Saturday 14 December 2019

Editorial: 'Tough words alone won't stop banks making a killing'

Central Bank Deputy Governor Ed Sibley
Central Bank Deputy Governor Ed Sibley


Banks were once to the economy what the heart is to the body. Pumping vital funds through the system, and scarcely noticed until there was a clot. After the coronary arrest of the crash, perceptions changed; hardly surprising, given the €64bn public funding transfusion required to get them back on their feet.

Now that they are back in the pink - or should that be the black? - we would hope things might be better. But the comments by deputy governor of the Central Bank Ed Sibley suggest evidence of a Pauline conversion by commercial banks regarding their relationship with customers is still some way off. Mr Sibley let them have it with both barrels for failing to protect their customers.

Their contention that they are driven to charge some of the euro area's top mortgage rates because of a punitive lending regime in comparison to the rest of the zone doesn't wash. When it comes to making profits, our banks want jam on it.

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Mr Sibley argued they can lend profitably at rates as low as 2.25pc to new customers, yet they are still charging existing customers up to twice that.

Admirable as Mr Sibley's comments are, it has to be remembered that those with home loans here have been paying these exploitative rates for years. Successive Central Bank warnings, nor indeed threats of dire sanctions from finance ministers, have brought about no noticeable change in banking behaviour.

The consumer continues to get a raw deal, and the banks make the killing. Given the Central Bank is charged with being the enforcer when it comes to safeguarding consumers, it is not good enough to keep railing against the banks without backing up the tough words with action.

Mr Sibley's message would carry considerably more conviction if it was reflected in the conduct of the Central Bank and not just in its conversation.

If for some reason the governor feels it is too difficult to both regulate the banks and be the consumer's champion, then why not hive off the role of looking after the customer to a separate entity?

If the banks can continue to charge Irish homeowners more for their mortgages than other European lenders they will continue to do precisely that unless they are stopped.

So who is to intervene if neither the Central Bank or the Government are prepared to step up to the plate to the extent that the banks actually take notice?

Mr Sibley is clearly exasperated that the Central Bank has had to push "too many retail banks too hard over too long a period to actually put your customers first".

His ire is understandable. But the ire of mortgage holders is more so. At this point there really ought to be no confusion about roles.

Banks will make profits where they can. Central banks have a duty to keep them in check.

The polite tickings-off over the years administered by central banks have come to nothing.

If mumbling in the margins was all it took to bring the banks to heel mortgage holders would have been out of the wringer long since.

Irish Independent

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