Dáil Éireann debate -
Wednesday, 24 Oct 2001

Vol. 542 No. 6

Ceisteanna–Questions. - Meeting with IBF.

Derek McDowell

Question:

71 Mr. McDowell asked the Minister for Finance the matters discussed and conclusions reached at his meeting with the Irish Bankers' Federation on 5 July 2001; the main features of the code of practice for branch closures agreed with the Irish Bankers' Federation; if all banks have subscribed to the code; if his attention has been drawn to concerns expressed by customers and consumer organisations regarding the withdrawal of certain counter services by a number of banks; if he will raise this issue with the Irish Bankers' Federation; and if he will make a statement on the matter. [25560/01]

Mr. McCreevy:

I had a short meeting with the President of the Irish Bankers' Federation, Mr. John Collins, on 5 July. I gave a brief update on the state of play on the proposed new financial regulator, the Asset Covered Securities Bill, 2001, and the Dormant Accounts Bill, 2001. The substantive issue discussed at our meeting was the Code of Practice on Branch Restructuring: Customer Communications and Relations, developed by the Irish Bankers' Federation and the Irish Mortgage and Savings Association. I would remind the House that I have no statutory function in regard to decisions relating to the location or size of bank branch networks, which are the prerogative of credit institutions themselves. They must be free to make decisions on the maintenance, closure or opening of branches based on their own commercial criteria.

The key elements of the code of practice in relation to branch restructuring include a minimum notice period of two months before bank branches would be closed and, in the interests of good customer and community relations, a commitment to give an explanation of the reasons for closing individual branches. The code was published on 16 July and copies are available from banks and from the IBF website. Retail banks and building societies have agreed to be bound by the code. I welcome the code of practice as a positive step towards alleviating some of the difficulties which arise when local banks close.

I accept that banks must react to changing commercial circumstances and the opportunities offered by new technology, such as telephone and Internet banking. However, despite the commitment under the code of practice to begin a process of familiarising customers with alternative banking facilities, the way in which certain changes have recently been introduced by some banks is to be regretted. It is imperative that financial institutions have regard to the needs of all their customers but, in particular, the needs of vulnerable customers such as older people and those with disabilities. This point is one I intend to raise again with the banks and their representative bodies when I next have that opportunity.

It is my intention that the Irish Financial Services Regulatory Authority will have a strong focus on consumer issues and, in that context, it would be appropriate for the new authority to monitor and report on access to banking services.

Mr. McDowell:

Will the Minister agree that the voluntary code published by the banks is seriously deficient in that, for example, it does not provide for any sort of consultation with local communities before banks decide to close a particular branch? Will he agree also that such is the weakness of the code it will provide little comfort to vulnerable communities and individuals who fear peremptory decisions to close their local branch?

Mr. McCreevy:

Under the code as published on 16 July, banks undertake to give a minimum of two months' notice and it would be the intention of banks to enter into some dialogue with local communities in that period of time. The code was published in the middle of the year in response to much disquiet among Members of the House, and the general public, on this topic. The code is a step forward. I do not have responsibility in this area, but I welcome the code as a significant step forward by the Irish Bankers' Federation.

Mr. McDowell:

In the event that the voluntary code proves to be ineffective, as I fear may be the case, will the Minister give some consideration to the possibility of ascribing responsibility to the single regulator, whenever that office is established, to approve or otherwise applications from banks to close particular branches?

Mr. McCreevy:

No. I will ask the Irish Financial Services Regulatory Authority, which will have a strong focus on consumer issues, to monitor and report on access to banking services but banks cannot be required to maintain a level of services, no more than a supermarket or a petrol station can be told to do so, regardless of commercial realities. It is not possible to do that. We could not bring in a law to force banks, irrespective of commercial realities, to do certain functions no more than we could force a shop to remain open in some town.

Mr. McDowell:

I agree with the Minister that we cannot and should not look to oblige a bank to maintain a loss-making business, but that has not been the case with a number of the recent branch closures. It has simply been a matter of maximising profits and given the strategic importance of banking in rural Ireland, and to the economy as a whole, that is something we should not easily tolerate. On the other issue, does the Minister share my concern about the withdrawal of certain counter services by the banks?

Mr. McCreevy:

I had noticed that all the financial institutions are trying to discourage people from coming into their organisations, but the banks must be left free to deal, as they see fit, with competition that has been forced upon them. Many of the new entrants to the financial market in Ireland are banks that are providing services through the Internet or other electronic means, and that implies that they do not need a plethora of branches as do the ordinary institutions. The banks and the other institutions must compete with that reality in the marketplace. The code of practice will endeavour to create a type of halfway house in that there will be consultation and dialogue and due notice given. When there is a great deal of hassle in some areas, and I have experienced this over a 25 year period in public life, banks often consider that what they intended to do in the first place is not worth it. The commercial reality is that new entrants to the market do not have a wide branch network and, therefore, they can have a lower cost base. The banks must be allowed to compete with those institutions as well. We would all like to go back to the days when one could go into the bank to see one's friendly bank manager once a year, the doctor would turn up at one's house at 2.00 p.m. or 2.00 a.m. and if one rang one's solicitor, he would come out to the house. The only person left in Ireland providing that service is a TD.