Dáil Éireann Debate, Wednesday - 10 March 2021
268. Deputy Denis Naughten asked the Minister for Finance if he will introduce legislation to allow banks to differentiate between customers in different sectors specifically to exempt solicitor client accounts from negative interest rate charges; the discussions he has had with the Governor of the Central Bank on the issue; and if he will make a statement on the matter. [12525/21]
View answer298. Deputy Éamon Ó Cuív asked the Minister for Finance if his Department had discussions with banks (details supplied) or with the Central Bank regarding their proposals to charge negative interest rates on transaction moneys held by solicitors in clients’ accounts; if so, the result of these discussions; and if he will make a statement on the matter. [13308/21]
View answer300. Deputy John Brady asked the Minister for Finance if his attention has been drawn to the fact that banks (details supplied) have given notice that negative interest rates charges are to apply to moneys held in the solicitors' client accounts; the measures he plans to take regarding same; and if he will make a statement on the matter. [13333/21]
View answerI propose to take Questions Nos. 268, 298 and 300 together.
The application of interest rate charges is solely a commercial matter for the board and management of each bank. I have no role in the day to day operations of any bank operating within the State including banks in which the State has a shareholding. Decisions in relation to commercial matters are the sole responsibility of the board and management of the banks, which must be run on an independent and commercial basis.
Deposit balances and liquidity in general has risen significantly across the banking system in Europe in recent years as the ECB has continued to provide additional funds through their asset purchase schemes and long term refinancing operations. This has been further exacerbated by the COVID-19 pandemic as households continue to stay at home and save and businesses defer investment decisions.
This excess liquidity which has grown significantly in the European system has to go somewhere and in the main it gets placed back on deposit with the ECB who charge the banks -0.50%. The application of negative deposit rates by the ECB has resulted in European banks incurring a consequent cost on deposit accounts. The Irish banks are impacted in a similar way to their European counterparts. The banks across Europe have looked to pass some of the costs associated with negative rates to deposit holders with larger balances. The Irish banks are no different in this regard.
In passing on some of these costs, it is important to note that banks cannot differentiate between customers in different sectors and for that reason the approach taken is to apply charges based on the size of the deposit balance.
I have no plans to introduce legislation to allow banks to differentiate between customers in different sectors. Firstly, it does not appear to me to be either fair or equitable to distinguish between different classes of customers with some benefiting from an exemption to negative interest rates and others not benefiting. In addition, the unintended consequences of such a decision need to be considered. Banks are operating in a challenging business and economic environment and may choose not offer services to customers if it is not possible for to pass on some of the costs associated with the delivery of those services to these customers.
