Banking Sector: Engagement with Bank of Ireland

We are dealing with item No. 6, which is the engagement with Bank of Ireland. I welcome members to the committee. I also welcome the bank officials, Ms Francesca McDonagh and Mr. Gavin Kelly. The purpose of today's meeting is to discuss in general the topic of banking matters with the representatives.

I wish to explain some of the limitations to parliamentary privilege and the practice of the Houses with regard to reference that witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected by absolute privilege, pursuant to both the Constitution and statute. If, however, they are giving evidence remotely from a place outside the parliamentary precincts, as such, they may not benefit from the same level of immunity from legal proceedings a witness physically present would. They are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory to an identifiable person or entity, witnesses will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

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 remind them of the constitutional requirements that they must be physically present within the confines of the places in which Parliament has chosen to sit - Leinster House on this occasion - in order to participate in public proceedings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting.

I invite Ms McDonagh to make her opening remarks. The opening statement which she has submitted can be taken as read and she can add some comments now, if she wishes. The members have been asked to keep their contributions tied to the questions they want to ask. We have only two hours and there are 15 members wishing to contribute. In terms of the questions asked, I ask that Ms McDonagh would give a direct answer in order to save time and not to answer questions that have been asked previously, so we can get as many members as possible to participate in the meeting. I welcome Ms McDonagh to the meeting and again invite her to make her opening remarks.

(Interruptions).

A technical issue has arisen. We will have to suspend the meeting. I ask Ms McDonagh to bear with us.

Sitting suspended at 3.36 p.m. and resumed at 3.42 p.m.

We will resume our meeting. Ms McDonagh was at the point of making her opening remarks.

Ms Francesca McDonagh

I thank the Chairman and members of the committee for the invitation to address them on the topic of banking issues. Hopefully, everyone can hear me loud and clear. I am pleased to be joined today by my colleague, Mr. Gavin Kelly, CEO of our retail Ireland business. I very much hope we can be of assistance to the committee today. I am conscious that we bring a particular perspective to today's session being the only majority privately owned Irish retail bank. We circulated a longer opening statement in advance. I will, therefore, address the key points in that statement in my opening comments.

Tomorrow marks the one-year anniversary of the introduction of broad restrictions on the Irish economy arising from Covid-19. As a leading lender to the Irish economy, we felt a strong sense of duty to respond quickly to support our customers and the wider economy.

At the outset of the pandemic, we moved at speed to proactively introduce a range of supports for our customers. For example, Bank of Ireland put in place more than 100,000 payment breaks across the group, and of these, 97% of customers have returned to pre-Covid-19 terms with only a small number requiring further support.

Like any business, Covid-19 has presented challenges for Bank of Ireland. I want to take a moment to outline our 2020 financial results. We believe this context is very relevant to our discussion today. Ensuring our business model is appropriately profitable and sustainable is absolutely critical if we are to attract and retain investors, generate capital that can be lent into the Irish economy and reinvest in the business to ensure our long-term competitiveness and viability.

Bank of Ireland is unique among Irish banks in being the only institution to have fully repaid the Irish taxpayer, which we did in 2013. This support from the taxpayer was vitally important during the financial crisis and was gratefully received. It should never have been needed, however. That is why Bank of Ireland made it an absolute priority to repay the Irish taxpayer as quickly as possible. To date, Bank of Ireland has returned €6 billion to the State, delivering a €1.2 billion net cash return to taxpayers. Over the past three years, €40 million in dividends have also been paid by Bank of Ireland to the State.

The State’s continued 14% shareholding in the group, which is held at the discretion of the shareholder, as is the case with any investor, will represent an additional return to the Irish taxpayer whenever it is sold. The same is true for any future dividends paid out to shareholders. I mention this by way of illustration of the unique nature of our position in the Irish retail banking market.

In terms of our most recent financial results, 2020 was a challenging year, with Bank of Ireland announcing a €374 million underlying loss before tax. The bank, however, saw a stronger performance in the second half of the year and a return to profitability.

