Written answers

Thursday, 11 March 2021

Photo of Eoghan MurphyEoghan Murphy (Dublin Bay South, Fine Gael)
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50. To ask the Minister for Finance the steps that can be taken to assist solicitors and other businesses being charged negative interest rates on money held in client accounts given such money is often borrowed as for example in the case of a mortgage to buy a home and therefore already subject to bank charges (details supplied). [13749/21]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The application of interest rate charges is solely a commercial matter for the board and management of each bank. I have no role in the day to day operations of any bank operating within the State including banks in which the State has a shareholding. Decisions in relation to commercial matters are the sole responsibility of the board and management of the banks, which must be run on an independent and commercial basis.

Deposit balances and liquidity in general has risen significantly across the banking system in Europe in recent years as the ECB has continued to provide additional funds through their asset purchase schemes and long term refinancing operations. This has been further exacerbated by the COVID-19 pandemic as households continue to stay at home and save and businesses defer investment decisions.

This excess liquidity which has grown significantly in the European system has to go somewhere and in the main it gets placed back on deposit with the ECB who charge the banks -0.50%. The application of negative deposit rates by the ECB has resulted in European banks incurring a consequent cost on deposit accounts. The Irish banks are impacted in a similar way to their European counterparts. The banks across Europe have looked to pass some of the costs associated with negative rates to deposit holders with larger balances. The Irish banks are no different in this regard.

In passing on some of these costs, it is important to note that banks cannot differentiate between customers in different sectors and for that reason the approach taken is to apply charges based on the size of the deposit balance.

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