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(Alliance News) - The chair of the Oireachtas finance committee has suggested that the bank levy in Ireland should be increased as a threat to the banks for not passing on interest rate hikes to savers fast enough.
It comes after Minister for Further & Higher Education Simon Harris criticised Irish banks as being "utter laggards" in introducing higher interest rates to people's savings deposits when compared with other countries.
Several hikes in interest rates, imposed in order to help tame inflation, are putting pressure on mortgage holders in Ireland.
According to the latest consumer prices index data, mortgage interest repayments were up 50% in the year to July.
The Banking & Payments Federation said that banks had sought "a balanced approach and have been slow in passing on the full effect of the ECB interest rate increases to mortgage holders in addition to deposit rates".
"In this context average mortgage rate increases in Ireland have been the second lowest when compared across other Eurozone countries in the past year," it said.
Harris said on Sunday that it was "utterly offensive" to increase interest rates on mortgages but not savings to the same degree, and said that a lack of competition was "key" to the issue.
Chair of the finance committee John McGuinness said that as banks make "substantial profits", people who have money on deposit were "being ignored".
The Fianna Fail TD also accused the central bank of standing to one side and the European Central Bank of not being proactive enough.
"I think it's time for the government to take a strong hand in relation to this, and now that the minister has called them out, perhaps it's time for the Cabinet to move forward and insist that the banks increase their interest rates on deposits," he told RTE's Morning Ireland.
He accused the central bank, the government and the ECB of not "giving leadership in this area".
"I think it's time perhaps to look at the bank levy itself as a means to perhaps penalise banks that find themselves in this position where, as the minister says, they are laggards.
"The bank levy was to bring in EUR150 million. It's bringing in a little over half of that because the banks have left the country," he said, referring to Ulster Bank and KBC Bank exiting the Irish market.
"Extend (the bank levy) and increase it, and then a hold threat over the banks that should they not comply with the government's desire to have higher interest rates for depositors, that they would then be sanctioned."
He added: "I think we have to take into consideration the fact that vulture funds now form a big part of the Irish banking system, or the Irish financial system and, therefore, there they must be included in whatever action is going to be taken by the government in the future."
Ulster Bank is owned by NatWest Group PLC.
The bank levy, imposed in the wake of the financial crash, is aimed at raising revenue to contribute to Ireland's economic recovery.
Although a public consultation process is under way on the future of the levy, Minister for Finance Michael McGrath confirmed that the levy will be extended in the 2024 Budget.
"In light of the level of profitability that the banks are enjoying at this point in time, I do believe it is appropriate that the levy is extended into 2024 and I will be recommending that to government," he told RTE.
"But the final detail of the scope of the levy, how much we intend to collect, and indeed the duration that the levy would be extended for are matters that remain under consideration."
Sinn Fein's public expenditure spokesperson Rose Conway-Walsh called on the government to meet the Central Bank and retail banks.
"Banks are making similar profits now as they were during the property bubble while struggling mortgage holders live in fear of falling behind with their monthly payments that have increased by hundreds of euro.
"The banking levy must be extended and expanded.
"For months now Sinn Fein has urged government to introduce temporary and targeted mortgage interest relief to ease the burden of increased interest rates.
"It is in nobody's interest for thousands of homeowners to fall into arrears. The personal cost of severe financial stress as well as the impact on the economy is something that cannot be ignored."
She added: "Households who, without their consent, have had their mortgages sold off to vulture funds are facing up to 10% interest rates.
"This is completely unsustainable and unbearable. We have requested that these mortgages be taken back by the original banks."
source: PA
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