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Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach debate -
Tuesday, 8 Dec 2020

Financial Services Union: Discussion.

I ask members and witnesses to please turn off their mobile phones. I ask those who are using seats that are non-microphoned to speak towards a microphone from their seat and I ask everyone to unmask as they make their contributions for the purpose of the Official Report and recording.

Today we are engaging with representatives of the Financial Services Union, FSU. I welcome Mr. John O'Connell, general secretary, and Mr. Brian McDowell, head of communications and public affairs. Mr. O'Connell will give a brief opening statement.

Before he does, I remind witnesses that they are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that where possible they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Witnesses are protected by absolute privilege in respect of the presentation they make to the committee and this means they have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse the privilege and it is my duty as Chair to ensure that this privilege is not abused. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that we comply with all such directions.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I note Deputy Richmond and Senator Higgins are attending remotely. As members are aware, if they are within the precincts of Leinster House, they are covered by privilege but if they are not within Leinster House, they are not covered.

I now invite Mr. O'Connell to make his opening statement.

Mr. John O'Connell

I thank the Chairman and the committee for the opportunity to address them today. I want to talk to the committee about Ulster Bank and about the need for a debate on the type of banking we as a society want in Ireland. The Financial Services Union, FSU, is clear that banking is too important to be left to senior bankers. It has proudly represented staff for over 100 years and it takes every possible opportunity to stand up for staff, customers, and communities.

I regret that Ulster Bank has declined the invitation to attend the meeting today but I am not surprised. Information about this process is, as we have discovered, hard found. Three months ago, media reports speculated that NatWest was undertaking a strategic review of Ulster Bank operations in the Republic of Ireland and that complete closure of its operation was on the agenda. Throughout this process, the bank has refused to engage with us on what is actually going on. It has been the media, through strong reporting, that has kept us, and the committee, informed about elements of the process. So much remains uncertain, unclear and unexplained. It would be one thing if the decision of NatWest only affected Ulster Bank and its employees but a decision to close a bank as important as Ulster Bank would have a devastating impact not only on the staff but on communities throughout Ireland and on the commercial life of those communities. It would create enormous uncertainty, and has already done so, for customers of the bank and it raises the distinct possibility that the Ulster Bank loan book, or at least major portions of it, could end up in the hands of a vulture fund.

The decisions around this review are being taken now and so we need action now and that is why we are grateful to the committee for this opportunity to address it. We have been talking to staff members about the impact of all this situation. I will illustrate by example the feedback we have received. The following staff member is not identified, but the words are well worth putting on the record of the committee today. The employee stated:

Working on a cash desk in a branch during the recent media speculation has been extremely difficult. Customers are asking daily when we are closing. They are asking what will happen to their account, savings, and mortgage when the bank closes.

I try to reassure them that it is purely speculation and that Ulster Bank and NatWest are committed to Ireland but honestly, customers are not buying it. It is so hard to tell customers this when I feel like I am lying to them.

Customers are telling us that there is no smoke without fire and the newspaper articles had to come from somewhere. The longer the speculation and media articles continue, the more difficult it is to reassure customers.

Let us put ourselves in the shoes of this staff member. This person has worked through the pandemic, keeping the bank and service going, has worked in the bank for years, has a real affinity for the bank and its customers and is rewarded by reading about the employee's own future in the media. The employer will not even inform staff of the terms of reference for the review, its timetable or core elements of the review process. This is completely indefensible. While the individual is anonymised, members of this committee know such employees as they are representative of many people around our country. They know their community, as members do, and they know, as members do, the impact all this could have. These loyal, dedicated staff members deserve better from their employer and loyal Ulster Bank customers deserve better from their bank.

Members will have read some commentary about Ulster Bank’s financial performance. Let us take a closer look at that. Ulster Bank is the third biggest bank in this country. It has 88 branches throughout the country. It employs around 3,000 people in Ireland and has over one million customers. In November 2016, Ulster Bank paid its parent company, NatWest, a dividend of €1.5 billion. In January 2018, that dividend was also €1.5 billion and in December 2019, a dividend of €0.5 billion was paid to NatWest. Ulster Bank has paid a total to €3.5 billion in dividends to its parent in the last three years.

NatWest also charges Ulster Bank for services provided by the parent company to the subsidiary. These can include anything from payroll services to charging for a proportion of advertising and sponsorship that the parent company undertakes. The committee may be interested to know that NatWest sponsors the English and Welsh cricket teams. As a result, Ulster Bank pays a proportion of this sponsorship. Help for what matters, the bank might well say, but hardly evidence of a bank that is struggling.

In December 2019, Ulster Bank CEO, Jane Howard stated, "Our CET1 ratio will be 27% post payment of this dividend which leaves us in a strong capital position and well-placed to continue to support customers' ambitions through excellent products and service." It seems clear that NatWest has decided to use Covid-19 as a cover to prioritise some other agenda over any long-term strategy. It has decided that staff, customers, and communities in the Republic of Ireland are of little significance. To be blunt, it has manufactured a crisis using Covid-19 as cover. We cannot sit back and allow this to happen on our watch. It will be too late when the decision is made. We need to act collectively in the national interest and protect customers, staff, and communities.

The Minister for Finance has a role to play. He must contact his counterpart in the UK and express the Government's opposition to NatWest selling any part of the Ulster Bank loan book to a vulture fund. We know the damage that a vulture fund can do. There should be no place in Irish banking or society for vulture funds. The Central Bank has a role too. Currently, any bank can close a branch with two months' notice. This does not serve customers or communities. We need a new code of consumer protection that actually protects customers and consumers. The last few months have seen all the main banks in Ireland announce reviews of their operations. They all have something in common. They are all looking to close branches and cut staffing levels. Bankers are writing the future of banking in front of our eyes. We know where that got us before. We cannot allow this to happen again.

