Michael McGrath (Cork South Central, Fianna Fail)
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Question 72: To ask the Minister for Finance if he has examined the recently published study on interest rate restrictions in the EU; his views on the feasibility of the use of interest rate restrictions to prevent providers of credit from charging consumers excessive interest rates; and if he will make a statement on the matter. [36893/11]

Michael Noonan (Limerick City, Fine Gael)
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I assume that the Deputy is referring to the 2010 "Study on Interest Rate Restrictions in the EU (Final Report) (Ref. No. ETD/2009/IM/H3/87)" which followed wide consultation with Member States and is available on the European Commission website. It should be noted that the views expressed in the study are the views of the consultants who drafted the study and not those of the European Commission.

The Study, which runs to over 400 pages, provides the European Commission with an overview of the many types of interest rate restrictions that exist in EU member states and assesses the relevance of such restrictions. Importantly it concludes that interest rate restrictions, where they are applied, do not affect ordinary mortgage loans because actual rates are usually far removed from the interest rate ceilings set, and also that interest rate restrictions can affect the supply of credit, as recently pointed out by the Deputy Governor of the Central Bank. I understand that the Study's findings will be taken into account by the European Commission if developing any future position on interest rate restrictions. 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 in Ireland regulated by the Central Bank.

In a recent letter to the Taoiseach, the Deputy Governor of the Central Bank stated that the power to exercise close regulatory control over retail interest rates is not sought by the Central Bank at this time. The Deputy Governor goes on to point out the difficulties which would result from Central Bank powers to set interest rates. These include a reduction in the availability of credit particularly to less secure customers, a chilling effect on entry of sound competitors in the market and an impediment to progress towards the re-establishment of bank management practices that could ensure a healthy and free standing banking system no longer dependent on the Government for bail outs.

Based on the advice received from the Central Bank I have no plans to recommend to Government that they introduce legislation to compel lenders to reduce their standard variable rates. However, I will keep the matter under review.