Talk about tailoring your message to your audience.
The National Treasury Management Agency (NTMA), in its latest update of Irish facts and figures for international investors in Irish debt uploaded on its website just before Christmas, boasts that Irish banks' return to profit in recent years has been aided by charging the highest mortgage rates in the euro area.
It's hardly news. The Central Bank highlights every month how borrowing costs in Ireland are way above the European norm. The latest figures shows that the average rate attached to new mortgages in Ireland was 3.38 per cent in October, compared with 1.74 per cent for the euro zone.
However, it underscores how the State’s control of the financial sector – eight years after bank bailouts began – leaves it in the awkward position of having to talk through two sides of its mouth about lenders’ actions.
Banks’ recovery
To demonstrate the Government’s creditworthiness to overseas investors, the NTMA has to show how the banks, which essentially pushed the Republic into a troika bailout in 2010, are recovering.
However, Minister for Finance Michael Noonan has also been known to haul top bankers before him to show irate taxpayers and borrowers that he is exerting pressure on lenders to cut variable mortgage rates. Some – step forward State-owned AIB – have been more than willing to demonstrate acquiescence and lower rates. Others, such as Bank of Ireland, in which the Government owns just 14 per cent, have resisted doggedly.
Compounding political discomfort, the minority Government was forced to sit back as Fianna Fáil pushed a Private Members' Bill through initial legislative stages last May to give the Central Bank power to cap mortgage rates. These are powers, it has to be said, that Central Bank governor Philip Lane does not want. And powers that European Central Bank president Mario Draghi made clear – in a strongly-worded opinion to the Government and the Oireachtas Committee on Finance in November – he does not want Lane to have.
The inherent conflicts of the State controlling the banking will remain as long as it holds on to its investments. Surely 2017 will finally see the Government get on with selling down its stake in AIB.