The FSU will shortly launch a discussion paper on the establishment of a national banking forum, one where we can all have an input into the future direction of banking in this country. I hope members will help to lead that debate. The timetable for this debate is short. On Ulster Bank, we need members' continued leadership also. We need political engagement to demonstrate the impact that this decision would have on our communities and staff. We must all act now: for our communities, to protect jobs and vital commercial infrastructure, for the bank's customers, to protect them from vultures and who knows what; and finally, to ensure a competitive banking system in Ireland, for our citizens, our SMEs and for our economy. If we do not act now, we face an effective duopoly in banking, with branches closed and jobs lost around the country, and with vulture funds holding the financial keys of family homes. Without action now, that is the near future for all of us.

I thank Mr. O'Connell. By way of information, at our meeting this morning we noted that Ulster Bank and the Central Bank refused an invitation to come before the committee, pointing to commercial sensitivities and so on. I do not accept that, and neither did the committee. We will write again to the Central Bank asking that it appear before the committee to hear directly from us our concerns in regard to this matter and to explore with it the general banking scene and what is happening. Likewise, Ulster Bank refused to come before the committee. We will write to it again too asking that it come before the committee to deal generally with the questions raised by the Financial Services Union. It is unacceptable that the bank would not come before the committee. It is also unacceptable, I think, to the customers and to the employees of the bank that the FSU would be treated in this fashion. We have asked also that information that has passed between the committee and the bank and the Central Bank to date would be sent to the Minister for Finance. The committee, following its hearing, may very well decide to insist that the Minister intervene or, perhaps, come in here to explain what the view of the Government is in regard to this matter.

I accept what Mr. O'Connell is saying. It is entirely unacceptable and I am sure the committee will endeavour to support the FSU and do whatever we can for it.

Gabhaim buíochas as an cur i láthair seo. I must declare that I am a member of the FSU, as I worked in banking in the years prior to joining it. However, I had just joined when I got elected, which was a bit of a surprise at the time. The vital role Ulster Bank has played in supporting local jobs is very clear. It employs 3,000 people and that has a serious impact on the economy and on regional balance as well. In 2019, Ulster Bank provided new lending of €3.1 billion into the southern economy and had deposits of €22 billion. It is the third largest mortgage lender in the State and provides 20% of lending to our SMEs. That shows how important an impact Ulster Bank has on the economy in the South. We have all seen speculation rather than detail, as Mr. O'Connell outlined, and it has been recently reported that Goldman Sachs has been employed to undertake the strategic review. Mr. O'Connell will be aware that Goldman Sachs has been involved in the Irish mortgage market in setting up vulture funds, which buy distressed debts from our retail banks and sell them without paying a cent in tax on their profits. What contact have the FSU and Ulster Bank staff had from either Ulster Bank or NatWest regarding the terms of reference of this strategic review?

Mr. John O'Connell

We have had a series of meetings with the CEO of Ulster Bank, Ms Jane Howard. We have also corresponded with the chairman of the board on a number of occasions when trying to ascertain, very basically, what the terms of reference and the timeframes for the review are to give people some sort of indication as to what is planned. In Ms Howard's case, we have had a number of very cordial meetings with her but elicited very little information, other than her confirming whatever the previous press leak was. The first time we met her, she indicated that it was pure speculation and the subsequent time we met her she confirmed what had happened the first time. We anticipate that at our next meeting she will confirm the Goldman Sachs story, which is the latest up-to-date story. The information has always been behind the curve and we have gotten it on foot of media stories. It is not credible that there are no terms of reference for the review and it is not credible that there is not a timeline for the review. The NatWest parent company is beholden to the stock exchange and shareholders and to have an open-ended review on something of such primary importance is not a credible position as far as we are concerned.

I echo what the Chairman said. It is deeply disappointing that Ulster Bank has failed to come before this committee, given the impact its withdrawal would have and the distress it would cause. It is important that Mr. O'Connell relayed the real-life experience of what staff are going through and, as he said, it is not just one particular member of staff, but all staff. It is hugely distressing for them. On 19 October, my colleague, Deputy Pearse Doherty, asked Ulster Bank to come before this committee. The Minister for Finance has not met with NatWest or the British Chancellor of the Exchequer. Doing so would be extremely important. What is the FSU's view on what the Minister for Finance needs to do now to progress this matter as soon as possible?

Mr. John O'Connell

I acknowledge the Chairman's remarks regarding the committee's intent and I welcome them. Any entity operating within the State that is invited to an Oireachtas committee should attend. I also welcome what he said about the Central Bank because of the seriousness of what we are dealing with, namely, the lives of 3,000 staff members and their families and more than 1 million customers. We met the Minister for Finance yesterday and had a very productive discussion. He shares all the concerns of colleagues here today. We went through our point of view, as we are doing today, outlining the concerns and the urgency around this. We seek that the Minister makes known to his counterpart in the UK an absolute opposition to any suggestion that vulture funds be involved in anything to do with the Ulster Bank situation. Equally, he should make clear to NatWest that it needs to commit to the future of Ulster Bank, which has been in existence for 200 years. It must commit to the future of Ulster Bank and engage on what is required to have a sustainable bank, which we believe it is, in the Republic of Ireland.

