News Irish News

Saturday 16 February 2019

Red tape forcing banks to quit IFSC, says AIB chief

Somers reveals lender won't pass on interest rate cut to homeowners

DANIEL McCONNELL Political Correspondent

International banks such as Goldman Sachs are pulling out of the International Financial Services Centre because of over-regulation, the deputy chairman of AIB Dr Michael Somers has said.

Dr Somers also said that AIB would not pass on the ECB interest rate cut to variable mortgage holders, because the bank could not afford it.

Dr Somers, who was chief executive of the National Treasury Management Agency for almost 20 years, said that although the banks that were pulling out of the IFSC would not say it publicly, they had told him privately that the reason they were moving their operations out of Ireland was because of heavier financial regulation here.

Dr Somers, who was speaking in an interview on RTE's The Business with George Lee, said that key people who he regarded as "systemically important" to AIB were leaving because of the government cap on bankers' pay, and that it was increasingly difficult to get people to join the bank.

He said that AIB had had no chief financial officer for a long time over the issue of pay and that this was an extraordinary position for a major financial institution to be in.

Dr Somers, who was appointed to the board of AIB on behalf of the National Pension Reserve Fund on the instruction of the Minister for Finance, said he was not anxious to see AIB writing off loads of debt any time soon.

He said that the money that would be written off was not the bank's money.

"It is taxpayers' money that had been put into the bank by the National Pension Reserve Funds and I want to see as much of that money as possible coming back to the pension fund on behalf of taxpayers," he said.

Dr Somers also said that many of those in charge of the banks at the time of the crash deserved the severe criticism they had received. "Most of the guys who were around at the time deserved to be beaten up," he said.

In a devastating blow to AIB customers, when asked if the bank would pass on the ECB interest rate cut, Dr Somers said: "I can't speak for the bank, but I don't think they will. They are still losing money, but they hope to be profitable next year. But I don't see it happening to be quite frank with you."

He agreed that the bank's customers would be severely disappointed that the interest rate cut won't be passed on.

"They will (be disappointed) yeah," he added. "It depends as to what you see the bank as being. There is only one shareholder, the Finance Minister. It is getting increasingly difficult to recruit people."

Dr Somers agreed that from a consumers' perspective, it could look like the bank was screwing its customers, with the permission of the Financial Regulator. "Looking at it from a consumer, I would agree with you. But there is an imperative to make the institutions profitable."

Dr Somers said that it was difficult to see where economic growth was going to come from. Ireland, he said, had some great entrepreneurs but the unfortunate thing was that most of them were now living abroad.

In response to Dr Somers, a spokesman for Finance Minister Michael Noonan said: "Dr Somers's opinion is not to be dismissed and he is highly respected. The Government's view is that there is a pay cap in place and all people hired have been subject to that cap."

Irish Independent

Editor's Choice

Also in Irish News