Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I have read the report, which goes through all the key elements of pricing in terms of interest rates, the cost of funds, the cost of credit risk associated with the lending, the operational costs of running the bank, the cost of capital and the competitive environment faced by the banks. The Central Bank position is well known. There are some interesting points in the report. For example, it says, "Their boards and management need to recognise that charging spreads that excessively exploit the current weak competitive environment risks being counterproductive if they bring down upon themselves Government policy reactions". The banks have not heard this message and responded accordingly, and this is the problem. The Bill passed Second Stage unanimously in the Dáil in May without a vote. The Government did not oppose the Bill. Perhaps the Government was anxious to avoid a parliamentary defeat so early in its lifetime.

On the question of constitutionality, I am not a senior counsel, and I welcome Deputy Pearse Doherty's suggestion that we refer to the Parliamentary Counsel. The Government introduced amendments to the personal insolvency legislation whereby an insolvency court could impose a solution on a lender, including a write-down of the mortgage amount owed. Although the Government said for a long time that it would not be constitutional, the Attorney General must have passed it. If it is constitutional, I cannot see how the measure in this Bill could be unconstitutional. We will await the judgment and opinion of the Parliamentary Counsel.

The key measure in the Bill is defining a market failure. It follows the Central Bank's assessment which can result in it issuing a direction to a lender or group of lenders whereby, as stated in section 4, the rate being charged is "higher than the Central Bank considers can be reasonably and objectively justified by reference to the factors set out in section 3". Those factors deal with all the issues contained in the Central Bank's report on variable rate pricing. The benchmark is whether the rate a bank is charging to the customer can be "reasonably and objectively justified" by reference to those factors. Undoubtedly, there are rates being charged in the Irish market that are exploitative and cannot be justified by reference to those factors. The Bill is particularly designed to deal with those outliers, those egregious situations in which people are paying rates that cannot be justified.