Fianna Fáil’s proposed legislation which would enable the Central Bank to regulate mortgage interest rates has sparked concern among investors, the Department of Finance has claimed.
Some feedback centred on the potential impact on Ireland as a location for foreign direct investment (FDI), the department said.
Minutes of the June meeting of the so-called Principals Group, an inter-agency gathering of senior officials from the Department of Finance, Central Bank and National Treasury Management Agency, noted that “lots of queries” had been received. However, it was pointed out that the Dáil bill has yet to be enacted.
Although some banks have cut variable rates, Fianna Fáil believes its bill will heap further pressure on banks to cut “excessive” rates. Under the legislation, the Central Bank would be required to carry out an assessment of the state of the mortgage market, taking into account factors such as the banks’ cost of funds, reasonable profit expectation, concentration within the market, and the ease with which borrowers can switch mortgages between lenders.
Finance Minister Michael Noonan has raised potential constitutional difficulties with the bill, which is due to go to Committee stage in the Dáil.
The minutes, obtained by the Irish Independent under Freedom of Information, show that staff from the Financial Services Division, which is responsible for policy and laws around regulation, told the meeting the bill had been receiving attention.
The division falls under the umbrella of the Banking and Financial Services Division, which also includes the Shareholding Management Unit, which looks after the State’s investments in both AIB and Bank of Ireland.
“Lots of queries have been received in respect of the SVR [standard variable rate] bill proposed by Michael McGrath TD, with some feedback on potential impacts on Ireland as an FDI destination,” the minutes note. “Concerns have been expressed, but it has been pointed out that the bill has not been enacted at this point.”
A spokesman for the department told the Irish Independent that “feedback on the mortgage bill came from multiple sources”. The spokesman said: “The banking unit have market- facing conversations all the time and the feedback came from multiple sources in the investor and advisory community.”
Mr McGrath told the Irish Independent that those who have provided feedback should come forward. “If the investment community have concerns, let them raise their heads above the parapet, name themselves, say exactly what their concerns are,” Mr McGrath said.
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