asked the Minister for Finance if he will state fully the changes which have taken place in bank interest rates on loans, overdrafts and deposits; the body by whom such changes were decided and the authority under which such action was taken; the reasons for the changes and the date from which it is intended that they should operate; whether the Government were consulted; whether the Government made any representations in the matter, and whether the Government concurred in the decisions taken.
Private Notice Question. - New Bank Rates.
I understand that there has been a general increase of 1 per cent. in the rates for loans and overdrafts and of ½ to 1 per cent. in the rate on deposits; these changes were decided by the Irish Banks' Standing Committee which includes representatives of all Irish banks; the main reason for the change was the banks fear of large-scale loss of deposits which would lead to a severe restriction of credit. The Government were informed of the proposed action in the matter and the reasons for it. After discussion with representatives of the banks the Government felt that, in view of the need for precautionary measures against possible serious loss of deposits and the curtailment of credit that might follow, they could not press further for a modification of the banks' decision. The new rates came into operation on Thursday, 20th March.
Will the Minister say if the necessity for raising rates on loans and overdrafts was particularly discussed, and if the reason for raising rates generally was in order to safeguard deposits here?
One follows inevitably on the other. The primary reason was to safeguard deposits here and to prevent the flow of capital out of the country. Arising out of the need to raise the deposit rate, it inevitably followed in view of the discrepancy between the overdraft rate and deposit rate, that an increase in the overdraft rate should take place.
Do I understand that the increase in the rates on loans and overdrafts operates immediately on all loans and overdrafts that were in operation on the date of the change?
The new deposit rate and the new overdraft rate came into operation on the 20th March.
Would the Minister say whether it necessarily follows that work done by local authorities and other public works will be dearer in the future?
It does not inevitably follow. The increase will certainly not be as great as if the volume of credit were restricted by reason of the outflow of capital from this country.
Will the Minister say whether a local authority which has to go to the bank to borrow money for the purpose of its day to day or year to year activities will be required now to pay this increased bank rate of say 6 per cent. to a bank which is giving 1½ per cent. to its depositors?
That question ought to be put to the banks.
I am putting it to the Minister who is perhaps the best representative of banks in the country.
No, I am not a banker.
The Minister has indicated that the new rate on loans and overdrafts will operate from the date which has been given. Will he say if the Government is persuaded that there are adequate reasons for increasing the rate on existing loans and overdrafts in all instances?
That is a comprehensive question which I am certainly not prepared to answer in this fashion.
Is the Minister aware that the cost of the increase in the bank rate is already adding an extra burden of £3,000 per year to the Cork Harbour Board? Arising out of the Minister for Industry and Commerce's statement here last Friday, I hope he is not now of the opinion that it does not matter who controls the banks.
Surely that is a separate question.