Brendan Burgess
Founder
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Dan O'Brien has an excellent article in the Sunday Independent
There is no justification for massive bank profits - steps must be taken
Gardai should question bankers over trackers and an interest rate-capping law should be enacted
He highlights how much more profitable Irish banks are than euro area banks and finally he calls for support for Michael McGrath's bill:
"In a well-functioning market, foreign banks would see the juicy profits to be made in Ireland and join the party. Increased competition could result in better deals for customers and compete away the supernormal profits. That has clearly not happened.
In the absence of new players and greater competition, Fianna Fail's Michael McGrath has proposed legislation to give the Central Bank powers to cap the interest rates banks can charge home borrowers. Currently, the idea is undergoing an impact assessment. While it has flaws, with some changes it merits serious consideration.
In general, frequently laws designed to limit prices that are the outplaying of market forces don't work and all too often they have negative unintended consequences. In the case of the banking industry, there can be little doubt but that an instrument as blunt as a legislative cap would do nothing to encourage new entrants into the market. But as there have been no new entrants despite four years of supernormal profits being made, this downside may be less of a downside than it first appears. It could also be mitigated by writing a three-year sunset clause into the legislation.
Companies making profits in free markets form the basis of our prosperity. But from the crooked timber of humanity nothing straight is ever fashioned. Perfectly competitive markets are rare and market failures are commonplace. Legislative fiat is not the answer to every imperfection and failure, but given the costs to consumers and business of exorbitant interest rates, a three-year cap written into legislation, rather than as a discretionary power to be made available to the central bank (as the Fianna Fail bills proposes), is now the appropriate and proportionate response."
There is no justification for massive bank profits - steps must be taken
Gardai should question bankers over trackers and an interest rate-capping law should be enacted
He highlights how much more profitable Irish banks are than euro area banks and finally he calls for support for Michael McGrath's bill:
"In a well-functioning market, foreign banks would see the juicy profits to be made in Ireland and join the party. Increased competition could result in better deals for customers and compete away the supernormal profits. That has clearly not happened.
In the absence of new players and greater competition, Fianna Fail's Michael McGrath has proposed legislation to give the Central Bank powers to cap the interest rates banks can charge home borrowers. Currently, the idea is undergoing an impact assessment. While it has flaws, with some changes it merits serious consideration.
In general, frequently laws designed to limit prices that are the outplaying of market forces don't work and all too often they have negative unintended consequences. In the case of the banking industry, there can be little doubt but that an instrument as blunt as a legislative cap would do nothing to encourage new entrants into the market. But as there have been no new entrants despite four years of supernormal profits being made, this downside may be less of a downside than it first appears. It could also be mitigated by writing a three-year sunset clause into the legislation.
Companies making profits in free markets form the basis of our prosperity. But from the crooked timber of humanity nothing straight is ever fashioned. Perfectly competitive markets are rare and market failures are commonplace. Legislative fiat is not the answer to every imperfection and failure, but given the costs to consumers and business of exorbitant interest rates, a three-year cap written into legislation, rather than as a discretionary power to be made available to the central bank (as the Fianna Fail bills proposes), is now the appropriate and proportionate response."