Lilja Alfreðsdóttir, Minister of Culture and Business, believes that annual reports should be produced on the fees and profitability of the Icelandic banks with the aim of increasing the restraint with the banks’ pricing and interest rate differentials. This was stated in Alfreðsdóttir’s case at the meeting of ASÍ, BSRB, BHM and the consumer association about a newly-published report on this issue, which was the request from the minister.

Alfreðsdóttir said at the meeting that the reason she requested the report was that it was necessary to compare the Icelandic financial system with apples and apples. She said that the discussion about the financial system often immediately turned into a debate about the Icelandic banks being unable to compare them with foreign banks, since the Icelandic banks were much smaller.

She has however believed that it would be possible to compare the Icelandic banks with similar banks abroad and to examine the fundamentals of the banks’ profitability, the interest rate differential and the cost development.

“Not acceptable”

Alfreðsdóttir explained that the Icelandic banks have managed to cut their costs significantly in recent years, and in addition to that, bank tax has been reduced. She says that the government assumed that this would result in a lower interest rate differential, but the result has been that the interest rate differential has increased in recent years. “This is not acceptable,” she said at the meeting.

Financial sector needs to be a part of the solution

She said that in an inflationary period, when the increased interest rate burden weighs heavily on both households and businesses, the financial sector would have to play a role in reducing costs for consumers. She said that the report made it clear that the banks are doing well and are thus capable to help businesses and households to avoid default.

The minister mentioned that in fact the interest rate gap when it came to real estate transactions has decreased, but the interest rate gap between companies increased. She said that many people would argue that this was because pension funds have entered the real estate loan market, and therefore there is a restraint and increased competition.

More expensive than in Denmark

Alfreðsdóttir also mentioned that the report showed that payment service providers are considerably more expensive than in Denmark. The Danish government uses a public payment system and she said it is important to continue to look at the work that has been done in the public sector in relation to payment service providers.

At the meeting, Alfreðsdóttir stated that the reason the trade unions and the consumers’ organizations were meeting was to keep the discussion on the findings of the report it going. She concluded by saying that she believes it is important that the report will be discussed in the parliament and in the economic and trade committee, and that it would be made every year to increase the restraint and oversight of the financial system.