THE THREE major banks in the State rebuffed the Government’s efforts to get them to lower interest rates during a “tense” and “frosty” meeting yesterday with the Taoiseach Enda Kenny and the Coalition’s most senior Ministers.
Senior executives from Bank of Ireland, AIB and Ulster Bank faced down pressure from the Government to pass on the recent reduction in the European Central Bank’s interest rates to variable rate mortgage customers.
Following the meeting, the Taoiseach rang Financial Regulator Matthew Elderfield. Asked about this last night Mr Kenny said: “At the end of three separate meetings with each of the banks, I called them all together and asked them in respect of the passing on of the mortgage interest rate reduction for mortgages – all three banks declined.
“I expressed on behalf of the Government the absolute disappointment of Government in this matter. I subsequently rang the regulator, Mr Elderfield, and informed him of the outcome of the meeting and I asked him that as regulator he should report to Government as to whether or not he considers this to be a level playing pitch and in the interest of consumers if he needs further enhanced powers that government will respond to him.”
In the two-hour meeting at Government Buildings, the Government was represented by its most senior figures: the Taoiseach, Tánaiste Eamon Gilmore, Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin.
“It became very tense and the meeting ended all of a sudden and not on a good note. There was a very frosty end to the meeting,” said a source. In a statement, the Government expressed “deep disappointment” at the outcome.
But privately, the Government was said to be infuriated by the attitude of the banks. A source said the Ministers treated the refusal of the banks to meet its request as a very serious development that required an immediate response.
It prompted the Taoiseach and the three Ministers to convene an immediate meeting of the Government’s Economic Management Council and the call to the Financial Regulator.
Mr Elderfield has previously stated that his powers of intervention are limited when it comes to forcing the banks to pass on mortgage rate cuts. The Government’s legal advice is that the roles of the regulator and of the Central Bank are independent and the Government cannot direct him to take action.
A source said it has instead “invited” him to consider the outcome of the meeting and, if necessary, make a request to Government for additional powers.
Mr Gilmore denied the Government was powerless in the matter. “No, this has some way to run yet . . . we will take further action if necessary,” he said.
In what was portrayed by the Opposition as an embarrassing rebuff, each of the banks stated, for different reasons, that they did not intend to pass the rate reduction on to variable rate customers. The stance led to an immediate tension between both sides.
Fianna Fáil spokesman on finance Michael McGrath described it as an embarrassing rebuff. His Sinn Féin counterpart Pearse Doherty described the Government’s actions as “pathetic”.
AIB was unapologetic about the decision not to lower its standard variable rate and insisted it had no choice but to maintain the rates. The bank’s executive chairman David Hodgkinson said the Taoiseach had raised the issue of struggling homeowners but he insisted its customers had already benefited from its decision not to raise rates over the summer.
Mr Noonan said last night: “AIB had a reasonable case as they hadnt passed on the previous two ”.
Chief executive of Bank of Ireland Richie Boucher described the meeting as “very productive” but the bank refused to comment.
