Rate regulation not 'good policy'

Irish Central Bank regulation of the interest rates charged by lenders "would not be a good policy outcome", Jonathan McMahon, the bank's assistant director general for financial institutions, has said.

"We can think of lots of very good reasons why regulation of interest rates would not be a good policy outcome," said Mr McMahon said today. "Much better could be done through the process of supervisory interventions."

He was speaking on the fringes of a conference on ethics and compliance in the management of financial services firms hosted by the Association of Compliance Officers in Ireland.

The Government asked the Central Bank last week if it needed further regulatory powers to force banks to pass on European Central Bank rate cuts to borrowers on variable rates.

Mr McMahon said Ireland's four main domestic lenders will post "materially higher" average loan loss provisions this year as they are forced to take a more conservative and consistent approach to impairments.

While it is "too early to say yet" how individual banks will fare from the exercise, the overall provisioning level will be higher, Mr McMahon said.

He said the exercise relates to the four lenders subjected to stress tests in March, including Allied Irish Banks, Bank of Ireland, Irish Life & Permanent and EBS, which subsequently merged with AIB in July.

Separately, Kevin Knightly, chief executive of Rabobank Ireland, told the conference its ACCBank unit is "heavily loss- making". Rabobank Ireland "continues to be profitable", he said in a speech in Dublin, adding the lender was "trying to tackle" losses at ACC.

Bloomberg