Tuesday, 21 February 2012
Department of Finance
State Banking Sector
I am advised by the Central Bank that when credit institutions provide fixed rate mortgages to customers, they utilise wholesale funding at a fixed rate to match the fixed credit they provide to customers. If interest rates fall, credit providers may be locked into accessing wholesale market credit at a higher rate than they can charge customers in the current retail market. As a result, a cost arises which is covered through the charging of a break cost. In the current environment, interest rates have fallen, and as a result there may be a differential between the interest rate that the credit provider has locked into, some time in the past, for the funds supplied to customers and what they can charge to customers, for the remaining period of the fixed rate loan.
Section 121 of the Consumer Credit Act 1995 permits a mortgage lender to apply an early redemption fee in certain circumstances, which includes breaking a fixed rate contract.
Question 190: To ask the Minister for Finance if he is satisfied that the pillar banks have met their lending targets in 2011; if he will provide details, for each bank, of the amount of new credit sanctioned and new credit actually drawn down in 2011; and if he will make a statement on the matter. [9842/12]
As the Deputy is aware, the Government has imposed lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Both banks were required to sanction lending of at least €3 billion in 2011, €3.5 billion this year and €4 billion in 2013 for new or increased credit facilities to SMEs. The details for each individual bank in relation to new credit sanctioned and new credit drawn down in 2011 are commercially sensitive and for this reason I cannot provide the information to the Deputy. However I can confirm to the Deputy that both banks have reported to me that they have achieved their 2011 targets. This information is currently being independently assessed by Mr John Trethowan of the Credit Review Office and will be dealt with in his quarterly report for end December 2011 which is due to be published shortly.