asked the Minister for Finance whether, in the light of the recent increase in the bank rate in Britain and the action taken by the banks here, it is the intention of the Government to examine the desirability of introducing legislation for the purpose of effecting changes in the banking system.
Ceisteanna—Questions. Oral Answers. - Banking System and Interest Rates.
asked the Minister for Finance whether discussions took place between the Government and the banks prior to the recent increase in the interest rates, and, if so, whether he will make a statement in the matter.
I propose, with the permission of the Ceann Comhairle, to take Questions Nos. 27 and 28 together.
The acting Minister for Finance had discussions with the Irish Banks' Standing Committee prior to the recent increase in bank interest rates. In view of the rise in interest rates elsewhere an increase in deposit rates was necessary here to safeguard the availablity of funds for the requirements of agriculture, industry and domestic activity as a whole. This increase in deposit rates necessitated an increase in lending rates. In adjusting their rates the banks were fully alive to the desirability, in the interest of economic development, of keeping lending rates as low as possible. The Government were satisfied that the changes in interest rates announced by the banks on 30th September, 1957, were, in the circumstances, necessary and appropriate and no cause is seen for any legislation bearing on this matter.
Would the Minister state whether he himself had any consultations with the Government before he spoke on this subject with America?
No. There was no indication that these rates here would be connected with American rates. I had consultations by cable, if you like.
asked the Minister for Finance what repercussions the increase in interest rates will have on the level of employment, and what action the Government propose to take to offset the adverse consequences.
Interest rates are only one of a number of factors which may influence the level of employment and it is impossible to isolate the effects of particular factors. It seems unlikely, however, that the increase of 1 per cent. in bank lending rates will, of itself, cause any serious setback in economic activity. It is gratifying that the recent live register figures of unemployment show a substantial reduction on the corresponding figures for 1956 and I am hopeful that the general economic position of the country will continue to improve. It should not be overlooked that the increase in deposit rates is intended to safeguard the supply of funds for trade and industry and for productive investment.