When we presented our annual results on 1 March, we also announced a range of significant changes to our branch network and to the provision of local banking services to our customers. In addition to the reduction in our branch network, we announced a new partnership with An Post to be launched in the coming months and in advance of any branch closures. This will enable all our customers to access banking services at more than 900 post office locations across Ireland in addition to our branch network.

This is the first significant change to the bank’s physical footprint in almost a decade whereas other banks have significantly reduced the size of their branch network in the preceding years. This change reflects the reality that we have reached an inescapable tipping point in customer preference between online and offline banking. We are, however, fully aware that changes like this can be of concern to some customers, especially those living or working in rural communities. Bank of Ireland will, therefore, continue to invest in a strong nationwide presence of 169 branches and, of course, we will also continue to offer mobile and telephone banking for all our customers.

Many changes are confronting the banking industry. As a country, we all need a profitable and sustainable banking sector to support ongoing growth and lending, especially as the economy recovers post Covid. A once in a lifetime process of change is under way in banking right now, not just in Ireland but across Europe, and indeed, the global banking sector.

The decision of NatWest to withdraw from the Irish market reflects the realities of a challenged sector and has thrust the dynamics of Ireland’s banking sector further into the spotlight. Our belief is that the continued attraction of private capital into the sector and the economy is the critical path to ensuring a sustainable, robust and more normalised retail banking sector.

In closing, the history of Irish banking, and the role banks had in Ireland's financial crisis of the past, is understood. The economic impact of the pandemic today on Irish businesses and households is recognised. We have been proactive in our support for customers during Covid-19. The focus of my team and me, however, is equally on the future of Ireland's economy, banking sector and the role Bank of Ireland can play over the next decade in Ireland's development. We are looking at am imminent period of recovery and growth. To enable the financial well-being of Irish households and businesses, an improved relationship between our sector and the State is overdue. As a leading lender to the Irish economy, Bank of Ireland wants to play a central role in this discussion about our collective future. I will be happy to now respond to any of the committee's comments or questions.

For the information of members, Deputies Doherty and Barry, Senator Higgins and Deputy Richmond will speak. I call Deputy Doherty.

I thank the Chairman. I welcome Ms McDonagh to the committee. I will begin by talking about the huge amount of correspondence my colleagues and I have received from individuals who cannot draw down their mortgages as a result of having what are deemed "underlying conditions" and are, therefore, considered by insurance providers as being at higher risk of death as a result of Covid-19. Has the bank witnessed this scenario? People have been approved for a mortgage drawdown but are not in a position to avail of it as a result of the legal requirement for the bank to ensure they have mortgage protection cover.

Ms Francesca McDonagh

I thank the Deputy. Obviously, we are in the business of lending. Mortgages are one of the most important and material parts of our balance sheet. We require people to have life protection when they take out a mortgage. I am not aware of any of the specific cases to which the Deputy refers. As always, the Deputy is most welcome to send me specific cases if there is a concern. I will give the Deputy a data point that may help demonstrate our commitment to helping people buy a home for the first time-----

Ms Francesca McDonagh

-----particularly first time buyers. We have a market share of 21% of applications but our market share of drawdowns is 26%.

Our conversion of people applying for a mortgage to actually getting drawn down and moving into their home or re-mortgaging-----

I appreciate that-----

Ms Francesca McDonagh

-----is one of the market leading statistics.

I have six minutes and I am sorry to interrupt Ms McDonagh but I need to get to the bottom of this issue. There are people, for example, who have diabetes and can no longer get mortgage protection cover from a range of insurance providers. New Ireland Assurance is a subsidiary of Bank of Ireland - indeed Ms McDonagh is the group CEO of that organisation. New Ireland Assurance has changed its criteria since May of last year and now asks applicants to identify whether they have had a symptom of Covid-19 in the last three months, which is then taken into account in respect of insurance. Is Ms McDonagh aware of the change of policy of the group of which she is CEO?