It is very important that the Minister for Finance reaches out to the British Chancellor and puts that on the record with him. Reaching out to NatWest is also extremely important because 3,000 livelihoods, families and communities will be affected by this. Mr. O'Connell outlined that very well in his opening statement. It has also been reported that Cerberus, one of the most aggressive vulture funds in this State, is considering buying up Ulster Bank's entire €20.5 billion loan book. This is extremely worrying for customers because of the amount of pressure and anxiety that puts on them. What impact would this have on Ulster Bank borrowers, its customers and mortgage holders?

Mr. John O'Connell

In general terms for any vulture fund taking hold of something like that, it would sell the performing portfolio on to other entities in the Irish market and then retain its core business, which is working with distressed assets. For those people unfortunate enough to be in that category, they will be dealing with something with which everyone in these Houses is familiar, and how they operate in their dealings with customers. The other entities would be moved to whoever purchases the performing loans from the vulture fund and, presumably if that was an existing entity in the State, it would deal with those customers but the staff would not survive that situation. The staff would not transfer with the work. That is the real concern of breaking it up when we believe there is no need to break it up. It is a successful entity and well capable of standing on its own feet for another 200 years.

In his opening statement, Mr O'Connell said, "There should be no place in Irish banking or society for vulture funds." Does he support my colleague Deputy Doherty's no consent, no sale Bill, which would prohibit the sale of mortgage loans to vulture funds without the consent of the borrower?

Mr. John O'Connell

As a principle, nobody could have a problem with consent. I am not familiar enough with the legislation to speak to the detail of it but the pretext of us consenting to things that affect us is something we support in general.

On 25 November, my colleague, Deputy Doherty, wrote to the Governor of the Central Bank to request the bank's views on the impact of Ulster Bank's withdrawal on the Irish market, both in terms of competition and consumer protection. He received quite an interesting response from deputy governor, Ed Sibley. In that letter, he said he could confirm that the Central Bank has "regular and intensive engagement with Ulster Bank on a broad range of matters, including the NatWest Group Strategic Review, and is in contact with the NatWest Group and the UK regulatory authorities, as appropriate". He also stated:

The Central Bank has regular and comprehensive supervisory engagement with the senior management of regulated firms on a wide range of topics including their business model, future strategy and the protection of consumers … The Irish retail banking system is concentrated by international standards, with five retail banks accounting for the majority … The exit of one entity from such a system, all other things equal, could contribute to upward pressure to lending interest rates and potentially lead to weaker credit availability.

What would the withdrawal of Ulster Bank mean for the banking sector and consumers?

Mr. John O'Connell

The scale of job losses and the impact on communities and customers would be devastating. We would also see the effects of a reduction in competition. It is a pity the Central Bank did not take the opportunity to turn up to address the committee today and explain this. Its core purposes are to protect consumers and to ensure a stable banking system. I cannot understand why the Central Bank's officials would not come here today and demonstrate what they are doing to protect Irish consumers and thereby protect Irish jobs. Protecting consumers is the Central Bank's core purpose.

I thank the witness.

I thank the Financial Services Union for the presentation and for attending today. I echo the Chairman's comments on Ulster Bank declining our invitation to be present here. It speaks volumes about that bank's willingness to engage. This seems to be confirmed by Mr. O'Connell's reports of how Ulster Bank has engaged with the Financial Services Union in the process of cutting jobs and costs.

I welcome Mr. O'Connell's comments on the future direction of banking in Ireland. He noted that the Financial Services Union will shortly publish a discussion paper on the establishment of a national banking forum. That would be very welcome. Does Mr. O'Connell have particular consumer protection powers in mind for the Central Bank? I am particularly thinking of Ulster Bank, which accounts for one eighth of all mortgages and one fifth of all loans to small and medium-sized enterprises, SMEs, in this country. If that loan book is sold to a vulture fund and Ulster Bank ends operations in this country, there will be massive competition and consumer protection implications. Does Mr. O'Connell have specific ideas about consumer protection powers the Central Bank should have?

Mr. John O'Connell

We all accept that banking is moving at a rapid pace. The current consumer protection code has been in place since 2012. It is still in draft form on the Central Bank's website. It has not kept pace with modern banking, including the development of digitisation, apps and so on. Any consumer protection code needs to be adapted to these areas.

I also refer to the importance of protecting what we have. We have a branch network that has served communities in this country well. Members will hear a lot of talk about reduced footfall. We are in a pandemic. We have advised people not to make unnecessary journeys. A dip in footfall is not surprising. However, a recent survey carried out by the banks themselves showed that the vast majority of people will return to branch banking after the pandemic, including greater numbers of young people. There is a bright future for banking if people invest in it.

We argue that a consumer protection code should be driven by what consumers and customers want and what small businesses need, not what banks feel is to their advantage. Customer service is being chipped away, whether the reduction takes the form of an ATM being removed or a reduction in the level at which a bank draft can be drawn. Those things should be defended by the Central Bank to protect the core functions of branch banking. This can be blended with a digital model that serves everybody. People need and want branch banking. If there was a cyber attack in the morning, people would be very glad to be able to access their funds through branch banking. We should act before it is taken away, because it will never be replaced. We need to have a proper debate about the level of banking we need and want in this country. It cannot be simply left to the banks.

I thank Mr. O'Connell. My next question was going to be about branch banking. The example Mr. O'Connell has given eloquently sets out the stress felt by branch workers at the moment, especially Ulster Bank employees. Mr. O'Connell has articulated a vision for the combination of branch banking with online digital banking. Are there good international examples of banks that have got this right without needing to cut thousands of jobs? This could involve internal redeployment or some other model of change. We need to know what the good examples are. Banking is being revolutionised in front of our eyes.

