Time not right for Bank of Ireland rate cut - Ross
DUBLIN Nov 15 (Reuters) - A more "normalized" funding environment is needed for Bank of Ireland to pass on European Central Bank interest rate cuts to customers on variable rate mortgages, U.S. billionaire and shareholder in the Irish bank, Wilbur Ross, told Reuters.
Bank of Ireland's refusal to pass on the ECB's recent quarter of a percent rate cut has put Chief Executive Richie Boucher on a collision course with Prime Minister Enda Kenny and the country's central bank.
Ross, who owns 9 percent of Bank of Ireland, said late on Monday that the lender's high funding costs made it difficult to pass on the ECB rate cut.
"I can assure you that Richie Boucher is well aware of the need for responsible pricing of loans and also is aware that lower rates make it easier for borrowers to remain current in their payments," U.S.-based Ross said in response to questions emailed by Reuters.
"High funding costs are hopefully a temporary phenomenon."
"In a more normalized environment it would become easier to synchronize interest rate spreads with changes in rates charged by ECB."
Ireland's government has spent nearly 63 billion euros ($89 billion) propping up its banks after a disastrous binge on property and Bank of Ireland's refusal to pass on the rate cut has angered taxpayers and the political establishment.
Boucher has more room to resist such pressure given that Bank of Ireland, unlike the rest of its domestic peers, is not under state control.
Ross and other North American investors spent 1.1 billion euros on Bank of Ireland over the summer giving them a combined stake of 35 percent and capping the state's shareholding at 15 percent.
The investment also shored up the position of Boucher, who was previously seen as a prime target for government plans to purge banks' boards of members appointed before the financial crisis struck in September 2008.
Despite a huge infusion of capital on the back of an European Union/International Monetary Fund bailout, Ireland's banks' return to profitability is hampered by sky-high funding costs. Local lenders have been increasing rates on standard variable mortgages to compensate for losses on tracker mortgages that automatically follow changes in the ECB rate.
Bank of Ireland warned last week that a prolonged period of low interest rates could hamper any further improvement in its profit margins.
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