THE DEPUTY CHAIRMAN of AIB has said he is not comfortable with banks who don’t pass mortgage rate cuts on to customers.
Michael Somers, who was a public servant for more than 4 decades and was appointed to AIB by the then-Minister for Finance Brian Lenihan in 2010, also said he doesn’t believe that AIB will cut its variable mortgage rates, despite the rate cut by the European Central Bank earlier this week.
“I can’t speak for the bank, but just to give you my own impression, I don’t think they will,” he told George Lee on RTE Radio One’s The Business this morning.
He said the bank is still losing money and hopes to become profitable next year, so will hold on to any money that it can. He described the situation was “perplexing” and said he was “never terribly comfortable” with banks not passing on rate cuts to customers.
Somers said he believed that Ireland continues to “shoot itself in the foot in many ways”, citing the heavy regulation which he says is to blame for a number of banks in the IFSC handing back their licences.
“One of the huge benefits to this country was the IFSC and I’m dismayed to see the banks handing back their licences down there,” he said. “The likes of Goldman Sachs handing back their licence… why is this happening? We don’t need it. We need those people to stay here”.
Somers also said it was getting increasingly difficult to recruit people to join AIB due to the cap on salaries for senior executives.
“In the NTMA [the National Treasury Management Agency, which Somers led for almost two decades before retiring in 2009] I was a believer – and it’s not kosher to say it now – in motivating people, and in the financial sector pay is the real motivator,” he said.
There’s an international market for banking skills and Irish people are very mobile. Some of them are very well trained, they’re very marketable and they can get jobs anywhere in the world – and there is a market level of pay.
Now the attitude at the moment is low pay, no bonuses and just kill the guy if he’s over whatever figure you want to chose. Fine – but the best people will just leave.
It comes less than a fortnight after the government said it would not use its stake in Bank of Ireland to vote against plans to pay the bank’s chief executive Richie Boucher a salary of €843,000.
Somers agreed with presenter George Lee who suggested that bank customers are being “screwed” by increased charges from a number of banks.
“There is this imperative to make institutions profitable and.. it’s very difficult to square that particular circle,” he said. “I mean, what do you do? We’ve already shrunk the numbers of staff there – if you go into any branch now you won’t get the same kind of services you would have got in the past. There’s a fella that’s going to direct you to a machine”.
Somers also said he doesn’t believe journalists are doing enough investigation into exactly how much banks are really lending to people.