Fianna Fáil finance spokesperson Michael McGrath has said that, each time the ECB changes its benchmark interest rate, the banks should be required by the Central Bank of Ireland to make a statement on the impact, if any, on the full range of products offered by the bank.
The ECB recently dropped their rate to an historically low 0.5% but none of the main banks are set to pass it on to their customers – apart from those on tracker mortgages, who automatically benefit from the rate cut.
Deputy McGrath stated, “Apart from the welcome rate reduction enjoyed by those with tracker mortgages, it is difficult what positive impact, if any, last week’s ECB decision will have on personal and business customers of the banks in Ireland. This is despite the fact that the purpose of the ECB rate cut was to stimulate economic activity in a flagging eurozone economy.
“Far from the rate cut stimulating economic activity in Ireland, the likelihood is that the banks will seek to make up for the additional losses on tracker mortgages as a result of the cut by implementing lower deposit rates and hiking variable loan rates even more. Following last week’s rate cut, not one bank came out and said that its variable mortgage rate would be reduced as a result.
“In my view, it is time the banks were required to make a formal statement in response to a change in the ECB’s benchmark rate. Aside from the obvious knock on effect on tracker products, the response would set out the likely impact – if any – of the rate change on a range of other measures including deposit rates, SME loan rates, variable mortgage rates, the bank’s funding mix and the bank’s profitability. It is only by assessing the impact of a rate change on all of these measures that we can begin to evaluate its influence on the wider Irish economy.
“I believe that requiring the banks to make such a statement would greatly improve our understanding of the impact of an ECB rate change on the Irish economy and would also serve to hold the banks accountable for their response to a change in the ECB rate.”