Mr. John O'Connell

There are good examples of blended models. We are not Luddites or opposed to change. We recognise the benefits of change. We are concerned about how change comes about for us, for consumers and for staff. Ireland is not at the level of digital maturity other countries have reached. We are on that curve and we are developing. However, the side effects of very advanced digitisation are being applied to us. As such, branch services are being withdrawn. Rural Ireland is a good example. Those communities do not have the broadband coverage they would like but they are at risk of losing their branch networks. The option of going digital is not really available. We are not saying change cannot be allowed in banking. However, we all need to get on that train together and get off at the right destination. We do not want communities to have their services withdrawn and be told they have the option of going online when they really do not. People cannot run their SMEs or businesses without that access.

I thank Mr. O'Connell.

Ulster Bank is a no-show this afternoon. Ulster Bank has more than 1 million customers and 3,000 employees. It is very poor form not to come in to answer parliamentarians' questions. What about the 1 million customers and the 3,000 workers? They have questions they want answered. Not only are their questions unanswered, the entity of which they are to be asked has not even shown up. It is a disgrace. I am not personally insulted but I think the customers and the workers have every right to feel that way.

This is a bank which has done very well from ordinary people in this country and the efforts of its workforce. The figures Mr. O'Connell has given for dividends returned to NatWest from the Ulster Bank operation in the Republic are staggering. Some €1.5 billion was paid in dividends in 2016. A further €1.5 billion was paid in 2018 and €500 million was paid in 2019. Some €3.5 billion has been sent to NatWest. It has done very well from this country. It is disgraceful that NatWest would even consider axing its operation, which consists of 88 branches, serves 1 million customers and employs 3,000 workers.

There is a powerful case for State intervention and for the nationalisation of Ulster Bank. We have seen nationalisation of banks in the past, when ordinary people had to pay the price.

Why can we not nationalise a banking chain to defend the interests of ordinary people, that is, of 1 million customers, of 3,000 workers and of mortgage holders who must worry every day about the possibility that vulture funds will get their claws into their homes? Under no circumstances should that be allowed to happen. Were the Irish State to nationalise Ulster Bank here, it would be a sure and certain way to prevent those eventualities.

We see a white-collar jobs massacre in banking and a massacre in retail and 2021 will see that threatened in other sectors. I believe the time is coming when the trade union movement in this country, the Irish Congress of Trade Unions, will have to initiate a serious discussion in its ranks about something such as a one-day national strike to defend jobs and workers' rights when jobs are threatened and to increase the pressure and mobilise support within society to put pressure on the Government for further, stronger, real action on these issues.

Mr. O'Connell's opening statement drew attention to the fact that a Central Bank policy is in place whereby a bank has to give two months' notice of a closure. That is completely insufficient. How would the FSU like that policy to change? What is its view on state intervention along the lines of nationalisation to defend and protect jobs and services?

Mr. John O'Connell

When changes such as branch closures are considered, we would wish for an environmental assessment of the impact of what is being proposed so that before any decision was taken, its impact on communities and staff would be assessed and that would guide the next steps. The future of the branch network has to be weighed up in the round, including the social impact of removing the branch and issues such as whether it is the last branch in town and so forth. Different factors would then come in to play such as what options were being put to customers or whether they were in an area with broadband or a rural area with very limited opinions. The first point of any proposal would be to assess the impact on the community of what was being proposed and then it would go from there. If closure was an option, there would have to be a lead-in time to give communities to come up with alternatives. Were it the last bank in town, that would require very serious consideration before such a closure was authorised.

We have submitted freedom of information requests to the Central Bank on branch closures and all the banks have closed branches. It is astonishing and breathtaking to see that it is effectively a tick-box exercise in that the bank alerts the Central Bank of its intention to close a branch and the Central Bank notes this intention. There does not appear to be further interaction on the withdrawal of services from communities. We were very surprised. We thought there would be a robust debate with the Central Bank before a service would be reduced or eliminated but that is not the case according to the evidence we have seen through freedom of information requests.

For clarity, if a branch is to close, the bank simply informs the Central Bank two months before a closure and that is noted by the Central Bank and there is no other part of the process.

Mr. John O'Connell

That is what we have seen from documents on the interaction between the bank and the Central Bank, which we requested through freedom of information legislation.

Did Deputy Barry have another question?

My question was very similar. This is a very interesting piece of information that has been put before the committee. I would like to tease out a little more information about what has been revealed by the freedom of information requests.

In the case of a town which has one bank - the only one for miles - and the bank's head office informs the Central Bank that the branch will close in two months, will that be the only correspondence? Is the Central Bank's only engagement to note it? I am interested to know precisely what is meant by a tick-box exercise. Have there been examples in recent years in which the Central Bank has resisted a proposed branch closure or even has sharply questioned the decision?

Mr. John O'Connell

What we have seen from the information obtained through freedom of information requests is that the bank gives notification and the Central Bank responds that it is noted. Perhaps where a press release has been issued, the Central Bank might ask for a copy. One bank closed one third of its branch network with one day's notice at the start of the pandemic.

Did the Central Bank respond to that notification? Did it ask any questions?

Mr. John O'Connell

It was at the height of the pandemic. We understand it related to staffing issues. That same bank says it has 1,450 surplus staff.

They were temporary closures.

Mr. John O'Connell

They were temporary closures.

That is very interesting.

