A SPOKESPERSON FOR the Department of Finance has told The Journal that the Government cannot intervene with the interest rates Irish banks are currently paying savers. 

Irish banks are currently the worst at pasing on rate gains to savers when compared to the UK, the US, the Eurozone and 18 other European countries according to S&P Global ratings as reported by The Financial Times.

The European Central Bank’s main lending rate now sits at 4.25%, the highest it has been since 2001. 

Despite nine consecutive interest rate hikes by the European Central Bank this year, Irish banks have been much quicker at passing this rise on to mortgage borrowers than they have been at passing it on to savers.

According to Irish comparison site Bonkers.ie, the best rate available for a monthly saving account with Irish banks at the moment is 2% AER.

In the UK, members of parliament (MPs) have been actively pushing UK banks to pass a higher savings rate back to bank customers. 

The UK’s Treasury Committee has been in touch with the heads of UK banks since February of this year in relation to the issue.

Last month, MPs on the committee wrote to bank bosses accusing them of failing in their “social duty” to promote saving and instead engaging in “blatant profiteering” by continuing to offer low rates.

According to data from July, the average one-year fixed savings rate in the UK stood at just over 5%. 

Speaking to The Journal, a spokesperson for the Department of Finance said the interest rates set by banks is a “commercial decision” for them to make. 

“It is not something the government can intervene with, it is their decision to make,” the Spokesperson said. 

However, opposition party TDs have said the government can and should do more. 

Independent TD for Tipperary Mattie McGrath said: “the Government’s passive approach is enabling a raid on savers’ pockets. 

“Despite hefty interest rate increases by the ECB, Irish banks have been sluggish in passing on the benefits to savers, leaving them with only negligible increases, if any at all. At the same time, these banks have been swift in implementing painful mortgage rate increases, further adding to the frustration and anger of bank consumers.”

“Other European countries, including Spain and France, have taken a strong stance in insisting that banks pass on deposit rates. However, the Irish government’s lack of proper oversight within our banking sector has resulted in Irish savers losing hundreds of millions in lost interest payments.”

Speaking about the issue last week, McGrath called on the Department of Finance and the Central Bank of Ireland to take “immediate action” to “ensure fair treatment of customers”. 

“We believe that a comprehensive ‘savings charter’ that fosters deposit competition, ensures transparency, and facilitates easier account switching for better rates should be immediately implemented on a statutory footing,” McGrath said, speaking on behalf of the rural independents group of TDs.

At the end of July, Bank of Ireland reported pre-tax profits of €1.02 billion for the first six months of the year.

Meanwhile, AIB updated its guidance after a surge in income, and now expects profits of about €1.2 billion for the first half of 2023.