Interest rates - Government, rein in AIB

Allied Irish Banks has announced pre-tax losses of €2.656 billion for 2009. Colm Doherty, the AIB group managing director has described the current state of retail banking in Ireland as “quite dysfunctional”.

The cost of borrowing money has been increasing, with the result that the bank has to pay more for the money it borrows than it charges customers. It does not take an economist to realise that this is commercially unsustainable. He warned that AIB prices are going to increase across the board, including mortgages, in 2010.

The figures involved are beyond the comprehension of most people. Much has been written about people facing repossession of their property at the current interest rates on mortgages, and if those rates go up the situation will become that much worse. This has already reached crisis proportions.

Those who bought homes at the height of the boom, paid exorbitant prices and are essentially saddled with negative equity. The banks were largely responsible for generating the extravagance that led to the problem, and must accept their share of the responsibility.

AIB developed a rather dismal record of overcharging during the good times of recent years. The Government has now been compelled to come to the rescue of the banks with public money. It has an even greater obligation to come to the rescue of those citizens who were innocent victims of what was allowed to happen.

The Government, which is helping the banks, must help the people, too, by using all of its influence to ensure AIB does not increase these mortgage rates.