AIB has ruled out any cut in its variable mortgage interest rates following the ECB rate cut last week.

Speaking after a meeting with the Taoiseach and other Government ministers, executive chairman David Hodgkinson said that customers had already benefited from the fact that the bank had not increased rates when the ECB had raised them in April and July of this year.

In a statement this evening, AIB said that because it did not hike rates after the last two ECB increases, its customers on a standard variable or loan to value rate mortgage had already saved between €120 and €170.

Bank of Ireland chief executive Riche Boucher refused to comment on the interest rate issue, other than to say that the meeting had been productive. But he said Bank of Ireland would meet its lending targets of €3 billion for small business this year.

The Government has expressed ''deep disappointment'' with the two main banks' refusal to pass on the recent ECB interest rate reduction.

RTE's political correspondent understands that the meeting - with the Taoiseach, Tánaiste and the Minister for Public Expenditure and Reform - involved ''frank exchanges''. The bank bosses of both AIB and Bank of Ireland were called in individually at first for ten minute sessions.

The Taoiseach has spoken to the Financial Regulator to inform him of the banks' attitude. It is understood the Government will be closely monitoring the pledges from the Bank of Ireland and AIB to keep up their lending to small businesses.

Gilmore wants banks to reflect on ''strong message''

Tánaiste Eamon Gilmore has said he hopes the banks will reflect on the "strong message" given to them by the Government this afternoon on reducing interest rates.

Mr Gilmore said the whole idea of rate reductions by the European Central Bank was to have them passed on to borrowers.

He said that he, Taoiseach Enda Kenny and Finance Minister Michael Noonan had made it very clear to the banks' executives that the latest rate cut needs to be passed on.

He said after the meeting the Taoiseach had made contact with the Financial Regulator and asked him to give him a response to the banks' position. "This has some way to run yet", Mr Gilmore said.