Kevin Humphreys (Dublin South East, Labour)
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Question 7: To ask the Minister for Finance the way he can justify allowing Permanent TSB to charge its home loan customers a standard variable rate of 6% while the two other State owned banks, ESB and AIB charge 4.8% and 3% respectively, and while acknowledging that it is not the normal role of the Minister to interfere with the setting of interest rates, it is noted that a precedent has been set when he persuaded the AIB to reduce their SVR and if he will do the same with PTSB; and if he will make a statement on the matter. [39299/11]

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. However, I can confirm to the Deputy that Permanent TSB did pass on, in full, the recent reduction to customers holding standard variable rate mortgages. Ultimately the pricing of financial products, including standard variable mortgage interest rates, is a commercial decision for the management team and board of each bank, having due regard to their customers and the impact on profitability, particularly where the cost of funding to each bank, including deposit pricing, is under pressure.

In his recent letter to the Taoiseach, the Deputy Governor of the Central Bank stated that the Central Bank was not requesting the power to have regulatory control over the setting of retail interest rates. He indicated that the experience of such controls in the past, and in other countries, did 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. This could have an adverse effect on sound competition in the market. The Deputy Governor mentioned also that, within its existing powers and through the use of suasion, the Central Bank will engage with specific lenders which appear to have standard variable rates set disproportionate to their cost of funds.