Vol. 436 No. 1
90 Mr. Yates asked the Minister for Finance if, in the context of the current margin between lending and deposit rates being charged by banks, he has any proposals to increase the powers of the Central Bank to ensure that borrowers have the minimum possible rates of interest on loans; and if he will make a statement on the matter.
The Central Bank is the body with primary responsibility for interest rates. The Bank has informed me that the trend of interest rates in Ireland is determined primarily by supply and demand conditions in wholesale money markets. These wholesale rates are currently on a par with those in Germany, and below those in most other EC countries including France, Belgium, Denmark, Italy, Spain, Portugal and Greece.
Arrangements agreed between the Central Bank and the Associated Banks constrain the highest rate these banks may charge for normal risk lending propositions for borrowers in the A (personal) and AA (small businesses/farmers) category borrowers, and the maximum rate chargeable is related to the level of the one month interbank rate. Moreover, the Central Bank has informed me that in fact the margin between the main banks' weighted average lending rate and weighted average cost of funds has been narrowing over the past year.
However, as the Deputy may also be aware, I have recently reminded the banks publicly of my concern that they should seek to ensure that small businesses get the maximum possible benefit from reductions in interbank interest rates and I was glad to see a response by some of the Associated Banks to these concerns in their recent round of rate reductions.
