# Central Bank/100% mortgages?



## cjh (23 Apr 2008)

I'm not really sure where this question belongs, so I'm trying here.

Did the Central Bank have the power to force Irish banks to curtail certain types of mortgages (e.g. 100%) or could they only _advise_ and hope that the banks complied?
I know they introduced new reserve rules to make high LTV mortgages more expensive for banks but did they have the power to say "That's it - max LTV is now 90%".


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## irishlinks (23 Apr 2008)

The banks decide for themselves based on various criteria - eg house prices, interest rates, inter bank lending rates, etc.  The ECB did not tell them what to do.


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## cjh (23 Apr 2008)

I probably should clarify - I'm referring to the Central Bank of Ireland and asking how far it's powers to restrict lending extend?


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## Protocol (23 Apr 2008)

No, I don't think the CB can *force* the comm banks to change behaviour.


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## Sunny (23 Apr 2008)

As far as I know they can issue guidelines on best practices and ask banks to comply with them but can't force banks not to offer certain products. Of course a bank would probably comply if the Central Bank made a direct request from some lending practice to cease


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## Afuera (23 Apr 2008)

Sunny said:


> As far as I know they can issue guidelines on best practices and ask banks to comply with them but can't force banks not to offer certain products. Of course a bank would probably comply if the Central Bank made a direct request from some lending practice to cease


I thought they had a lot more clout than that but in the recent past have simply chosen to adopt a policy of releasing recommendations rather than direct intervention. They could withhold or remove the banking license of banks that were being run recklessly, for example.


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## Sunny (23 Apr 2008)

Afuera said:


> I thought they had a lot more clout than that but in the recent past have simply chosen to adopt a policy of releasing recommendations rather than direct intervention. They could withhold or remove the banking license of banks that were being run recklessly, for example.


 
I am sure they have alot more clout than what I am giving them credit for and you could be right that they have more tools up their sleeve but it is very unlikely that they would threaten AIB or BOI with loss of banking license because they were offering 100% mortgages so in that way their powers are limited. What I meant is that I am not sure if the Central Bank could out and say 100% mortgages or other products that aren't illegal or misleading or dodgy are now banned. Maybe they can.


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## Afuera (23 Apr 2008)

Sunny said:


> What I meant is that I am not sure if the Central Bank could out and say 100% mortgages or other products that aren't illegal or misleading or dodgy are now banned. Maybe they can.


I'm not 100% sure, but if they felt the practise was a serious threat to the banking system, while maybe not being illegal, I'd say they could use it as grounds for removing a license. I imagine that this would be the last of many steps they would take should they have a rogue bank on their hands though. The usual cautious remarks and recommendations would probably be spouted off many times before anyone loses their license.


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## cjh (23 Apr 2008)

Thanks for your responses,
cjh.


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