BANK of Ireland will come under fresh pressure to reduce its mortgage interest rates if the European Central Bank opts for a cut tomorrow.
But there are no plans for another public campaign to encourage banks generally to pass on any reduction.
It is understood that AIB could even be advised against fully passing on another cut since the almost-nationalised bank is charging well below market rates after dramatically capitulating to pressure to pass on the last 0.25pc ECB cut.
The Frankfurt-based banking powerhouse is expected to cut rates by as much as 0.5pc tomorrow, a move that would save a family €90 a month on a €300,000 mortgage.
If AIB passed on a 0.5pc rate cut to its mortgage holders, the bank would earn about €40m less from interest payments, the Irish Independent understands.
While the bank makes some of that back in cheaper funding, that doesn't fully offset the cost. Some of AIB's funding comes directly from the ECB, so the cost of that money will go down in line with any rate cut.
But AIB pays a fixed rate for some of its funding, so it won't make any immediate savings on that portion.
A spokesman for the bank declined to comment on whether further rate cuts would be passed on in full.
The issue is likely to be one of the first to cross the desk of AIB's new chief executive David Duffy, who starts this week.
Bank of Ireland faced down calls from the Taoiseach, Tanaiste and Finance Minister to pass on the last rate cut, insisting only that its rates were kept under constant review. The bank this week declined to comment beyond saying that rates were still under review.
While there are no plans to summon the bank's bosses to another meeting with Government leaders, sources said the State had "made its feelings clear" and it would be very difficult for Bank of Ireland to hold its rates steady in the face of a second cut.
The Central Bank, which was first out of the traps to threaten action against banks that didn't pass on cuts, is understood to have no plans to make any public statements after any action from the ECB this week.
Executives there are focusing their attentions on the "outliers" who are charging excessive mortgage rates, sources said, pointing to recent correspondence with "specific lenders" over their standard variable mortgage rates.
Permanent TSB passed on the latest cut and is expected to pass on any future cuts in full, as is AIB subsidiary EBS, the Irish Independent understands. The position of Ulster Bank, which also failed to pass on the last rate cut, is unclear.
The bailed-out Irish banks will see an immediate impact from lower ECB rates across the cost of some €65bn in funding they're drawing from Frankfurt, which will cost them some €1.425bn less a year if rates go down by 0.25pc.
The ECB rate also indirectly impacts some of the banks' other funding costs, but sources stress that funding costs remain "elevated" due to high deposit costs and the premium paid for the government guarantee.