I welcome the witnesses and thank them for coming. There are a couple of things the committee needs to deal with. I was unable to attend the earlier meeting as I had two meetings at the same time. The non-attendance of representatives of the Ulster Bank and the Central Bank on foot of the committee's request is unacceptable. Presumably it is based on its view that it is none of the committee's business and it will do whatever it is intent on doing regardless and will consult afterwards. Unfortunately, the recent history of the banking system in this country would lead us to have serious questions about that kind of attitude. Many times before the financial crash, the House raised questions about the direction in which the country, and particularly the banking system, was going. We were reassured our fears were groundless, there was no need to worry, we were in safe hands and the banks knew what they were doing. They did not, however, that is the bottom line on it, and it appears they still do not know what they are doing. To treat Members of the Houses of the Oireachtas, those elected by the people of this country to be their messengers, with an offhand attitude is absolutely unacceptable. Legislation may have to be considered to deal with this because the move is of such magnitude and will have such an impact on the banking system, as well as businesses, domestic customers and mortgage holders. Everyone in the country is affected by this kind of attitude, especially when it is a bank with a large portion of the market. I know the Chairman has written to the bank again expressing dissatisfaction. It says it does not want to discuss commercially sensitive issues.

We do not want it to discuss business sensitive issues. We want to tell it what we, as the elected representatives of the public in this country, representing business, industry, agriculture and the banking system, think. It is not just one sector. It is everybody. It behoves it to come before the committee at the earliest opportunity and give us an indication that it is listening to what we have to say. I emphasise I do not want it to divulge any secrets but I want to know if its intention is to sink part of the banking system into oblivion and to do so at its leisure without reference to anybody. That would not be acceptable, particularly in the aftermath of the banking issues we have come through in the past ten years.

The Governor of the Central Bank has a role and should be here in this context, as should a representative of Ulster Bank. A representative of NatWest should also be here, particularly given that we are now talking about an entity that will be outside the European Union, and controlled from outside it, shortly. It is totally unacceptable that people in that situation do not respond to what is a genuine call. The Financial Regulator also has a role. The regulatory system is affected by changes in the format of the banking system in the country and by changes in polices, including lending policies and staff relations policies, the latter being a simple aspect.

All members have spoken with the relevant Ministers since we spoke last. The Minister for Finance is very concerned about what is happening. He is monitoring it on a daily basis and continues to be ready to respond to whatever might happen when it might happen. The most important thing in this kind of situation is that the banking system, or the controllers of part of the banking system, cannot be allowed to have it within their gift to determine what they will do regardless of what anybody else, or the people of the country, think or how the people and their lives will be affected by it.

I thank the Chairman for his strong actions earlier in terms of writing to the Central Bank again and also to Ulster Bank through NatWest. The Central Bank's arrogance towards this committee is disgraceful. It does not have a sound track record, as alluded to by Deputy Durkan. It has anything but that. During the last crisis, when money was pumped into most of the banks, Ulster Bank, which was with the Royal Bank of Scotland, RBS, at the time stayed outside that particular scheme. The total arrogance of the Central Bank beggars belief. Ulster Bank appointed a new chief executive officer not that long ago and such a change brings reviews to explore where the business might be going or what might be best for it. I was not that shocked when I saw what was going on at first but the longer it has been going on and the more I have seen from this committee, the more I am concerned. If Ulster Bank had very little to hide and was being honest with us, it would come before us but, evidently, it is hiding something. That is why it does not want to come before us to answer questions. It is very evident it is hiding what its plans are. I would have given it a fair kick of the ball but the way this has gone on, and the way it has avoided and eluded this committee, means there is no doubt it is in negotiations with somebody who is probably not going to be too palatable to the Irish people. I would have serious concerns.

I have a question for Mr. O’Connell or Mr. McDowell. I would have strong concerns about AIB given there is considerable talk in the media about closures and job losses. AIB is one of the banks that received massive amounts of money to keep it afloat. It nearly put our State to the edge trying to keep our banks afloat. If AIB, which has already had a massive cost-cutting programme, sees that we have come through the pandemic with many branches and sub-branches having closed, and with staff working from home and on short-time working and all sorts of different mechanisms to cut costs, it might believe this has worked and could be a way for it to get a greater return for its investors and help its stock price. I would be concerned about that. AIB has a duty of care and a debt to pay to this country, and it cannot be steered only by what its stock price is. It owes more to this country than that. I would have serious concerns about what it intends to do next. Mr. O'Connell might shed light on that. What has been the experience of his members? What is he seeing on the ground?

Mr. John O'Connell

We engaged with AIB last week. It acted responsibly earlier in the pandemic. It had plans to reduce the head count but it paused that. It acted responsibly in pausing it and saying it would re-engage in that respect. It has re-engaged and has indicated it will fully engage with us on our proposals. It outlined its proposals in the public domain and indicated that the model it wishes to follow is to reach agreement with us. Change is inevitable but, as I said at the start of my presentation, how change comes about is the key for staff and customers alike. AIB indicated it will engage with us and we believe it will. We also have an agenda of matters that are important to us. For instance, the staff in AIB work the longest hours. People want job security, certainty and a commitment around branch networks. We tabled all these issues with AIB in the past few days and will engage with it. It did not come to us with a baked cake and said this is what is happening. It came to us and said what it wants to do on the basis that it believes it is the right thing for the bank. It now wants to sit down, discuss and negotiate with us on it. That is what we believe is the appropriate method of bringing about change in any sector but particularly in banking.

In terms of Ulster Bank, we are hoping that the Minister will meet NatWest, as he indicated to us, and out of that we hope it will provide clarity and we can return to where we were with Ulster Bank last July when we met it and it shared with us financial details around the bank and what it wanted to achieve. That would not be without pain for some of our colleagues but we believed we could sit down and negotiate with it. However, while we were doing that, it was engaged in a review elsewhere that has obviously pulled the rug from underneath those discussions. We hope the Minister will meet NatWest, get us back on track and get us back to a position where we can sit down and discuss the future of Ulster Bank and what has to happen, just as we are doing with the other banks. We hope we can come to a position that retains the bank but also brings about the kind of change with which we can all live.

