Eurozone banks move swiftly to cut rates

DOZENS of banks across the Eurozone have moved swiftly to cut rates and, in most cases, passed on the full ECB cut to their customers.

Despite mounting criticism, the State’s two largest banks, Bank of Ireland and AIB, have made no decision following the latest rate cut. The banks are expected to make a decision by the middle of the week.

Permanent TSB said it also expected to make an announcement on the interest cut sometime this week.

Financial institutions in Austria, Spain, Finland, France, Holland, Belgium, Germany, Greece and Portugal, have all cut their rates - most of them reduced it by the full half percent.

The only exception is Italy, where mortgage rates are still way ahead of other EU countries at 7.6% and the banks are refusing to pass the ECB cut on to their customers.

The small firms organisation ISME said Irish banks had failed to pass on the full interest cuts since the ECB took control of interest rates.

The organisation said the cuts were being made at a time when banks were making billions on ordinary customers and small businesses.

Eddie Hobbs of the Consumers’ Association of Ireland said the banks behaved the way they did because there was no great competition in the Irish market.

The CAI’s financial spokesperson, however, was also critical of consumers who needed to wake up to the fact that they were being constantly taken for a ride.

Finance Minister Charlie McCreevy is considering levying banks who fail to pass on European Central Bank interest rate cuts to customers.

A 300 million levy was imposed on all financial institutions in the December budget and the minister can increase it in the next budget and pass the extra cash accrued by the Exchequer back to the taxpayer.

Tánaiste, Mary Harney, also warned lenders not to use the ECB’s action to increase their own profits and that she would be very angry if the interest cut was not passed on to customers.

IIB Bank was the first Irish lender to follow ECB’s cut by reducing its variable rate to 3.45%.

A reported comment by IFSRA - the financial services regulatory authority, that it would expect the cut to be passed on to customers by the lending institutions, was criticised by Financial Services Ireland, the national financial services industry body.