Ms Francesca McDonagh

I am aware of changes that we make but certainly, we are in the business of supporting customers to get a mortgage. If there is a specific case the Deputy is referring to, I am happy, as always, to take that offline to investigate. I am not seeing a material volume of complaints or cases that have been brought to my attention to demonstrate that our life protection policy is in any way prohibiting people from taking out a mortgage. However, I am happy to look at any individual case the Deputy would like to share with me.

Does Ms McDonagh acknowledge that the insurance company that she operates has changed its policy, does take this into account and does not grant mortgage protection insurance if a person has had a Covid symptom over the past three months? It is in black and white on the website. Underlying conditions are also being factored in. Those with conditions that were never factored in in the past, for example, diabetes and obesity, are now being refused mortgage protection by insurance companies such as New Ireland Assurance, and a wide range of others. These are families who have saved for years to get a deposit for a house, and who have got approval to draw down a mortgage. Now, however, the pandemic is being used to state they are riskier applicants and therefore cannot fulfil their legal requirement to get insurance. This is connected. These companies are owned by the likes of Bank of Ireland.

Ms Francesca McDonagh

I am aware of a media report on this issue. I am not aware that it applies to either Bank of Ireland or New Ireland Assurance insurance coverage. We look at every single application on its merit. We want to ensure that people are able to take out a mortgage that is sustainable and is the right mortgage for them, and that they are able to continue to work appropriately to repay their mortgage. It is difficult for me to comment further on this issue without specifics on the case, because it is not transparent to me if the cases to which the Deputy has referred are specific Bank of Ireland scenarios.

I will move on from this issue, but I will draw Ms McDonagh's attention to her own group's website, which states that if an applicant has had a Covid symptom in the last three months, his or her application will not be processed for at least another month and it will be sent to the underwriters, who will consider the fact that he or she has had a symptom - not a positive test result, just a symptom. The group is practising that type of policy, not just in respect of one individual, but hundreds of individuals who have had symptoms over that period-----

Ms Francesca McDonagh

As I said, we are in the business of growing our mortgage business, which we demonstrated that we are able to do in 2020. I will certainly look at any cases that the Deputy can provide me with but we are not in the business of prohibiting people from taking out a mortgage where it is viable. That is the bread and butter of a retail bank.

I would like to raise what I regard as an appalling decision, on which I have communicated with Ms McDonagh and in fairness, she has responded to that communication. It concerns the appalling decision to close down one third of the branch network right across the State. I want to put on the record again that the Bank of Ireland exists today because of the taxpayers of this State, who bailed it out at a time when it collapsed because of the reckless behaviours of bankers before Ms McDonagh's time. It exists today because of that sacrifice the Irish people made and now, in the time of a pandemic as we have just discussed, the response from Bank of Ireland is to withdraw those services in the communities.

Ms McDonagh will be aware that the Financial Conduct Authority in Britain has asked banks not to close branches during the pandemic for a most important reason, namely, because those who might want to move to digital access may not be in a position to get that support in-branch because they are cocooning. However, the Bank of Ireland group has decided to ignore that. It is closing 15 branches in the North and 88 branches in the South. There are vulnerable people who are cocooning and who will not be able to leave their houses to go to the branch to get help to go online. My view is that the group used Covid as a dummy run for this process, when during the first wave a similar number of branches were closed under the guise of the pandemic. In recent weeks, the bank has announced that basically, the same number of branches and most of the same branches will be closed. Is there anything that the Minister for Finance, as the major shareholder in the Bank, could say to encourage the group to at least delay this until after the pandemic is over?

Ms Francesca McDonagh

The way the Deputy has described our decision is not how I would entirely characterise our approach. I will respond factually. First, as I said in my opening statement, we were very grateful for the support of the taxpayers, which we have repaid more than in full, over eight years ago. However, I appreciate and recognise the history of banking. On our current and future practices, we need to respond to the changes in our customers' preferences. The Deputy will understand that that is how a well-run business should act.

