Dáil Éireann Debate, Wednesday - 1 February 2012
45 Deputy Catherine Murphy asked the Minister for Finance his plans to introduce consumer legislation in the area of mortgage rate reductions; the options available to him; the obstacles that require consideration prior to drafting legislation; and if he will make a statement on the matter. [36213/11]
Amharc ar fhreagraI have no plans to introduce consumer legislation into the area of mortgage rate reductions. In late 2011 the Taoiseach asked for the Central Bank's opinion on recent developments in mortgage interest rates and on possible action by the Central Bank in that regard. In response to the Taoiseach's request, the Deputy Governor wrote to him on 11 November 2011. In his letter the Deputy Governor stated that the Central Bank was not requesting the power to have regulatory control over the setting of retail interest rates given that this could absolve banks of their responsibility to price risk accurately. He indicated that experience of such controls in the past and in other countries, did not encourage the Central Bank to believe that such a regime would be advantageous in net terms as the banking system recovers its normal functioning. Binding controls tend to reduce the availability of credit and channel it to the most creditworthy customers, starving smaller and less secure customers from credit. Binding controls would have a chilling effect on the entry of sound competitors in the market. By absolving banks from their responsibility to price risk accurately, binding interest rate controls would especially during the recovery phase, impede progress towards the re-establishment of bank management practices that can ensure a healthy and free-standing banking system no longer dependent on the Government for bail-outs. In his letter, the Deputy Governor also said that within its existing powers, the Central Bank would continue to engage with specific lenders which appear to have standard variable rates set disproportionate to their cost of funds.
