Banks are piling pressure on the Government to force An Post to cut interest rates on its savings accounts because they are more competitive that those offered by other financial institutions.
The three domestic banks have been lobbying the Department of Finance to introduce interest rate reductions on An Post savings accounts. They have argued that the higher interest rates offered by An Post distort competition and create an uneven playing field in attracting deposit flows.
The department declined to comment, although a department source said, "this is an issue and it is something we are looking at".
The three banks also declined to comment. However, sources at two confirmed they have asked the Government to lower the interest rates applied by An Post.
The current rates on An Post products include:
* 7% on the three-year savings bonds;
* 12% on the four-year national solidarity bond;
* 15% on the five-year savings certificate;
* 17% on the six-year instalment savings;
* 45% on the 10-year national solidarity bond.
These rates have helped An Post soak up a huge amount of one-off large sum deposits. The banks offer a number of fixed rate and term accounts. Bank of Ireland offers 2% on regular savings accounts, AIB 2.85% on its regular savings account, and Permanent TSB also offers 2.85% on its regular savings accounts.
There was a cut in the interest on An Post savings accounts last December, the first rate decrease since 2007. The ECB lowered the main interest rate for the eurozone to a historic low of 0.5% a week before last.
The cost and availability of deposits has caused huge problems for the domestic banks. Because of the vulnerable state of the sector, the banks had to pay punitive interest rates on deposit accounts, which squeezed profitability. In some cases the banks are paying more for the cost of funding than they are charging on products — the multi-billion euro tracker mortgage books are a case in point.
Over the past two years the three banks have attracted new deposits and have lowered the rates on deposit accounts. Funding costs were eased further by the removal of the Government’s eligible liabilities guarantee scheme at the end of March. Further progress is hampered by competition from An Post, they claim.
The NTMA, which is responsible for setting the rates of An Post savings products, said "it constantly keeps rates under review".
Meanwhile, chairman of the Dáil’s Public Accounts Committee John McGuinness says probes into the banking collapse are being blocked. The former Fianna Fáil minister says the committee has been denied access by the finance department to key files about what happened on the night of the bank guarantee.