Main banks to appear before Oireachtas committee on deposit rates

The main banks and the industry’s lobby group will appear at an Oireachtas committee to answer questions about interest rates and the banking levy. Chair of the finance committee John McGuinness said all of the pillar banks would appear in early September, as would the Banking and Payments Federation of Ireland.

Mr McGuinness also said he agrees with plans to extend the banking levy into 2024, but said it should be increased and that banks should be further penalised if they do not pass on interest increases to savers.

It comes after Minister for Higher Education Simon Harris said Irish banks have been “complete and utter laggards” when it comes to passing on increases in interest rates to savers. Furthermore, Minister for Finance Michael McGrath also confirmed that the bank levy would be extended into 2024.

“The levy should be extended and include the financial services sector, and it should be increased. Banks that don’t comply should be further penalised. The levy is not yielding enough, and it is not doing the job it was supposed to do,” Mr McGuinness said.

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He said he would ask banking representatives in September about interest rates, as politicians seek to pressure the banks into taking action.

Meanwhile Sinn Féin spokesperson on public expenditure Rose Conway-Walsh said that households have become “victims of profiteering banks and a dysfunctional government”.

“There are several actions that must be taken as a matter of urgency. These include convening a meeting with the Central Bank and retail banks to examine their role in supporting households to deal with the massive income shock they are experiencing.

“Banks are making similar profits now as they were during the property bubble, while struggling mortgage holders live in fear of falling behind with their monthly payments that have increased by hundreds of euro. The banking levy must be extended and expanded.”

Sinn Féin is calling on the Government to introduce temporary and targeted mortgage interest relief.

Taoiseach Leo Varadkar indicated last week that the Coalition was considering targeted relief for homeowners who find themselves in financial distress and who were at risk of losing their home.

The European Central Bank has hiked interest rates nine times since July last year. The main interest rate now stands at 4.25 per cent compared to zero 13 months ago. While the Irish banks have increased rates for borrowers there has been little change for savers.

In recent months financial analysts here have warned that the failure of Irish banks to increase deposit interest rates in line with ECB hikes is costing Irish savers more than €120 million every month. Meanwhile, banks have been reporting healthy profits, driven by the rate hikes.

Last week Italy imposed a new levy on its banks’ profits, with the government citing the increased mortgage bills for borrowers while the interest paid to savers had not kept pace with ECB increases.

The current bank levy here, introduced in 2014, has brought in around €87 million annually in recent years.

Over the weekend Mr McGrath said it was his intention to recommend to Government that the levy – due to expire this year – be extended into 2024. He said the details – like the scope of the levy, its rate and duration – “require further consideration, and this work is ongoing as part of the budgetary process”.