"Central Bank does not want powers to enforce rate cuts""

[Brendan Burgess]

From [broken link removed]

THE CENTRAL Bank has told the Government it does not want powers to force banks to pass on interest rate cuts to mortgage-holders and other customers.


In a letter sent to the Taoiseach on Friday, the Financial Regulator and deputy governor of the Central Bank, Mathew Elderfield, said the Central Bank would prefer to address the issue of banks not passing on interest rate cuts as part of his wider regulation of the banking sector.

This is at variance with what Matthew Elderfield threatened in his [broken link removed]to the Association of Compliance Officers.

If the banks continue to act in a way which is so damaging to customers and which appears to take advantage of the current dysfunctional competitive environment, it seems they are courting the risk of a public policy response involving powers to impose direct restrictions on their rate setting capacity by the competition or financial regulatory authorities.

Matthew Elderfield is a good guy. But he has made a huge blunder in this speech. This has caused the government huge embarrassment.

 

[onq]

Totally agree.

This kind of volt-face is so serious that it prompts me to ask whether Elderfield been at the coal face with the banks for so long that they have managed to establish some sort of relationship with him that is at odds with discharging his duties.

 

[Kerrigan]

Agree with you both especially the latter part of onq's post.

This is a shocking statement from Elderfield, absolutly shocking.

 

[ClubMan]

Maybe I'm missing something here but he does not seem to be calling for legislation/powers allowing him to dictate lenders' rate policies here - just teasing out one possible consequence of what is happening right now...

If the banks continue to act in a way which is so damaging to customers and which appears to take advantage of the current dysfunctional competitive environment, it seems they are courting the risk of a public policy response involving powers to impose direct restrictions on their rate setting capacity by the competition or financial regulatory authorities.

Did he call for such powers in some other context? If not then I can't see how the two snippets quoted by Brendan above are necessarily inconsistent...

 

[onq]

Thanks Kerrigan (although that was rank speculation on my part)

Hi Clubman - I read

"..by the ...financial regulatory authorities"

As referring to Elderfield's office by implication.
He's the guy with the biggest stick and it seems he's refused this.

On reflection he may be suggesting that it would be better legislative process to enact a law supporting this in a general sense.

 

[ClubMan]

Thanks Kerrigan (although that was rank speculation on my part)

Hi Clubman - I read

"..by the ...financial regulatory authorities"

As referring to Elderfield's office by implication.
He's the guy with the biggest stick and it seems he's refused this.

Maybe I'm splitting hairs but he suggested that the banks' actions might result in something happening (more powers/legislation). He did not ask for this to happen - at least not above - as far as I can see. Did he request more powers/legislation in some other context? I haven't really followed the affair in detail other than watching Prime Time the other night.

 

[Brendan Burgess]

I understand that he clarified his calls on RTE radio and/or television.

The government was clear in its response and said "Tell us what powers you want and we will give them to you..."

I am guessing that Governor Honohan realised that he was out of order and he changed his position.

This kind of volt-face is so serious that it prompts me to ask whether Elderfield been at the coal face with the banks for so long that they have managed to establish some sort of relationship with him that is at odds with discharging his duties.

This is very odd reasoning.

If he was in "some sort of relationship" with the banks he would not have tried to get them to cut rates. The change in his position is simply because he realised that he had made a huge error.

Brendan