asked the Minister for Finance if he will make a comprehensive statement as to the reasons for the widening of the margin between the Central Bank's rediscount rate and the commercial banks' overdraft rates since 1968.
Ceisteanna—Questions. Oral Answers. - Bank Rates.
14.
The Central Bank's rediscount rate is normally determined each month primarily by reference to the discount rate for Exchequer Bills which in turn is related to the average discount rate offered at the weekly tender for British Treasury Bills in London.
The commercial banks' overdraft rates do not necessarily vary with the Central Bank's rediscount rate. They are influenced by factors such as the general cost of money and the interest rates of the British commercial banks. At the present time, the Central Bank considers that the level of overdraft interest should not be such as to promote excessive demands for consumer credit.
Will the Minister agree that the rediscount rate of the Central Bank, if it is to be used properly, should be a weapon to force the commercial banks to charge a proper rate? In the two years since 1968 it has moved approximately 1½ per cent from the Central Bank rediscount rate. This is jacking-up unnecessarily the profits of the commercial banks.
I have already pointed out to the Deputy that there is not necessarily any close connection between the two items he is trying to compare.
There certainly is.
The Deputy is right.