AIB cannot cut the cost of standard variable rate mortgages because it needs to ensure the bank's future financial health, outgoing chief executive David Duffy is expected to signal today.
Mr Duffy will tell TDs and senators on the Oireachtas Finance Committee that claims the bank is borrowing at almost no cost are an "overly simplistic" assessment.
He is also expected to confirm that the bank started repossession proceedings against almost 6,000 owner-occupied homes last year.
Meanwhile, Permanent TSB (PTSB) warned potential investors that a return to profit may be at risk from political pressure to cut interest rates and a UK exit from the European Union.
PTSB may be forced to lower its existing 4.5pc standard variable rate on mortgages because of mounting political, regulatory or competitive pressure, the lender said. It made the statement in a 132-page capital- raising document obtained by news agency Bloomberg.
Mr Duffy will appear before the Oireachtas Finance Committee today. The outgoing AIB chief executive says claims the bank can borrow for virtually nothing are an "overly simplistic" assessment of the situation.
He says a suggestion that the bank can fund itself at the European Central Bank's base rate is not the case, as only 3pc of the bank's funding comes from the ECB.
"We must maintain a balance between securing the bank's present and future financial health, preserving and building capital to fuel the economy and repaying the State the sums invested in the bank - while all the time providing our customers with sustainable lending rates in the market," Mr Duffy will tell committee members.
Further rate reductions are something which he and the management team continue to consider, according to Mr Duffy, who pointed out that a cut was made late last year. Mr Duffy, who is leaving the bank to take up a post with Clydesdale Bank in Scotland, also defended the bank's approach to the mortgage arrears crisis, saying it has put in place the "most comprehensive set of permanent arrears solutions in the market".
AIB aims to keep people in their homes if they engage with the bank, he says.
However, figures provided to the committee show it started repossession proceedings against 5,700 owner-occupied homes in 2014, and thousands more other properties.
Not all these properties will ultimately be repossessed - in many cases the move is an attempt to get an owner to engage with the bank.
The Government has been embroiled in controversy over the high cost of Irish loans for the roughly 300,000 customers with standard variable-rate mortgages.
Finance Minister Michael Noonan met Central Bank Governor Patrick Honohan recently to see if pressure can be brought to lower variable rates.
Irish lenders have been reluctant to pass on ECB rate cuts to their mortgage customers.