The Central Bank would be given powers to force the retail banks to reduce variable interest rates under a new bill being published and proposed today.
ndependent Senator Feargal Quinn has drafted a new Bill - the Central Bank (Emergency Powers) (Variable Interest Rates) Bill 2015 - to give the Central Bank power to direct retail banks in Ireland to reduce the level of interest they are charging in respect of variable rate mortgages.
His proposal comes ahead of meetings between Finance Minister Michael Noonan and the heads of the commercial banks this week to discuss the variable rate controversy.
The banks have come under sustained pressure from the public, and even from Government, to pass on European Central Bank rate cuts to their customers.
Now, Mr Quinn is proposing giving powers to the Central Bank that would enable it to force the banks to cut their rates. He said: "The rate has been below 1pc for over three years, and the interest rate set by the ECB is at an all-time low."
He said Irish banks were able to borrow money from the ECB at extraordinarily low levels and were then charging Irish mortgage customers exorbitant rates.
Calling for decisive action to be taken to deal with the banks, he said: "Gentle persuasion has failed as a policy tool. It is time for us to arm the Central Bank with the powers necessary to force banks to reduce their variable interest rates on mortgages to a reasonable level."
Under the terms of the bill, which Mr Quinn described as "proportionate to the objective to be achieved", the legislation would be only temporary and lapse after three years.
A direction issued by the Central Bank would remain in force for only one year and would apply only to variable rate mortgages that have been taken out on a person's principal place of residence.
The bill would also apply only to banks operating in the Irish market on or before January 1, 2015. No new entrants to the market would be affected. "This measure is designed to ensure that this bill is not seen as being an obstacle to new entrants," he said.
"I intend to table this bill for debate in the Seanad at the earliest opportunity," he added.
Calling on the Government to support his bill in the Seanad, Mr Quinn said: "The banks have been obstinate in the face of reasonableness. This is all the more galling for homeowners given that a number of the banks involved have been bailed-out or guaranteed by taxpayers. This shameless profiteering by banks can no longer be tolerated."
Mr Noonan will meet executives from AIB, Bank of Ireland, Permanent TSB and Ulster Bank from Tuesday.
They will discuss the findings of a new Central Bank report into the application of variable rates to customers. The report was commissioned by Mr Noonan and was received last week.
The Government is strongly urging the banks to move on the rates ahead of the general election. AIB is the only bank to cut its rate so far, by 0.25pc.