Michael McGrath (Cork South Central, Fianna Fail)
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Question 97: To ask the Minister for Finance the progress that has been made on the Programme for Government commitment to force banks to absorb a 0.25% interest rate increase by the European Central Bank; and if he will make a statement on the matter. [17945/11]

Michael Noonan (Limerick City, Fine Gael)
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The Deputy is reminded of the exact terms of the programme for Government:

The Government will examine a number of ... proposals, including ... directing any mortgage provider in receipt of State support to present Government with a plan of how it intends to cut its costs, over and above existing plans, in a fair manner by a sufficient amount to forego a 25 basis point increase on their variable rate mortgage.

The Government has published a comprehensive programme setting out the goals to be achieved over the lifetime of the current Dail. Items in the programme will be addressed in a measured way and prioritised during the five year term.

As part of the restructuring and recapitalisation, the banks are engaging in ambitious cost reduction plans which are already well under way. The effect of these cost reductions will be to improve operating margins and permit the banks to better absorb any future raises in funding costs without passing them on to customers or to indeed pass the savings onto mortgage customers. The Government remains in consultation with the banks in connection with the more significant parts of these plans including a significant reduction of employee numbers.