the Central Bank exactly, literally, what they asked for' and not enough true dialogue and meaningful engagement to find a solution.

"I see way too many 'extend and pretends' masking as solutions. And this is the most disappointing part. A culture of leadership is missing".

Sunday Indo Business

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