‘No evidence’ of Central Bank attempt to cut mortgage rates

British financial institutions felt Central Bank over-aggressive in dealings with them

Briefing notes drawn up for Minister for Finance Michael Noonan were released to Sinn Féin finance spokesman Pearse Doherty. Photograph: Gareth Chaney/Collins

Briefing notes drawn up for Minister for Finance Michael Noonan were released to Sinn Féin finance spokesman Pearse Doherty. Photograph: Gareth Chaney/Collins

 

There was no evidence of how active the Central Bank had been in trying to persuade the banks to cut standard variable mortgage rates, according to briefing notes drawn up for Minister for Finance Michael Noonan before his meeting last month with Central Bank governor Patrick Honohan.

The notes also show that the Irish Ambassador to Britain had fed back some “very negative comments” from British financial institutions about their experience in dealing with the Irish Central Bank, which they felt was “overly aggressive” and too focused on small infringements.

As controversy built about the level of standard variable mortgage rates, the Minister raised the issue with Mr Honohan at a meeting on April 2nd.

According to briefing notes prepared by senior civil servants and released to Sinn Féin spokesman on finance Pearse Doherty, the Central Bank had traditionally resisted the idea of taking direct control of interest rates, arguing that this would hinder competition and the availability of credit. Instead the bank preferred to rely on persuasion, it said.

No evidence

However, the note then added: “There is no evidence of the extent to which the Central Bank has been active in this regard.”

Since the meeting, pressure on the banks has mounted and AIB has reduced its standard variable mortgage rate, though a number of other banks say they have no plans to do so.

The briefing note also refers to “issues” between the Central Bank and the Department of Finance on legislation to protect borrowers whose loans are sold to investment funds and other buyers.

However, the details of this are redacted.

The note also says that the two men would discuss mortgage arrears and indicated that measures were being put in place in case the Government decided that the Credit Review Office, which currently reviews lending decisions, also took on a role in overseeing cases where banks turn down insolvency cases.

Publish plans

The Government is expected to publish its plans on mortgage arrears shortly and it is expected to include a review mechanism.

In a separate briefing note also released to Mr Doherty, the Minister is briefed on the negative feedback from British financial institutions provided to the department by the Irish Ambassador to Britain, Dan Mulhall.

The firms criticised the Irish Central Bank for what they said was its aggressive stance and its focus on “minor, inconsequential infringements.”

The note added: “In their view this has the potential to undermine the Irish financial sector.”