We have announced the closure of 88 branches in the Republic of Ireland and 15 in Northern Ireland. None will be closed until September. In parallel with that announcement, we have announced a partnership with An Post. We already have a partnership with the Post Office in Northern Ireland. That will provide all of our customers with access to their 900 outlets. The reason we are doing this is because there has been a seismic shift in customer behaviour to which we must respond. Yes, it is one third of our branch network but I can assure the Deputy that it is not one third of our footfall. If anything, those branches have been rarely visited. Three out of four customers of those branches have not set foot in them within the past year. Maybe that is partly because of the pandemic but if one looks at the two years preceding the pandemic, one sees the overall footfall in branches across our network reduced by 25%. At the same time, we have seen a significant take-up in mobile usage. As the Deputy will be aware, we launched a new mobile app in 2020 with a 50% increase in functionality. Since we launched it, we have had an increase of over 26% in take-up. Therefore, there has been a shift in how our customers want to engage in banking. It has been expedited by the pandemic but it is a process that has been ongoing for probably the last decade. We have responded to customer preference in our decision to close branches.

The Minister for Finance is obviously a key stakeholder in the bank. The State owns a 14% minority shareholding. The Minister has said on public record that it is not his responsibility to influence or impact commercial decisions that are taken by the bank. We have taken those commercial decisions in reflection of customer behaviour. I hope I have answered the Deputy's question.

My first question is this: if Bank of Ireland purchases Davy, will Davy executives become Bank of Ireland executives and be subject to the bankers' pay cap?

Ms Francesca McDonagh

I thank the Deputy for the question. I know that it is a very topical theme and that Davy has featured prominently in national debate and the media in the past few weeks. I think that we are getting ahead of ourselves here. It would be premature for me to make any such statement or response. We have gone on the public record to express our disappointment in Davy's breach of its regulatory obligations, which fell short of the standard expected. We note the decision by the Davy board to appoint advisers to proceed with the sale. That is at a very early stage as far as I understand, and as that process starts we may look at this opportunity as we look at a variety of opportunities in the market. However, it is premature for me to hypothesise about what could happen in a process that has not actually officially started yet.

Let us not talk about what could happen; let us talk about what has happened in Irish banking. AIB is lined up to purchase Goodbody and Goodbody executives can stay as Goodbody executives and remain outside the bankers' pay cap. Not only that, AIB executives can now transfer over within the new entity, which is still AIB, to be Goodbody executives to get around the bankers' pay cap. Therefore this is not an issue of speculation; it is a live, current, immediate issue in Irish banking.

Into this situation now come Bank of Ireland and Davy and the real possibility - I accept it is only a possibility - of a purchase. It is therefore not premature or speculative of me, as a member of the committee, to ask Ms McDonagh today to rule out something that the Irish public would be outraged by, that is, sneaky ways around the bankers' caps. I will ask the question in a different way. If Bank of Ireland purchases Davy, will Bank of Ireland executives be able to transfer over to Davy and escape the bankers' pay cap, or would Ms McDonagh be prepared to use this opportunity before the committee today to rule that out?