Does Mr. O'Connell foresee many bank closures through what AIB is proposing?

Mr. John O'Connell

It indicated it has a number of city centre-type mergers envisaged but it sees – I can only tell the Deputy what it has told us - branch banking as core to its philosophy of doing banking and it is committed to a branch network, save the changes in city centre mergers that it has outlined.

I certainly hope that is the case.

I have had difficulty with my remote log-in but I have been reading the presentations and following the debate with interest. As everyone said, it is unacceptable that Ulster Bank has again declined to meet the committee today.

It is clear that many of these processes cut across the Central Bank's duties in the context of consumer protection and, as a result, it is extremely disappointing - and a real problem - that its representatives are not here to answer questions.

The importance of Ulster Bank's 3,000 staff and 1 million customers has been mentioned. Reference was also made to its loan book, worth approximately €20 billion, and the fact that 25% of SMEs here are involved with the bank. This is clearly a matter of national interest. As has been articulated, in terms of different banks and different ways of operating, the main banks have been accorded considerable political and policy engagement, be it in the context of slightly different measures for AIB and others. We saw that even this summer when we passed yet another credit guarantee in terms of the State underwriting small loans for banks. It is also apparent in our policies, which I personally do not support, on deferred assets and the fact that, effectively, many banks are not even paying taxation because of their previous losses. The banks clearly believe that these issues are our business when it suits them.

I agree that it is not credible that this is an open-ended review. I do not know of any consultancy agency, whether it is Goldman Sachs or whatever, which signs up to an open-ended general review. There is a timeline. There are terms of reference. One of the key asks from the Minister and, I suggest, from this committee and other interested parties should be that there be some engagement and clarity regarding the timeline and the terms of reference. I am not referring to commercially sensitive financial matters. What is already in the public domain about the finances tells us that they are very healthy. I understand that dividends of €3.5 billion have been paid by Ulster Bank in recent years. I note- Mr. O’Connell might want to elaborate on it - the comment to the effect that, separate from the dividend, Ulster Bank pays for things like sponsorship of local teams in the UK. There is a good deal of direct cash transfer between Ulster Bank and its parent company, NatWest, even aside from dividends. It is important that the terms of reference address those issues of national duty of care and responsibility, workers' security, consumer protection and local impact. We have seen, at least in the case of AIB, that it is giving us a sense that those are the issues it is examining and this is the way that it is examining them. That then gives a basis for appropriate engagement.

I was very interested in Mr. O'Connell's comments on the importance of branch services, although it may be a slightly wider discussion. While Covid-19 has moved people online in some cases, it has also been important, given the restrictions in terms of county boundaries and so forth, for people to have local branches for important banking provisions and actions. That has been shown to be the case for many people in the Covid-19 crisis.

I concur with Mr. O’Connell's assertion that digitisation is not simply a matter for the companies. It is a matter for the customers also. More than 50% of people in Ireland lack basic digital skills, according to EU sources. The facts and figures are that Ireland is not at a point of digital literacy.

Those are important points but the key issue, and it was picked up by Deputy Barry, is the two months' notice. In terms of what it means, it clearly points to a flaw in the Central Bank’s 2012 consumer protections. Mr. O’Connell might point out how that should be addressed and what he believes should replace that two months' notice in terms of customers and consumer protection but also what it means for workers? What would a two-month notification mean for workers and, to use the example of a temporary closure with one day's notice, the impact of that on financial services workers? That is very important.

A huge number of homeowners have their mortgages with Ulster Bank and 25% of SMEs have their business with it. Mr. O’Connell mentioned performing loans. We are having a separate but related debate here on the question of securitisation and the way non-performing loans are categorised. What are Mr. O’Connell’s thoughts or concerns about the potential dangers in terms of securitisation if a large number of loans are being categorised as non-performing? What would be the implications for people of the exit of Ulster Bank from the market here?

Mr. O’Connell specifically mentioned the duopoly. Again, this is not about one bank or the other, but what are the known risks in having such narrowed competition in terms of a duopoly? What should we be looking for in terms of having a diverse or healthy financial eco-system?

Mr. John O'Connell

I thank the Senator. We approach all the points she raised from the point of view of competition, consumers and colleagues. In terms of any of the issues she highlighted, whether that is branch closures, non-performing loans or how to categorise the impact of these on people and so forth, they have to be approached from the point of view of the purpose of the regulator and what we are asking the regulator to do. I do not believe we are being unreasonable in expecting that the approach to any of those issues would be that the consumer and jobs are protected. That is not to say that things cannot change. That is not our track record but if we have a situation where the regulator is asking for two months' notice, the impact of that on the community will be felt for a long time. For instance, a research paper which I can share with the committee shows that if a branch closes lending to the SME sector drops by 64%. If that is the last branch in town, that figure is significantly higher for obvious reasons. The impact we are talking about will be on real people. These are people who rely on the manager in their local bank branch to support them in good times and in bad. That is the impact that studies have shown in that regard.

In terms of the national broadband system, we are not quite there yet so many of the communities that are impacted by closures are communities that do not have the support of a good broadband network. I was in north Mayo on holidays during the summer and I could hardly get a phone signal, let alone a broadband connection. We are telling the communities that if they set up SMEs in these areas it will drive business and so forth but if there is not the infrastructure in those areas they do not have a hope to do that, and a banking infrastructure is a key part of any community.

