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DECEMBER 2018
ICMSA
Pat McCormack
www.irishfarmersmonthly.com
Irish banks pillaging
their farm customers
on interest rates
It's not as if Ireland doesn't have enough public
watchdogs: it's difficult to open a paper or turn on a
television or radio without being treated to a `warning'
or an expression of `concern' from any of the dozens
upon dozens of quangos or agencies that seem to serve
as commentators on Irish public debates as opposed to
doing anything really tangible. It is in the area of financial
regulation, or, to be more precise, non-regulation, that
we see this phenomenon most clearly. Our banks and
financial institutions see to operate in a free-floating
environment unencumbered by any restraint of State,
when one of these institutions does get itself into trouble
and it'll very quickly become our trouble the noise
of stable doors long after the horse has bolted becomes
an almost national soundtrack. The contrast with other
states where the banks and financial institutions are
closely supervised and monitored is instructive and may
give the clearest hint as to why states like Germany
and Holland never seem to suffer the kind of national,
across-the-board, financial meltdowns that we had to
undergo less than 10 years ago. For instance, I have
had occasion before to mention the "deafening silence"
from the Government and the regulators on the question
of the excessive interest rates being charged by Irish
Banks, and most particularly the interest rates being
charged by banks on loans to their farmers customers.
In my capacity as a board member of the European Milk
Board I have got a clear picture of the real rates being
paid by mainland EU farmers compared to their Irish
counterparts. The differences are, put bluntly, jaw-
dropping with German farmers, for instance, at interest
rates of between 1 and 1.8%, in France, the intertest
rates paid vary between 2 and 2.8%, substantially lower
than what Irish banks customarily charge. In Denmark,
the rates including an administration charge might
amount to 3%, with Belgium coming in at less than that.
In case you find the rate comparison tedious, we should
make the comparison in terms of sample loans and
sample terms.
ICMSA estimate that a farmer with a loan of 80,000
over a five-year term will pay over 6,500 more than
their German counterpart borrowing the same amount
over the same term. The only appropriate word for this
is `pillaging' and it's long past the time when someone
in authority asked our regulatory agencies for an
explanation.
It's exactly the same as the mortgage rates where we
see the same comparatively punitive interest happily
loaded on by the Irish banks that sees Irish customers
paying thousands more over the term of the loan than
their mainland EU counterpart and all without so much
as a chirp out of the regulatory system the ultimate
sleeping watchdogs. Farm loans are probably a bank's
dream business in that they are usually fully secured
against the farm itself and so completely collateralized,
on any logical basis that would make farm loans cheaper
because there's less risk of defaulting. But what we see
here is that not alone is that repayment safety factor
overlooked; we see that comparatively penal rates are
loaded on to what is the safest loan that a bank can
make. Whenever we point this out to the Government
and regulatory bodies, we are told to `shop around' for
cheaper rates. But thanks to another very dubious
piece of legislation passed a few years ago about which
we protested farmers who do secure a cheaper rate
from a competitor Irish bank now find they have to pay
two sets of solicitors when they switch their loan and can
very often run up 3,000 or more in legal expenses. The
official Irish position is that they seem happy to allow the
banks to pillage their farm customers and then permit
the solicitors to join in the event that the farmer can find
a cheaper interest rate
The over-riding question is this: why and how have we
ended up paying an interest rate double that of Germans
when our security against the loans is worth as much - if
not more than theirs? That's the first question and the
second is this: at what stage will the Government and
its regulators actually do something about the officially
sanctioned pillaging of the Irish people by their banks
through comparatively penal interest rates?
Pat McCormack
ICMSA President
Pat McCormack, President of ICMSA
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