Ms Francesca McDonagh

I thank the Deputy for the clarification on the question. Obviously, there is a precedent for this in the public domain in the form of our competitor's acquisition of Goodbody. My sources are media reports in the public domain as much as the Deputy's, but my understanding is that AIB is able to maintain the remuneration of those in the entity it has acquired and that a small number of AIB executives may be transferred. Obviously, I am here to talk about Bank of Ireland, but that is in the public domain. I will keep this quite generic because it is just not appropriate for me to talk about a third party whose process has not started. If Bank of Ireland were to acquire an entity in which bonuses and variable remuneration are paid in a normalised way, as in the case of every other non-Irish bank and corporate entity in Ireland, and it is only Irish banks that have this restriction, then I would certainly look at opportunities to normalise pay. Even if there is no acquisition, in our annual report - and I appreciate the Deputy has a response to this - there was a letter from our group chairman that referred to the need to revisit normalisation of remuneration. We have repaid the taxpayer in full. Irish banks are severely restricted and treated uncompetitively compared with our normal Irish peers, with whom we compete for talent and customers here in Ireland, and with other banks in Europe and the UK and other Irish entities, with which we compete for digital, finance and customer service skills. I appreciate, given where the economy is now, that to talk about bankers' bonuses is highly contentious. If, however, I just step back and think about the future and the recovery of this economy, having Irish-only banks restricted in a way in which other banks in Ireland are not is anti-competitive and makes it very difficult for us to retain and attract key talent, which we need for a profitable and sustainable Irish banking sector.

I have limited time and I just want to be clear on what is being said. My understanding of what Ms McDonagh has just said is that if we leave Davy out of the equation and speak in general rather than specific terms - and we talked about Bank of Ireland acquiring another entity that is not covered by the bankers' pay cap; let us call it "entity B" - all things being equal, Ms McDonagh would favour the idea that "entity B", if it is not covered by the bankers' pay cap at the moment, not be brought into that system and that she would favour instead what she describes as "normalising pay", by which I think she means not including staff working for such an entity in a bankers' pay cap, that is, not capping their pay at €500,000 per year but allowing the entity's executives to continue to earn over the €500,000 cap. Is that correct?

Ms Francesca McDonagh

The Deputy's summary is absolutely accurate with the exception that the restrictions are not just about the €500,000. Very few people in the sector would earn in excess of the €500,000 cap. It is about the variable pay. Variable pay is a way of aligning colleagues' performance with shareholder interests. Those outcomes are related not just to profit but also to whether or not staff are achieving customer satisfaction targets and whether or not they are doing the right thing as far as risk management is concerned. Varying people's pay based on performance can be a very good thing if applied appropriately. There are new European Banking Authority regulations that are very clear. We are one of, I think, very few banks in the European Union that still face restrictions. The Deputy's summary is right, however. If we were to acquire another entity, "entity B", that was not covered by bankers' pay restrictions, we would, subject to agreement with the Minister for Finance, seek to maintain competitive pay for talent, for which I understand there is now precedent with our competitor.

That is a very interesting answer.

My final question is the following. The AIB-Goodbody deal allows for the possibility that AIB executives can now sign up under the Goodbody side of the house and not be covered by the bankers' pay cap. Does Ms McDonagh think she would rule that out in a situation whereby Bank of Ireland was to purchase an "entity B", or would she be open to that in such a situation?

Ms Francesca McDonagh

As the Deputy will understand-----

I have to move on to the next speaker so I ask Ms McDonagh to give a short answer to that.

Ms Francesca McDonagh

I am the CEO of Bank of Ireland, not another entity, so I can talk only about my own institution. We would certainly be supportive of normalisation of pay, subject to agreement with the Minister for Finance.

I thank Ms McDonagh for her answers. They were very clear.

I have been struck by a couple of points. In Ms McDonagh's responses she talked about the money the Irish public contributed in the bank bailout being repaid. It is really important to be clear that while the money may have been repaid, the cost of the impact of austerity, the impact on people's lives - young lives - and five or ten years of missed opportunities and lost services has not been repaid. I will be frank. I am quite shocked to see there is a push for "normalisation", as it is being framed. It is not normal that we would have such a huge level of pay into the financial sector through the effective removal of the pay cap and the reintroduction of excessive pay incentives. The message I hear today is that we need to tighten our action and legislation on this in order that we do not see loopholes being exploited because clearly they will be.

