Gay Mitchell (Dublin South Central, Fine Gael)
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Question 166: To ask the Minister for Finance if he is satisfied that as interest rates rise, the financial institutions are not taking the opportunity to increase their margins. [10210/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Deputy may wish to note that my function as the Minister for Finance is to provide an appropriate and robust legislative framework for regulation of the financial services sector. I am satisfied that, since the establishment of the Financial Regulator and the Financial Services Ombudsman, with a particular focus on the consumer, we have such a framework in place.

I have no statutory function in setting the interest rates offered by credit institutions — they are based on commercial criteria in the light of market conditions. Since 1992, the Irish banking market has been open to competition from credit institutions authorised in any EU/EEA Member State. Hence, new entrants to the market have helped stimulate increased competition in, for example, the mortgage market and the market for personal deposits. In addition, the Financial Integration Monitor, published by the European Commission to assess major trends in the pan-European financial market, indicates that the cross border competition inherent in the single market has contributed to convergence in interest rates across the euro area.

The Financial Regulator has drawn attention to the need for consumers to choose the right type of financial product for their needs. The Consumer Director in the Financial Regulator has statutory obligations in relation to monitoring and reporting on the extent to which competition exists in the Irish financial services market, as it affects customers. The Consumer Director reports on this area in the Annual Report of the Financial Regulator and it is also reflected in the priorities of the Financial Regulator set out in its Strategic Plan. Furthermore, the Financial Regulator's Consumer Protection Code requires that financial service providers, in all their dealings with customers, act fairly and honestly in the best interests of customers and make full disclosure of all relevant material information, including all charges. Also, when a credit institution is changing its interest rates, it must state the effective date of the new rate. It must also update the interest rate details on its information services as soon as the change comes into effect. The Consumer Credit Act, 1995, obliges credit providers to include specific information on the cost of all credit agreements.

The September 2005 Competition Authority report on banking focused on two markets — personal current accounts and SME lending. It suggested measures aimed at promoting more active competition, but found no evidence of anti-competitive behaviour by banks. The Authority recommended steps to make switching of accounts easier, and this recommendation has now been implemented both in respect of personal and business accounts among domestic financial institutions.