Pressure on as banks defy call to cut rates

PRESSURE mounted on the country’s two largest banks to cut mortgage interest rates last night after a warning by Taoiseach Bertie Ahern that they were morally obliged to act to ease the burden on hard-pressed customers.

Four financial institutions have passed on the 0.5% reduction announced by the European Central Bank (ECB) last Thursday.

Permanent TSB, National Irish Bank and ACC Bank yesterday followed the example of IIB Homeloans, which was first to make the move last Friday.

But major lenders including AIB and Bank of Ireland, Ireland’s two biggest companies, defied calls to follow suit, refusing to rise to a series of challenges thrown down by the Tánaiste, Minister for Finance, the Financial Services Regulatory Authority and Mr Ahern.

First Active, the EBS and Ulster Bank were also among the institutions that continued to drag their feet, drawing a blunt message from an impatient Mr Ahern to “cut it quick”.

The Taoiseach said while he could not force the banks and building societies to make cuts, there was a “moral imperative” on them to do so and he hoped they would act in line with the Government’s view on the issue.

He reminded the institutions that the cuts were made by the ECB to help stimulate the European economy.

He said he could understand the banks’ reluctance if they were in a borderline financial position but added he had not read about any bank that was on the borderline recently.

He did not rule out calling in the banks to explain their position, saying Finance Minister Charlie McCreevy could do so if necessary.

The Taoiseach’s intervention and the tone of his comments are being viewed by some as an attempt to side with cash-strapped consumers amid criticism of the Government’s handling of the economy and recent forecasts that showed Ireland will be the most expensive country in the eurozone this year.

But the move may say more about the Government’s relationship with the main banks, which opposed the imposition of a €300 million bank levy announced in the last budget.

Permanent TSB denied it had passed on the cut in response to political pressure.

Head of marketing Niall O’Grady said the decision was formalised prior to the Taoiseach’s comments and was not announced earlier because adjustments had to be made to the company’s computer system

More in this section


Select your favourite newsletters and get the best of Irish Examiner delivered to your inbox