‘No plans’ for BoI to follow AIB in cutting rate

There are currently no plans to reduce Bank of Ireland’s standard variable mortgage rate following AIB’s 0.25% cut, although the situation is under review, according to chief executive Richie Boucher.

Speaking to the Oireachtas Finance Committee yesterday, Mr Boucher noted that AIB owes the taxpayer €20bn. “It is their decision how they use that money,” he said.

AIB announced last Thursday that it was cutting its standard variable rate mortgage by 0.25% to 4.15%. Bank of Ireland has not reduced its standard variable rate mortgage since 2009.

However, Mr Boucher denied a claim by Fianna Fáil TD Michael McGrath that the bank was “profiteering” from ordinary customers.

Mr McGrath said Bank of Ireland was charging 4.5% for the standard variable rate mortgage yet its cost of funding had dropped to roughly 1.15%. Moreover, Bank of Ireland was offering much more competitive rates in Northern Ireland and Britain, Mr McGrath added.

Mr Boucher said the bank’s net interest margin, which is the difference between the average interest it earns and its cost of funding, was 208 basis points. “This is less than banks in the UK and the US,” Mr Boucher said.

There was a significant liquidity risk of offering credit over a 25-year period and this had to be reflected in the margin a bank earned over that timeframe, he added.

Labour TD Arthur Spring accused Bank of Ireland of “damaging its brand” through its aggressive pursuit of customers in mortgage arrears. Mr Spring compared the bank unfavourably to what he claimed was the more accommodating approach by AIB. Mr Boucher again denied these claims.

He said the ultimate responsibility was to the taxpayer. Bank of Ireland had so far repaid €6bn to the Government for its €4.8bn investment and the State still controlled a 14% stake in the bank, he added.

Bank of Ireland’s management of its mortgage arrears was much better than AIB or Permanent TSB, Mr Boucher claimed.

At the end of June, there were 19,700 customers in forbearance measures, which was eight out of ten customers in arrears. Of these customers, 86% were sticking to the terms of the restructuring.

Bank of Ireland has completed 45 personal insolvency arrangements. Mr Boucher said he did not know whether there was a debt writedown involved in any of these cases. A spokesperson for the bank said that information was not available when contacted last night.

However, it remained the bank’s policy to pursue a customer for the residual value of the mortgage even when a house had been repossessed and sold. “The debt is with the person, not the property,” said Mr Boucher.


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