The head of the Irish Banking Federation, a lobby group for the banks, has said the banks need to able to retain control of their ability to set interest rates to make a return and to attract investors.
Pat Farrell, chief executive of the IBF, was responding to comments by the head of financial regulation Matthew Elderfield last week that the banks face legislative restrictions on their ability to raise variable mortgage rates if their actions exacerbate arrears.
He made the comments in an interview with RTÉ following the publication of a Trinity College report on overindebtedness in Ireland. Mr Farrell told The Irish Times that he fully agreed with the Central Bank's strong focus on customers.
"On the issue of mortgage rates we are very conscious of the need to strike a balance between the cost of funds and not exacerbating the issue of mortgage arrears," he said.
Irish mortgage rates compared competitively with banks in Europe, he said.
Mr Elderfield said last week that he was "breathing down the necks" of the banks on their handling of mortgage arreasr and that if they persisted in raising variable interest rates, they risked a cap on rates being introduced.
The Irish banks have raised variable rates on their loss-making mortgage books in some cases outside of increases by the European Central Bank to take account of the higher cost of raising deposits and market funding.
The number of Irish residential mortgages that are in arrears or have been restructured increased to 12 per cent in the three months to the end of June, according to the Central Bank.
Today's report by Trinity College's Policy Institute concluded that the financial crisis offers an opportunity to rebuild the banks to become more inclusive of all sectors of Irish society, including those experiencing poverty and social exclusion.
Funded by the Department of Social Protection, the report - Understanding and Combating Financial Exclusion and Overindebtedness in Ireland: A European Perspective - said that Ireland has the lowest level of access to current accounts in western Europe and some of the population relied solely on moneylenders to access credit.