The issue I really want to focus on, however, is the branch closures that have been announced. Ms McDonagh has framed this as a response to the digital demand, but we need to be clear. We know from EU statistics from just last year that 47% of the Irish public lack basic digital skills. That is the statistic from an EU analysis. Ireland is not a place where every single person has a smartphone in his or her hand. That is a bit of a myth. In that regard I am very concerned about the branch closures. What consultation will Bank of Ireland have with local communities on the branches? I think over 100 branches across the island might be closed. What social impact assessment or environmental impact assessment has been done of the longer distances and the longer wait times to access services? What engagement is there with local authorities on landmark buildings? Many Bank of Ireland branches are anchor or landmark buildings in towns across Ireland.

As for the post office proposal, is it Ms McDonagh's understanding that there will be a reversal of the planned 200 post office closures in respect of this deal? When she talks about the 900 post offices, does she anticipate that this partnership will in fact reverse post office closures in that regard?

The engagement with trade unions has been very disappointing from their perspective. What measures are in place to engage with trade unions? Is it the case that at the moment permanent staff who take voluntary redundancy are being replaced with temporary staff? Those questions relate to the branch closures.

Lastly, has the bank sold ATMs in the past year? Can Ms McDonagh confirm the bank's plans in respect of its network of ATMs across Ireland? That is a part of that service also.

Ms Francesca McDonagh

There were a few questions there. I will invite my colleague, Mr. Gavin Kelly, to respond specifically on the treatment of the landmark properties, our post office arrangement and ATMs. I will just say before I hand over to him that I agree with the Senator's comment on the assumption that every single customer has digital skills. There is a need for increased digital education, but that has been progressing. I am not sure what data the Senator is referring to.

We have seen that change. Today, 70% of our entire customer base is digitally active. We have seen satisfaction in our digital channels increase by 25 points in the past year. This is not just an age issue where it is just younger customers. Over half of customers of 60 years and older are registered online and two-thirds of them were active in the last three months. We would not be closing branches if we did not see that level of digital take-up. It is because of that level of digital take-up that we are closing branches where footfall has reduced to a de minimis number.

The CEO has prompted me to add a few more questions in case I do not get to come back in again. She referred to the past three months and today. We are in a unique situation where those who would normally access physical services may not be accessing them. The percentage will, therefore, shift. In terms of Covid, I am concerned that this year is distorting perceptions as regards the preference for digital access.

Will Ms McDonagh indicate how loans are categorised as non-performing? Will the last year be insulated? Will the past 12 months play a significant role in determining whether a business loan or mortgage is non-performing? Can Ms McDonagh assure us that this will not be the case and outline the steps the bank is taking in that regard?

Ms Francesca McDonagh

I thank the Senator and appreciate the additional questions. I will cover off the question on engagement with the Financial Services Union, FSU, and employee representative groups in general before Mr. Kelly replies to some of the Senator's questions.

We work on a no-surprise basis with our employee representative groups. We currently exceed both our legal and industrial relations requirements on our engagements. When this is reciprocated by the unions it builds trust. We certainly proactively engage and we sought to meet and discuss our branch closure plans with the FSU in advance of the announcement. Mr. Kelly will talk about the post office, ATMs and landmark buildings and then I will discuss non-performing exposure or NPE.

Mr. Gavin Kelly

To date, our engagement directly with the post office has been positive. The Senator referred to comments made by the Irish Postmasters' Union on the potential closure of post offices. The issue has not come up in our engagement with the post office to date. We believe the contract we are signing with the post office goes to ensuring the viability of post offices into the future by bringing another service to postmasters. That is where we see the benefit for them. From our perspective, it makes sure we bridge the digital divide so that customers who want to avail of lodgements and withdrawals can do so in the network of post offices around the country. We believe the 900 post offices currently operating give ample coverage, particularly in the locations where we are closing.

