THE three retail banks have been accused of “ripping off” their customers by paying savers tiny amounts in interest while using their money to earn billions of euro.

The accusation comes after Central Bank Governor Gabriel Makhlouf told TDs and senators banks were making around €1.8bn a year by putting household and business deposits they have in the European Central Bank (ECB).

He said they were using money from savers to “subsidise” mortgage holders.

Interest paid on savings by banks in this country are among the lowest in the Eurozone.

Average interest paid on so-called term deposits, where money is locked away for a period of time, is just 1.02pc.

This is compared with 2.01pc across the Eurozone, according to ECB figures.

Mr Makhlouf told the Dáil Committee of Public Accounts banks here have around €60bn of surplus funds deposited with the ECB earning 3pc.

This works out at an annualised income of €1.8bn for the Irish banks.

He said interest paid on deposits by banks and what they charge for loans are “commercial decisions”.

He had been asked if Central Bank should intervene on the ultra-low rates savers are receiving.

“That’s a commercial decision that they’re making,” the governor said, confirming that the Central Bank does not want the authority to intervene in the rates lenders pay or charge. “One of the implications of the judgments [banks are making] is that lower rates that they are paying for deposits are subsidising the lower rates that they’re charging for mortgages.”

Central Bank figures published last week show the average rate on household overnight deposits was just 0.03pc in February.

Sinn Féin TD Imelda Munster challenged the Governor on why they had not pressed retail banks to pass on the benefits of European Central Bank deposit interest rates to consumers.

She said the fact that AIB, Bank of Ireland and Permanent TSB were paying so little on savings, at a time when inflation was 7.7pc, mean depositors were losing money on their savings.

“At the same time, their own deposits in the European Central Bank (ECB) are yielding them a small fortune.

“The Irish Central Bank is responsible for regulating the sector and I would have expected this to be a matter of significant concern – based on my interaction with the Governor today it is apparent that it is not,” Deputy Munster said.

She claimed the Central Bank was allowing banks to rip off savers, and questioned why the regulator was doing more to stop this.

“For the Central Bank it appears the ripping off of Irish consumers is simply ‘business-as-usual’,” she claimed.

Last month there was an increase in the interest paid on new State Savings products has been increased for the first time in 16 years.

It follows six rate rises by the European Central Bank (ECB).

The interest rates being paid on new issues of the National Solidary Bonds, new Savings Certs and new Instalment Savings went up by between 0.54 percentage points and 0.35 percentage points.

The popular savings products are sold through post offices.

However, the rates are still considered low at a time when the ECB deposit rate is 3pc, and is due to go up again next month.

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