Dáil Éireann Debate, Tuesday - 11 May 2021
237. Deputy Aindrias Moynihan asked the Minister for Finance the engagement that has been had with the Central Bank in relation to the planned negative interest rate charges that will affect some solicitor client accounts; the measures being examined to ensure that any additional charges are not at the expense of the average customer and clients of these solicitors; and if he will make a statement on the matter. [24282/21]
View answerI 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 such as the application of interest rate charges are the sole responsibility of the board and management of the banks, which must be run on an independent and commercial basis.
I am advised by the Central Bank that it serves the public interest by safeguarding monetary and financial stability and by working to ensure that the financial system operates in the best interests of consumers and the wider economy. Monetary policy for the euro area is formulated by the Governing Council of the European Central Bank (ECB) and implemented by the Eurosystem. The Governing Council sets its key lending and deposit rates with regard to its monetary policy objective. The Central Bank has also advised me that it too does not have a role in prescribing or setting interest rates.
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 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, banks have decided that they cannot differentiate between customers in different sectors and for that reason, banks have chosen to apply charges based on the size of the deposit balance.
I am not in a position to comment on the potential impact on clients of solicitors. However, I understand that some legal practices have already taken steps to work closely with their clients to ensure that clients' monies spends the least amount of time possible in the solicitors client account.
