IFA pushes for greater transparency on how banks publish interest rates

FARMERS want greater transparency from Irish banks on how they publish the interest rates they charge on loans, according to IFA farm business chairman James Kane.

Having previously published rates based on Euribor plus margin, the Irish banks have changed to publishing the Bank Cost of Funds plus margin. This move has taken away a clear and transparent reference rate.

This switch has made it more difficult for account holders to follow the interest rates they are being charged, given that the Euro Interbank Offered Rate (Euribor) can be read in newspapers daily.

Mr Kane said: “It is not acceptable that some of the banks have moved towards less transparent forms of charging, and I have written to the Financial Regulator asking him to investigate these practices and to take action to prevent the banks taking advantage of their farm business and SME customers.”

The IFA banking spokesman has issued a broadside accusing the banks of “sharp practices” over the past 12 months in the increased costs they have been charging farmers on overdrafts, mortgages and on most loans above €300,000.

IFA members have been complaining that their repayments are creeping up steadily, without any adequate explanation from their banks as to why.

Mr Kane said: “Normally, when the banks raise rates by 0.25% it is preceded by a fanfare of publicity, and this jump was three times that change. Some loan rates have risen 1.75%, others by 1% upon renewal. That’s another charge that was never there before. It is extremely unfair.”

He said with the lack of competition in the banking sector, and the high costs of providing security to new lenders, there are few options for farmers to move between banks in response to price rises.

“Over the past year, interest rates and other borrowing costs have increased for farm business customers as the financial institutions have implemented unilateral changes to existing accounts. This has included increased use of fees and charges, and adjustments to existing agreements.

“The additional costs being borne by customers are putting pressure on farm incomes and the viability of farm enterprise, deterring investment and undermining the competitiveness of the agriculture sector.”