Simon Harris, the Minister for Further and Higher Education, said there has been too much “guff” in relation to Irish banks not increasing interest rates for savers to the same degree as for mortgage holders.
Several hikes in interest rates have been imposed in order to help tame inflation, leading to higher borrowing costs for mortgage holders.
According to the latest Consumer Prices Index, mortgage interest repayments were up 49.5% in the year to July.
However, the Banking & Payments Federation has said that banks have “been slow” in passing on the full effect of ECB interest rate increases to deposit rates.
Mr Harris said the choices of Irish banks are commercial decisions but added that “it is a statement of fact that they are laggards” when it comes to passing on benefits of interest rate rises to savers.
“If you live in the United Kingdom, 43% of the benefits to a deposit has been passed on, if you live in Ireland it’s 7%.
“Many savers in this country are getting 0% interest while the bank is getting 3.75% from the Central Bank.”
Speaking to reporters for the launch of the Public Service Apprenticeship Plan at Government Buildings, he said there was a need to counter “straw man arguments” on the matter.
“Many savers in this country are getting 0% interest while the bank is getting 3.75% from the Central Bank.
“Now I think there’s far too many straw man arguments and guff going on here in recent days that needs to be cut through.
“Savers and mortgage holders are not always different people. There’s many people, including many people that I represent in Dail Eireann, who might try to put away a few bob for a rainy day for their family and, in fact, that might be the few bob that they try to dip into if they see an increased bill.
“So the saver and the mortgage holder could well be the same person in many cases, and there’s a third leg of the stool here as well – it’s not just savers and mortgage holders, it is profit.
“And profit is a good thing by the way, but profit is generally something earned on the basis of ingenuity, of hard work, of innovation, not something that you manage to exploit arising from an inflationary crisis.”
Mr Harris added: “People are really struggling … and I do think it galls them when they see a lack of fairness. It’s not that we’re just a little bit behind in Ireland, we’re well behind what is the European norm.”
Mr Harris was speaking alongside his party colleague and Minister for Public Expenditure Paschal Donohoe, who said the announcement that the banking levy would be extended in the next budget was a “vital decision” by Minister for Finance Michael McGrath.
“Of course, we recognise that, at the time in which the profit levels of banks are beginning to change, particularly in the context of the level of support that the banking system did receive here in Ireland, is the reason why we have a banking levy here in the past in Ireland and it’s equally important why the Minister for Finance has recognised it has an important role to play in the future.”
He said another reason why the review of the levy was important was that the structure of the Irish banking system was “fundamentally altered” after Ulster Bank and KBC left the market.
“We’ve gone from the five-bank model here within our economy now to the three-bank model and we need competitive lending to our consumers, to our households and to our businesses.”
Mr Harris also said he welcomes the decision to keep the banking levy while reviewing the scope and impact of its current levy.
