Enda Kenny (Mayo, Fine Gael)

We called in the banks and had a discussion with them about lending policy in general and whether AIB and Bank of Ireland would be in a position to meet the 2011 target of lending €3 billion apiece, €3.5 billion next year and €4 billion in 2013. We also called in Ulster Bank so there were three banks together at the end of that meeting for a discussion on the passing on of the interest rate reduction as confirmed by the ECB. The ECB passed on reductions in interest rate to help people who are under pressure, to prevent banks making a profit on such cases and because it is in the interest of stimulating investment and growth.

Allied Irish Bank passed on the interest rate reduction; the other two did not. Since then there has been a further reduction. The point made at the meeting was that the Government was in full agreement with the regulator that we do not want to see unfair increases put upon mortgage holders who are under pressure. Obviously, this is in everybody's interest. One does not want a situation whereby mortgage holders are severely put upon by the very banks that made serious mistakes in the past.

Following that meeting we contacted the Central Bank and the Financial Regulator to request their opinion on recent developments in regard to mortgage interest rates and the possible policy of the Central Bank in the matter. The Financial Regulator responded to me and indicated it would step up an intensive engagement with the banks on the issue of setting variable interest rates disproportionate to the cost of their funds. This is in addition to the Central Bank ensuring the banks treat their customers fairly.

I also made it clear to the banks that we would call them back in January to discuss an agenda of items in regard to access to credit, lending policy and difficulties being experienced by a whole range of would-be borrowers in business and in SMEs throughout the country. I had indicated that if the Financial Regulator sought change in his powers of authority the Government would respond to that. The regulator replied by way of clarification, stating that the power to exercise close regulatory control over retail interests is not being sought by the Central Bank at this time.

In regard to further ECB interest rate cuts announced on 8 December, the same applies. I welcome the decision of EBS, Permanent TSB and the Irish Bank Resolution Corporation to pass on a further reduction to variable rate customers and would encourage the other banks to follow suit. I reiterate, the reason the ECB announced interest rate reductions was to relieve pressure on hard-pressed mortgage payers, to stimulate growth and investment and that banks would not make a financial killing as a consequence of bad decisions they made.

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