Eric Byrne (Dublin South Central, Labour)
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Question 141: To ask the Minister for Finance the action he will take against banks who do not pass on ECB interest rate cuts; and if he will make a statement on the matter. [34527/11]

Michael Noonan (Limerick City, Fine Gael)
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Neither the Central Bank nor I, as Minister for Finance, have a statutory role in the setting of interest rates charged or paid by financial institutions regulated by the Central Bank. While I want to welcome the decision by the majority of lenders to reduce their standard variable rates following the recent announcement by the ECB, I would encourage all lenders to follow suit. Such a reduction will be of benefit to homeowners struggling with mortgage payments.

The Government wants the lending institutions to pass on the interest rate cut for a number of reasons. In particular, the interest rate cut will be of assistance to those mortgage holders who are struggling to pay their mortgages. Following a request from the Taoiseach, Mr Elderfield, the Deputy Governor of the Central Bank, forwarded a report regarding mortgage interest rates on 11 November 2011. The Deputy Governor acknowledges that the Government is not unjustified to have concerns for some particular banks regarding the widening of the spreads by which their standard variable rate (SVR) exceed their cost of funds and how they are still so far above the prevailing rates of their industry peers. However, the Deputy Governor states that the power to exercise close regulatory control over retail interest rates is not sought by the Central Bank at this time. He has indicated that the Central Bank will, within its existing powers and through suasion use existing processes to engage with specific lenders which appear to have standard variable rates set disproportionate to their cost of funds.

The Deputy Governor has indicated that experience of interest rate controls in the past and in other countries does not encourage the Central Bank to believe that such a regime would be advantageous in net terms as the banking system recovers its normal functioning. Binding controls tend to reduce availability of credit and channel it to the most creditworthy customers, starving smaller and less secure customers from credit. The Deputy Governor indicates that this could have a chilling effect on the entry of sound competitors into the market. By absolving banks from their responsibility to price risk accurately, binding interest rate controls would, especially during this recovery phase, impede progress towards the re-establishment of bank management practices that can ensure a healthy and free-standing banking system no longer dependent on the Government for bail-outs.

I welcome the report from Mr Elderfield which will be examined to see what further action, if any, is required. My initial reading of his report is that the Deputy Governor is not seeking emergency legislation. Taking into account the advice of the Central Bank, I do not intend to recommend to Government to introduce emergency legislation.

Michael Noonan (Limerick City, Fine Gael)
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I set out below the rules applying to the opening of a bank account with an Irish bank under Irish anti money laundering legislation. Insofar as the Deputy's question relates to difficulties experienced by emigrants in opening a bank account in other jurisdictions, the applicable rules would depend on the legislation of that jurisdiction. However, Member States of the European Union apply broadly similar anti money laundering rules under the 3rd Money Laundering Directive. The 3rd Money Laundering Directive, in turn, reflects the recommendations of the Financial Action Task Force on money laundering (FATF), the main international anti money laundering organisation. Those recommendations should be reflected in the anti money laundering rules applicable to opening a bank account in the member countries of the FATF which include countries such as the United States, Canada and Australia. Section 33 of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 ("the CJA 2010") requires designated persons (such as banks) to apply customer due diligence measures prior to establishing a business relationship with a customer e.g. open a bank account for a customer.

The customer due diligence measures require that the designated person must identify and verify the customer's identity on the basis of documents or information that the designated person has reasonable grounds to believe can be relied upon to confirm the identity of the customer. Where a person has emigrated and does not present in person to the bank for verification of identity, additional customer due diligence measures must be applied. A number of such additional measures are set out in section 33(4) including verification of identity on the basis of obtaining additional documents or information.

The CJA 2010 does not limit the kinds of documents or information that a designated person may have reasonable grounds to believe can be relied upon to confirm the identity of the customer. Draft guidelines which have been prepared by various sectors of the financial services industry in consultation with the Central Bank of Ireland provide guidance on the identification and verification procedures. These guidelines specify a non-exhaustive range of documentation which the bank may choose to accept for the purposes of verifying identity. The range of documentation includes utility bills but also many other types of documentation issued by Government Departments, state agencies and financial institutions. In the event that an individual provides a plausible explanation as to why the suggested documentation cannot be provided, the bank may choose from an additional specified list of methods to assist in confirming the identity of the customer.

Ultimately, it is up to each bank to decide on a risk based approach whether they will accept other forms of customer ID. However, where it is not feasible to expect the customer to meet the documentation standards as set out in the guidelines, the bank is encouraged to consider whether it is appropriate to adopt an alternative approach to facilitate financial inclusion which is set out in an appendix to the guidelines. There is a very clear statement in the guidelines that "where an individual is genuinely not in a position to provide standard evidence of identity it is important that he/she is not prevented gaining access to the financial system solely due to not being able to produce particular documentation."