Notwithstanding the fact that the State is a significant shareholder in the covered institutions, I must ensure that the banks are run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State, as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. Relationship Frameworks have now been agreed that clearly define the nature of the relationship between me and each of the covered institutions. Those Frameworks were published on 30 March 2012 and can be found at: http://banking.finance.gov.ie/presentations-and-latest-documents/. As has been stated previously, I have no role in the day-to-day commercial and operational decisions of the covered banks, which includes the pricing of financial products, including standard variable mortgage interest rates. Ultimately, the pricing of financial products, including standard variable mortgage interest rates, is a commercial decision for the management team and board of the respective banks, having due regard to their customers and the impact on profitability, particularly where the cost of funding to the banks, including deposit pricing, is under pressure. Credit institutions are not primarily or always funded from the ECB, but rather from a wide variety of sources.
Neither the Central Bank nor the Department of Finance has a statutory function in relation to interest rate decisions made by individual lending institutions at any particular time. However, the Central Bank have informed me that, using their existing powers, they will engage with lenders which appear to have standard variable mortgage rates set disproportionate to their cost of funds.