Minister for Finance Michael McGrath said the Government has not received any word yet on potential Irish job losses at Microsoft, amid reports that the US technology giant is planning to cut about 5 per cent of its global workforce. A 5 per cent cull would equate to about 175 jobs in the tech giant’s employee total in the Republic.
“We don’t have any indication yet. I spoke with the IDA this morning, and they don’t have a readout yet of what the implications will be for Ireland,” Mr McGrath told The Irish Times on the fringes of the World Economic Forum (WEF) in Davos on Wednesday.
Microsoft, which employs more than 3,000 people in the Republic, confirmed later on Wednesday it is preparing to cut 10,000 jobs around the world. This is slightly below the 11,000 that had been rumoured the previous day.
Meanwhile, Mr McGrath said he will use his first meeting as Minister for Finance with the Central Bank governor, Gabriel Makhlouf, to engage on the “concerning” issue of how holders of 100,000 mortgages sold by banks to overseas investment funds are facing above-the-odds rates of as much as 7 per cent on their loans.
“We are seeing a significant divergence in the rates being charged by some nonbank lenders who now have ownership of these loans, as against loans that are managed by the banks themselves. It is a concern,” Mr McGrath told The Irish Times on the fringes of the World Economic Forum (WEF) in Davos. He is due to meet Mr Makhlouf next week.
“I have no indication that the Central Bank is looking for further powers in this space, but they do, of course have a consumer protection mandate. I have no doubt this is an issue that they are very much alert to and I do intend to have a discussion with the Governor of the Central Bank to get his views”.
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Mr McGrath noted that many of the borrowers in question are unable to switch to active lenders offering lower rates because of poor credit histories. The fear among consumer advocates is that a raft of standard variable rate hikes by service providers used by investment funds – or what are often referred to as “vulture funds – in the wake of European Central Bank rate increases since July will push many borrowers into deeper trouble.
While then Central Bank governor Patrick Honohan said in 2014 that it would not be good idea for the regulator to be given powers to control variable mortgage rates, he said that there may be a need to restrict rates on mortgages sold to non-banks deviating from market practice.
A Bill published by Mr McGrath in 2016, when in opposition, aimed at giving the Central Bank the ability to cap variable rates did not progress through the Oireachtas. Mr McGrath, who took over as Minister for Finance last month, signalled, however, that he is not supportive of a Labour Party Bill introduced last summer that is similar to the one he previously championed.
“A lot has changed since I introduced my own Bill. Irish rates are now the third-lowest in the euro zone, whereas they once were among the most expensive,” he said. “We also have a situation now where over 90 per cent of new mortgages being written are fixed-rate in nature. We have also seen an uptick in mortgage switching.”
Meanwhile, Mr McGrath is continuing to sell AIB shares on the stock market, after his predecessor Paschal Donohoe cut the State’s stake from 71 per cent to 57 per cent last year. However, he said that it would “require political discussion” among Government parties before he crosses the key 50 per cent threshold, which he expects to occur “in a number of months’ time”.
The Minister conceded that the 50 per cent level “will be seen as an important threshold in the context” the continuation of a €500,000 pay cap at AIB stemming from the financial crisis. “But I’m not giving an explicit commitment that the restriction will be removed when we reach a certain threshold of ownership,” he said.
The Government said last in November, as it removed caps at Bank of Ireland, that it would do similar at AIB and Permanent TSB when its stakes fell to an unspecified “appropriate level”.