Noel Coonan (Tipperary North, Fine Gael)
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Question 54: To ask the Minister for Finance his views on whether increases in bank charges and interest rates are consistent with the banking policy; and if he will make a statement on the matter. [11575/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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There are basically two categories of charges applied by the banks – interest-related banking charges and non-interest-related banking charges and fees. Interest-related banking charges are determined by the banks themselves on the basis of market considerations and neither the Minister for Finance nor the Financial Regulator would have any statutory role in this matter. In setting the level of such charge for a borrower, a bank would have regard to a variety of factors such as the customer's credit history, the risk perceived to attach to the loan, the cost of funds to the bank, competition considerations etc.

The increase in the interest rates on some personal loans and overdrafts reflects the commercial market realities which the bank faces. Basically, the bank must pay more to access the funds which it uses to operate. Although the ECB base rate remains at historic lows, the level of interest rates also depends on a broad range of factors including deposit rates, market funding costs, the competitive environment, an institution's overall funding. With regard to the impact on Irish families of these changes, it is self evident that any increase in interest rates will have a negative impact on the disposable income of households. The Government has through a number of measures, including the Mortgage Interest Subsidy Scheme and the moratorium on home repossessions, sought to ease the burden of the recession for the most vulnerable members of Irish society. However, I do not have any function in the day to day running of the recapitalised banks and have no role in setting interest rates.

The regulation of non-interest-related banking charges/fees is vested in the Financial Regulator and credit institutions are obliged to seek the prior approval of the Regulator before any increase in such fees. In fact, Ireland is the only EU country with statutory control on such fee increases. If the increased charge to which the Deputy is referring falls within this category, then it will, as I have indicated, have received the prior approval of the Financial Regulator.