I have a follow-up question on non-performing loans because I am concerned about these. In even identifying the loans that are likely to perform, especially after Covid-19, when many very healthy businesses will be in limbo, I would imagine that the loss of that kind of local bank knowledge is a concern. If we have a very blunt and rushed process, which seems to be coming down the line, that will have major implications in terms of identifying potential performing and non-performing loans and how they are treated. Mr. O'Connell might comment on that.

Mr. John O'Connell

A danger of large numbers of head count being reduced and so forth is that we lose that corporate memory and the local knowledge, whether that is a farmer or a small businessman. If they are not there we are then into a situation where a decision is being taken remotely by somebody who does not understand the implications and that every couple of years this particular farmer or business has a downturn but that it is cyclical and will come back. That is the type of knowledge that determines the categorisation of loans and so forth that it is important to retain.

Will Mr. O'Connell confirm that he has not been given either any sense of a timeline or terms of reference for the review and that that is something he would regard as important?

Mr. John O'Connell

No, despite repeated requests. I am aware the Minister will meet with NatWest and we have asked that a timeline and terms of reference would be requested but also the opportunity, and I felt it was important that Ulster Bank would be before the committee today, to have a debate before a decision is taken. It is pointless having us there at the end stage and being told that that is the outcome, live with it or whatever. People have to be listened to as part of debate. The bank says that it consistently brings its values to act in the best interests of its customers, colleagues and stakeholders.

That is what the bank says it operates under. That is not very visible to me or the Senator and her colleagues here today. We are asking that it engage with us, stakeholders and the committee and give us the opportunity to debate these issues.

Moreover, this is a highly profitable bank.

I thank Mr. McDowell and Mr. O'Connell for being here today to answer questions. We have seen considerable withdrawal of post office and bank services from towns and villages. It is obviously driven by profitability. They want to withdraw that shopfront service, which is very important to people, and go online. Online is fine when it works well but when it does not work well, people need that customer interface, which is lacking in many situations. We do not seem to have much control over that. It is very much down to these entities to decide whether they will withdraw or withdraw completely. We could not even get one such entity to attend here today. In light of that and looking at the pattern of how things have been going, does Mr. O'Connell think there is any role for a community banking system in this country? Could a community banking system offer that alternative that would offer people something different from that offered by established banking systems, which might make those established banking systems up their game a bit and say "there is some competition in the town"? Mr. O'Connell spoke of that local branch knowledge that is out there. I would like to hear his comments on community banking system like the Sparkasse model in Germany. I know it was discussed in 2018.

Mr. John O'Connell

This is the very reason why we are calling for a forum on the future of banking. It is so we can have a debate on what type of banking model we want. Regulation and legislation should follow where the debate takes us. If we went to any community and asked whether it wanted to lose a service, we know what the answer would be. We need to have a mature and broader debate. Digitisation is here. Its impact is being felt. How can we end up with the best of both worlds in terms of our banking system where we have all the upsides of digitisation but do not lose any of the good aspects of local branch banking that exist? We are on that cusp. We see where Ulster Bank is. Other banks have made or have indicated decisions. We think it is an opportune time to have an open debate with all the key stakeholders at the table to outline their vision of banking for the next ten years. This would be a reasonable step. Our big concern is that at the end of Covid, people ask what happened to our banking system, why it changed so rapidly and how we missed it. There is a missed opportunity for Ulster Bank today but this committee and the Houses of the Oireachtas have an opportunity to endorse such a forum. We spoke to the Minister about it yesterday in terms of outlining where we want banking to go in order that we do not end up being told that a service or a certain type of banking model is no longer available. Who decided that? We must have an input into this.

Does Mr. O'Connell think a community banking system could be part of that? I met with Irish Rural Link a couple of months ago. It has been pushing that idea for quite some time. It is an idea we might include in that consideration of the entire banking system. Do most banks in this country own their premises or are they mostly leased or rented?

Mr. John O'Connell

It is probably a mixture. Much of it is physically owned but the Deputy will have seen in the past few days how all of the banks are reducing their footprint, particularly in the capital with regard to head offices, because much of their workforce is working remotely and they are rationalising their footprint. I think AIB envisaged going from eight to three offices with support staff over a number of years. This is assisted by home working, in which many of our colleagues are engaged. To their credit, it is not just the people who have worked in branch banking during Covid but people who have worked at their kitchen tables and in their bedrooms who have kept the banking system open. This is why people in Ulster Bank, who have really been successful in supporting the bank, are as upset as they are to find themselves in the current situation.

Would Mr. McDowell like to comment?

Mr. Brian McDowell

I thank the committee for allowing us the time to address it today and giving the matter so much time. I will reiterate what Mr. O'Connell said. The three main banks are undertaking reviews across the country. We know this is happening with Ulster Bank, AIB with its announcement during the week and Bank Ireland, which is undertaking a review in Northern Ireland. KBC is closing hubs. We have a consumer code of practice that is written by the Central Bank for the Central Bank to implement. Banks are now writing the future of banking in front of our eyes, which is why we are making a strong case for a debate on the future of banking in this country as soon as possible and why we met the Minister yesterday regarding the establishment of a banking forum. We would really appreciate it if this committee took a leading role in that because this is where legislation is passed. We will shortly publish a discussion paper that we will forward to every member of this committee. We really look forward to the committee's input. As my colleague said, what we do not want to happen is for us to look around for our local branch once we have exited the pandemic and find it is nowhere to be seen and that we have moved online across the country without anyone taking any notice of it. The National Adult Literacy Agency, NALA, produced a report that said that up to 18% of people did not have sufficient literacy levels to access online banking so we are leaving a lot of people behind at present through the closure of branches and so on. A real discussion is needed. We will publish a report very shortly and will forward it to members of the committee. We would really appreciate it if the committee could have a discussion on the future of banking as soon as possible.

