Dáil Éireann Debate, Tuesday - 10 May 2022
263. Deputy John Lahart asked the Minister for Finance his views on the practice of banks of charging negative interest charges to client accounts held on behalf of clients by solicitors who have their office accounts charged by the banks and have to pass on these negative interest rate charges to their clients as a consequence; and if he will make a statement on the matter. [22625/22]
View answerAs the Minister for Finance, 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 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.
Monetary policy for the euro area, including the setting of interest rates, is formulated by the Governing Council of the European Central Bank (ECB) and implemented by the Eurosystem. Negative policy rates have been part of a comprehensive monetary policy strategy adopted by the ECB since June 2014. The policy was introduced to counteract disinflationary pressures and to stimulate spending and investment in the wake of the global financial and sovereign debt crises. The Deposit Facility Rate (DFR) has been -0.5% since September 2019. The DFR is the rate that applies to funds that banks deposit with the Central Bank and with the current levels of excess liquidity, it controls market interest rates and prompts a general repricing of interest rates across different asset classes.
The application of negative deposit rates by the ECB has resulted in European banks incurring a consequent cost on deposit accounts. 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 solicitor's client account.
