AIB EXECUTIVE chairman David Hodgkinson yesterday flagged increases in the cost of customer borrowing as the bank strives to achieve “commercial viability”.
Speaking at the MacGill Summer School in Glenties, Co Donegal, Mr Hodgkinson described pricing as “the tomb of the forbidden subject”, adding that it was a “fact” that higher credit charges were needed.
“While this is a very unpopular concept given the amount of taxpayers’ money that we have received – it is nevertheless simply not possible to build a sustainable future for any bank that is lending funds without getting a return.”
He was speaking as the Government injected the final €6.1 billion of the €14.8 billion into AIB to recapitalise the bank by the end of July deadline set by the EU/IMF.
The last tranche of funding for the bank, which is 99.8 per cent State-owned, was given by way of a so-called “capital contribution” for which no consideration was given.
Mr Hodgkinson said it was also “dangerous” to think banks could take equity risks for loan returns.
“We absolutely must, of course, do much better at making credit accessible but we cannot continue to misprice risk,” he said.
He said there was a case for the State introducing a maximum interest rate on deposits, as banks compete for client money.
“This is in part because there are insufficient deposits in the domestic system to meet all the economys lending requirements.”
He said AIB hoped to start borrowing on the external markets now that the Government had capitalised the bank.
“We are still dependent on the goodwill of the ECB and Europe,” he said.
“We are lessening our dependence all the time. As the capital has come into place we will be actively looking to ways to raise funds from the external market so that the dependence on the ECB continues to lessen.”
