Michael McGrath (Cork South Central, Fianna Fail)
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Question 72: To ask the Minister for Finance his views on the fact that EBS, as a wholly owned subsidiary of AIB, is charging a standard variable rate of interest on residential mortgages significantly in excess of AIB; if he intends to take any action in this matter; and if he will make a statement on the matter. [17466/12]

Michael Noonan (Limerick City, Fine Gael)
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Notwithstanding the State's significant shareholding in the bank, AIB operates at arm's length from the State in relation to commercial issues. It is a matter for the individual board and management to determine and implement operational policy in their organisation. Therefore, such commercial matters are solely a decision for the bank. However, I would note that the merger of AIB and EBS was formally completed on 1 July 2011. Prior to the completion of the merger, each of the banks set their variable mortgage rates according to the levels, calculated by the respective management teams and boards, that was required for each of the institutions to operate as a commercially viable entity in light of the challenging market conditions, the expected cost of funds, future impairments and on-going operational costs.

Irrespective of the merger of the two banks, EBS continues to operate as a wholly owned subsidiary of AIB with its own individual banking license, brand and cost structure. This arrangement has been determined by the Board of AIB as being the most effective method of integrating the EBS business whilst retaining the core strengths of each individual entity which should return the greatest value to the State over time as shareholder. While this operational position exists it is likely that AIB and EBS will continue to offer different products to customers and as such, the banks can be expected, in the short to medium term, to price their mortgages and deposits differently from each other in the marketplace. I would also point out that EBS have reduced their SVR mortgage rates by 0.60 % since the beginning of November 2011 while AIB have decreased their SVR rates by 0.25% in the same time period.