Can I recap? Did Deputy Farrell have a question?

A great deal of interesting stuff came up after my own questions. What was very interesting and stark was the fact that if a branch closes, lending to the SME sector falls by 64%. This will obviously affect rural, more isolated and smaller places. I represent Galway West, which houses the likes of Connemara. I can see the impact this would have on the likes of Clifden. If Ulster Bank does withdraw from the market, has the FSU worked through a scenario regarding what could happen to branches and the loan book? What remedies would it suggest? Obviously, the SMEs are hugely reliant on it.

Mr. John O'Connell

I think the remedy is for Ulster Bank to sit back down with us. It outlined to us in July in quite an amount of detail what it would take to reset the bank and deal with the challenges it said it was facing. We got to the exploratory stage of that discussion when the rug was pulled so for us, it is really about resetting the clock and Ulster Bank coming back to the table, acting responsibly, committing to the Irish market of which it has been a part for 200 years and engaging again with us. As I said, we have a good track record. We fight our own corner and make no apologies for that but we have a good track record of working out change. We believe the bank has a future - a bright future - if it engages with us like that.

Mr. O'Connell is right. The key thing here is responsibility. The bank has a responsibility to the 3,000 people who work for it. It has a responsibility based on the fact that it has been around for 200 years. It is outrageous that it has refused to come before us time and again despite numerous requests.

It is good that the message coming out of this committee meeting loud and clear is that Ulster Bank has a responsibility to those people and it must come and speak to us.

We have to be perfectly clear about this before we leave the meeting. I chaired the committee for the entirety of the previous Dáil. We discussed vulture funds and their activities throughout the country at length. We discussed community banking and the issues around the pillar banks and other banks, issued some final reports and had the report on vulture funds debated in the House.

When I look back, I find nothing much has changed. In fact, the situation has got worse. If we leave here without doing something definitive, it will show that we are just a talking shop that does not take real action. It is time for the Government to acknowledge that we had two specialists before us who told us the banking inquiry was a whitewash and waste of time, a point of view to which I subscribe. Mr. Jonathan Sugarman came before the committee and opened our eyes about a whistleblower in the banks. That issue is still unresolved. The Central Bank is making a choice to turn its back on his actions.

Since then, vulture funds have run roughshod over the country. They have stolen from the people we are here to represent and the people have had little or no representation in the courts because they are almost as bad as the vulture funds when it comes down it. We have no real understanding of where banking is going. A political intervention is required.

The forum is a medium to long-term proposition politically. We need action. Writing to Ulster Bank after the witnesses' contribution today is one action the committee can take. We can write to the Central Bank and NatWest, regardless of what the Minister is doing. We should express not just our deep concern but also our anger about the fact that they have not come before us and insist that they do so. Whether they sit and listen to what we have to say or are willing to contribute is entirely up to them. They should be invited in the strongest possible terms. Likewise, the Minister for Finance should be informed of our actions and what we are doing.

There is a mechanism for debate in the Dáil Chamber. If the committee is of a mind to draw up a short report to bring to the Dáil Chamber for debate on this issue, perhaps that is something we should consider. Members can take from what was said here, take it to the floor of the Dáil and publicly challenge the banks, the Minister and the Government to respond to what I believe is a crisis in banking. There is no doubt but that there is a crisis in banking. This involves 1,500 jobs in AIB, the possibility of further actions in Bank of Ireland-----

Mr. John O'Connell

The figure is 1,400.

-----involving 1,400 jobs and 3,000 jobs in Ulster Bank. That is before we include the workers, customers and all of the rest.

Quite frankly, I saw enough of the banks for five years to understand that one simply does not believe them. Whatever they might say in regard to re-engaging, all it is is soft talk. We have to be very strong politically and demand some action on this; otherwise we are not serving the purpose for which we are here. I have seen enough social devastation wreaked upon the people of this country by vulture funds to want the Government to intervene and ensure there is no place for them.

To think that there is the possibility that they will be reintroduced, through the reformation or whatever it might be of Ulster Bank, is something that I could not bear. I ask the clerk to carry out all of the actions we set out, consider the possibility of drawing up a report and engaging with the Dáil and brief the Minister on exactly how we feel about this.

The drawing up of a short report to go to the Dáil to enable a debate is a proposal I will second.

Are we all in agreement with that, if what I have suggested is technically correct?

We should complete an interim report or some other report so it is available as a reference. I know the time for that is short, but it could be helpful.

I refer to the reluctance of the Central Bank or any banking entity to come before the committee to hear what it has to say. In the not-too-distant past, there was a period during which one could only describe what went on as reckless trading. That is a serious offence in the financial services area. Raiders came into Ireland from outside of the country and proceeded to undermine the Irish banking system through the medium of alleged competition. That created a vacuum in the banking system that was not filled by anybody. It created huge inflationary problems. They then generally walked away and escaped from the country. That happened in financial services, banking and insurance. There is no reason in the wide earthly world why we should have to tolerate that.

The vulture funds-----

They have of course-----

That can be incorporated into any report that might get us to the point of a debate in the Dáil Chamber. If members are agreeable, we will wind up today's proceedings. I thank Mr. O'Connell for his very informative contribution and Mr. McDowell for his presence. I hope they can liaise with the clerk on any information they might want to provide to us. We support their efforts for further engagement.

Mr. John O'Connell

I thank the Chairman and the committee for the action plan that was outlined. It will give a lot of heart to people in Ulster Bank and other Banks. I welcome that.

We have completed our work.

The joint committee adjourned at 3.08 p.m. until 2 p.m. on Wednesday, 9 December 2020.