Honohan critical of SME bank rates and calls for competition
Interest rates for small and medium-sized businesses have come down everywhere in Europe, except Ireland, outgoing Central Bank governor Patrick Honohan said yesterday.
Speaking at the Small Firms Association lunch, Mr Honohan, who is due to retire at the end of the month, questioned whether this was as a result of limited competition in the sector.
"We could all do with more competition in the banking system," he said.
He also said that criticism that the banks are not passing on European Central Bank interest rate cuts are unfair.
"The banks actually don't benefit from the ECB lowering interest rates. It doesn't change the costs of current accounts," he said.
"It disimproves the interest receipts on tracker mortgages. Although tracker mortgage holders and the Government's finances benefit enormously from the reduction in interest rates from the ECB, but the banks have not benefitted. They have actually suffered."
And in a veiled reference to calls for the Central Bank to do more generally to encourage banks to cut rates, Mr Honohan said "poking around" wasn't a good idea.
"We have to have a banking system that works in an efficient way, and poking around at the most politically sensitive issue at any particular moment is not the way to get the working more effectively.
Mr Honohan also said that in the past year, the level of non-performing loans in the SME sector for the five main banks had dropped by just under €5bn, or 33pc.
The recovery in the economy, he said, was credit less, but not jobless. He said that since the middle of 2012, there had been a rise in employment of 130,000, or around 7pc. But he said the roughly 6pc growth rate in GDP projected for this year had to be treated "with great care" because of the complexities of the accounting of multinationals.