Irish banks have been ‘utter laggards’ in terms of passing on interest rate hikes to savers - Harris

Irish banks have been “complete and utter laggards” when it comes to passing on increases in interest rates to savers, Minister for Higher Education Simon Harris has said. His remarks came as he welcomed confirmation by Minister for Finance Michael McGrath that the bank levy will be extended into 2024.

There have been a series of interest rate increase by the European Central Bank (ECB) over the last year. In recent months financial analysts here have warned that the failure of Irish banks to increase deposit interest rates in line with ECB hikes is costing Irish savers more than €120 million every month. Meanwhile banks have been reporting healthy profits for the period that has seen interest rate increases.

Last week Italy imposed a new levy on its banks’ profits, with the government citing the increased mortgage bills for borrowers while the interest paid to savers had not kept pace with ECB increases.

The current bank levy here, introduced in 2014, has brought in around €87 million annually in recent years.

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[ Italy’s bank levy highlights ‘surprising’ lack of pressure in Ireland ]

In remarks to the Business Post Mr McGrath said it was his intention to recommend to Government that the levy – due to expire this year – be extended into 2024. He said the details like the scope of the levy, its rate and duration “require further consideration and this work is ongoing as part of the budgetary process”.

Asked about the new Italian levy, Mr McGrath said the review of Ireland’s existing bank levy “is the most appropriate and comprehensive way of considering the contribution the sector should make next year”.

Mr Harris, the Minister for Higher Education, said on Sunday: “it would have been pretty ludicrous to allow the bank levy expire this year because of the very serious situation that we see in terms of inflation, the cost-of-living crisis and, quite frankly, in terms of people in this country feeling they’re getting fleeced by certain financial institutions”.

He said Ireland needed a competitive banking sector but “we also need a reality check here from the banks. They can’t have it both ways.”

He said that mortgage interest rates have increased at the same time that savers were not benefiting from the interest rate hikes. It is “offensive” for Irish banks “to be complete and utter laggards when it comes to passing on the benefits to those who have money on deposit in relation to interest rates”.

He was speaking to reporters ahead of the annual commemoration for Michael Collins and Arthur Griffith at Glasnevin Cemetery in Dublin.

Mr Harris also signalled that last year’s once-off reduction in third-level fees and an extra payment for students in receipt of maintenance grants would be considered again in talks leading up to the budget. The student contribution fee was cut from €3,000 to €2,000 last year as a once-off cost-of-living measure, while those in receipt of grants got an extra €679 payment in 2022.

Asked if these measures would be repeated, Mr Harris replied: “I’m great believer when a once-off measure works it should certainly be considered again.”

He said students and parents were “not immune” to the cost-of-living crisis, and “I will be working very closely with Minister [for Public Expenditure Paschal] Donohoe and Minister McGrath to see what more we can do.”