Róisín Shortall (Dublin North West, Labour)
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Question 105: To ask the Minister for Finance the arrangements in place to ensure that banks who are availing of the bank guarantee scheme pass on ECB interest rate reductions in full to customers; the monitoring there is of such activity; and if he will make a statement on the matter. [47585/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The decision on whether a bank operating in Ireland passes on ECB interest rate cuts to customers is a commercial decision for the individual banks concerned. While my Department monitors the impact of changes in mortgage interest rates on the Consumer Price Index (CPI), it has no direct function in relation to the individual bank decisions on the matter.

However, as the Deputy will be aware, I have publicly indicated that I expect banks to pass on funding cost reductions to their customers, including in particular to those purchasing properties on variable mortgages and to small and medium-sized enterprises. This is important to help support sustainable growth and employment along with the maintenance of price stability.

My Department will be working closely with the Financial Regulator to ensure that those institutions covered by the bank guarantee scheme do not pass on the costs of the bank guarantee to their customers in an unwarranted manner. However, it must be borne in mind that banks primarily borrow not from the ECB but from the interbank market, where spreads have been significantly above ECB rates over the last year. All covered institutions have to date passed ECB interest rate reductions to their customers in full. While two credit institutions have indicated that they will not be passing on the full amount of the recent interest rate cut to their customers, these are not covered by the guarantee scheme.