The chair of the Oireachtas finance committee has suggested that the bank levy should be increased as a threat to the banks for not passing on interest rate hikes to savers fast enough.
It comes after Minister for Further and Higher Education Simon Harris criticised banks as being “utter laggards” in introducing higher interest rates to people’s savings deposits when compared to other countries.
Several hikes in interest rates, imposed in order to help tame inflation, are putting pressure on mortgage holders.
According to the latest Consumer Price Index, mortgage interest repayments were up 49.5 per cent in the year to July.
Mr Harris said on Sunday that it was “utterly offensive” to increase interest rates on mortgages but not savings, and said that a lack of competition was “key” to the issue.
Chair of the finance committee John McGuinness said as banks make “substantial profits”, people who have money on deposit were “being ignored”.
The Fianna Fáil TD also accused the Central Bank of standing to one side, and the European Central Bank (ECB) of not being proactive enough.
“I think it’s time for the Government to take a strong hand in relation to this, and now that the Minister has called them out, perhaps it’s time for the Cabinet to move forward and insist that the banks increase their interest rates on deposits,” he told RTÉ’s Morning Ireland.
He accused the Central Bank, the Government and the ECB of not “giving leadership in this area”.
“I think it’s time perhaps to look at the bank levy itself as a means to perhaps penalise banks that find themselves in this position where, as the Minister says, that they are laggards.
“The bank levy was to bring in €150 million, it’s bringing in a little over half of that because the banks have left the country,” he said, referring to Ulster Bank and KBC Bank exiting the Irish market.
“Extend (the bank levy) and increase it, and then a hold threat over the banks that should they not comply with the Government’s desire to have higher interest rates for depositors, that they would then be sanctioned.”
He added: “I think we have to take into consideration the fact that vulture funds now form a big part of the Irish banking system, or the Irish financial system, and therefore there they must be included in whatever action is going to be taken by the Government in the future.”
The bank levy, imposed in the wake of the financial crash, is aimed at raising revenue to contribute to the State's economic recovery.
Although a public consultation process is under way on the future of the levy, Minister for Finance Michael McGrath confirmed to RTÉ that it will be extended in Budget 2024.
“In light of the level of profitability that the banks are enjoying at this point in time, I do believe it is appropriate that the levy is extended into 2024, and I will be recommending that to Government,” he said.
“But the final detail of the scope of the levy, how much we intend to collect, and indeed the duration that the levy would be extended for are matters that remain under consideration.”
