Vol. 545 No. 2
30 Mrs. B. Moynihan-Cronin asked the Minister for Finance when the promised Irish financial services regulatory authority will be established; the role he envisages the authority will have regarding monitoring and reporting on access to banking services, especially having regard to public concern regarding the withdrawal of certain counter services and the closure of branches; and if he will make a statement on the matter. [29958/01]
The heads of the legislation to establish the Irish Financial Services Regulatory Authority were approved by the Government in June and the text is being prepared by the Office of the Parliamentary Counsel. The legislation will transfer existing functions of the Central Bank, the Minister for Enterprise, Trade and Employment, the Director of Consumer Affairs and the Registrar of Friendly Societies to the Irish Financial Services Regulatory Authority. This authority is to be established within the new structure of the Central Bank of Ireland and Financial Services Authority.
I am aware of public concern at the fast pace of developments in the financial sector. The matter was recently discussed before the Joint Committee on Finance and the Public Service. I am also aware of the recent initiative of the Irish Bankers' Federation and the Irish Mortgage and Savings Association to produce a code of practice on branch restructuring with particular regard to customer communications and relations and that there is a programme of public education organised by these bodies. I welcome such debate and initiatives, which help people to adapt to the changes in the banking sector and to take advantage of the new possibilities opening up to carry out banking transactions from the home and the workplace, as well as through bank branches. The banks need to work actively to bring the public with them as they restructure the retail banking network.
It is my intention that in addition to the transfer of existing functions to the Irish Financial Services Regulatory Authority, the legislation will establish a new post of the Consumer Director of the Irish Financial Services Regulatory Authority. The consumer director will have the function of monitoring and reporting on developments in the financial sector as these affect customers, as well as taking over various existing functions in relation to consumer issues. An authoritative source of information in relation to developments in this area should assist legislators and the public in ensuring the public benefits in the period ahead from a banking sector which meets the highest international standards of quality and competitiveness. In addition, it is intended the consumer director will, ex officio, be a member of the board of IFSRA. This will, for the first time, place a person with a legislatively defined consumer focus at the heart of banking regulation.
The Director of Consumer Affairs and others addressed the recent meeting of the Joint Committee on Finance and the Public Service, referred to by the Minister. The meeting focused on two issues, the closure of rural branches and the withdrawal of some over-the-counter services. The Director of Consumer Affairs expressed the view that while she did not have the power to regulate these matters, the new single financial regulator would have responsibility for them. In response to a question last October, the Minister said the new regulatory authority would have "a strong focus on consumer issues." Does he intend the new single financial regulator will have a focus on over-the-counter services and the closure of rural branches?
On the last occasion I answered parliamentary questions there was a question on the closure of branches. I said it would not be possible legislatively to provide that banks would either have to operate in a certain place or not close branches at certain locations, no more than the Government could compel a person to act uncompetitively by opening a sweet shop, bicycle shop or such like. However, I also advised that following a series of meetings with us, a code of practice had been announced by the Irish Bankers' Federation and the Irish Mortgage Savings Association, which outlines the practice they will adopt in the future regarding possible bank clos ures. The position on over-the-counter services will be similar.
I pointed out that Irish banks must take account of competition issues. Much of the competition they face is from foreign institutions who have very few branches in the country. As much of their business is done over the telephone, the Internet and other more modern means of technology, they do very little business across the counter. Irish banks must compete with that.
Recently the banks have responded to suggestions in national newspapers that they were going to close branches. One institution said it had no plans in that regard. Like any other business, it is not possible to compel an institution to operate against its own best commercial interests.
This impinges on the issue of whether there is collusion among the banks. There is prima facie evidence, at least, that there is collusion among them on the issue of branch closures. For example, two banks do not close a branch in the same area. Does the Minister agree this is not just a rural but a suburban issue? People in Ballymun, Cabra and Inchicore who have lost bank branches will confirm this. Does the Minister agree the banks should be required to have at least some social concern in their business and that to maintain competition between the banks, the aspect of unspoken collusion between them should be urgently addressed and that new rules should be enforced?
The Deputy raises some interesting points on the social concerns of banks and other financial institutions. All organisations should adopt that as part of their agenda. However, the job of the Legislature is not to compel people to be good, it is to compel them to operate within the law. We are straying into an area here where it would be very difficult to draw up objective criteria under which one could operate.
The Deputy is right to highlight that bank branch closures is not only a rural phenomenon. The same is happening in Dublin and other major cities and towns. According to our figures, there has been no net reduction in bank branches in the last ten years. Branches may have been closed in some areas but others have been opened. The code of practice recently agreed to and the process banks undertake before initiating closure will have a bearing on future developments.
I recently spoke to a banker who takes an opposing view on the question of branch closures. He maintains that over the next ten years banks will seek locations to open branches, that the current phase of branch closures has ended and that under the new phase it will be deemed that the way to get business is to open branches.
That will happen when there is real competition.
