Anger over Government’s lack of action passing on ECB rate cuts

FARMERS are enraged that the Government has made no progress in forcing Irish banks to pass ECB interest rates cut on to customers.

The IFA has slammed the Government’s seeming inability to exert influence over the main Irish banks, who yesterday said they intend to maintain the independent setting of interest rates. The matter was raised in a heated Dáil debate between Taoiseach Enda Kenny and Fianna Fáil leader Micheál Martin.

IFA president John Bryan said there is increasing anger among farmers as the banks increase the costs of borrowing for existing farm and other small business customers and refuse to pass back ECB rate reductions.

“The Government and the financial regulator must intervene and bring some transparency to the way in which banks calculate the cost of funds,” said Mr Bryan. “I am seeking an urgent meeting with the regulator to discuss this.

“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.”

He said the additional costs are putting pressure on farm incomes and the viability of farm enterprise, delaying investment and hurting competitiveness.

“In different times, customers would be advised to shop around but the reality is, with the lack of competition in the banking sector in Ireland, and the high costs of providing security to new lenders, there are almost no options for farmer customers to move between banks.”

Mr Kenny yesterday told the Irish Examiner he had not made any move to legislate on banking interest rates because he had received no approach from the financial regulator, Michael Elderfield, on the matter.

Meanwhile, IFA farm business chairman James Kane has met with senior officials from the Bank of Ireland to discuss a number of banking issues concerning farmers.

Mr Kane again raised concerns over BoI’s lack of transparency on its rate charges, a subject directly linked to the refusal of the Irish banks to track the Euribor rate. In real terms, farmers report they are being hit with loan repayment rises varying from €2,000 per year to €200 per month.

The IFA banking expert asked how loan rate rises of 0.7% could be introduced without any attending publicity, and asked why ECB rate cuts were not being passed on to Irish banking clients.

“They said that when their costs of funds were lower, they would give the reductions back to the customer,” said Mr Kane. “They said that, for those farmers who were put into difficulty by the extra charges, they would consider putting them on interest-only repayment plans.

“They said that those already on interest-only plans would be more difficult to sort out. They said that they were well within their rights to make the extra charges. On the question of transparency, they said the Central Bank would be overseeing any changes they introduce.”

The IFA team also questioned BoI officials on its long-term commitment to farming, noting that half of the €200m in funds earmarked for farmers has now been loaned out.

The officials said the bank was completely open for agriculture business.