Specifically on properties, the Senator is correct. We have a number of landmark buildings around the country. A substantial number of the 88 properties are landmark buildings and many of them are large, for example, some of them have living quarters upstairs where the branch manager used to live. The Senator will be familiar with that. There is quite a bit of space in these properties that could be availed of for community use in the future. We have received a lot of expressions of interest from various community groups, credit unions and local businesses seeking to set up remote working hubs in their towns, right up to Departments and county councils. We are open to engaging on these buildings. We have already had extensive discussions and these will continue over the next six months. We are not closing any of these properties, which will remain as bank branches for the next six months. Post September, we will make sure the buildings are maintained until we have reached agreement with prospective buyers on the best use of the properties going forward. In four of the 88 locations we will retain an ATM and maintain the buildings because there is no alternative ATM in the towns in question.

On the Senator's final question on ATMs, just before Christmas we sold 700 ATMs to a company called Euronet. These were all ATMs that were based in stores and shops. Euronet is a professional services ATM company and ATMs are its only business. It focuses on maintaining specific retailer ATMs that provide an important service. We sold our ATM network in shops to Euronet. Our commitment is to maintain ATMs in the 169 branch locations that we are retaining. We will also retain four specific ATMs in certain towns where there is no alternative access to an ATM facility.

Ms Francesca McDonagh

May I respond to the NPE question?

I call Deputy Richmond.

Ms Francesca McDonagh

I am happy to respond offline to the Senator's question.

It would be great to get a written answer.

Does Deputy Richmond want to ask a question?

I thank Ms McDonagh and Mr. Kelly for joining us this afternoon. This meeting is a welcome opportunity. I will try to avoid repeating questions that have already been asked. I will begin by following up on a set of questions Deputy Doherty asked concerning mortgages for people with underlying conditions. I have a concern because it has been reported and, indeed, denied by the Bank of Ireland and other banks that applicants for mortgages have been either refused a mortgage or have been unable to draw down their mortgages because their employers are participating in the employment wage subsidy scheme, EWSS. I appreciate that the claim has been denied by Bank of Ireland and that these matters are correctly dealt with on a case-by-case basis, an approach the Minister for Finance has encouraged. How many mortgages have been approved by Bank of Ireland in the past 12 months and how many of those have been drawn down? How do those figures compare with the previous 12 months, taking Covid into consideration? Given that mortgage brokers have stated this is happening and the banks are denying it, what is the truth of the matter?

Ms Francesca McDonagh

We have increased our share of the mortgage market. We have done that by being competitive in terms of our servicing. We have not changed our pricing structure. I know we can have a discussion about mortgage prices in Ireland but we have not reduced or changed our pricing. We have increased our market share because we have worked with brokers and improved our turnaround times. We now have over 50% of first-time buyers who get end-to-end approval and drawdown on their mortgage digitally. Those sorts of service initiatives are central to our business model.

In terms of excluding customers for any particular reason, we look at customers on a case-by-case basis. It is not in the interests of anyone, either the customer, the bank, the State or the economy, to have banks provide mortgages that are not sustainable for individuals who then find themselves in financial distress. We want to make sure that a mortgage is sustainable for the life term of the mortgage.

In terms of total lending, we lent a total of €5.3 billion in retail Ireland in 2020. That covers mortgages and SME and personal lending. Of that, €2.1 billion was in Irish mortgages and those are part of our 2020 annual report. I do not have the number in terms of volume but that is an example and a very clear data point, with a 2% increase in market share during that period, showing our commitment to support homebuilding and home buying in Ireland.

I appreciate the clarity Ms McDonagh provided. I will move to a wider question which she touched on in her opening remarks and in the notes she presented. The future of the Irish banking sector has been an underlying theme not just in this engagement but in all our engagements. We have gone through a tumultuous number of weeks in which a long-standing service provider announced it is to leave the market. The system of banking is changing rapidly. The closure of branches, regardless of whether we like or whether it is modernisation or something else, is devastating for many communities. We have also heard rumours that there are other concerns for other institutions.

Perhaps the issue I am about to raise is one for the Central Bank and the Minister for Finance. I have tabled parliamentary questions on it to the Minister and I have tried to ask the Central Bank the same question a number of times. What is the future of the Irish banking sector? Why are banks not coming into this market? What is so unattractive about the Irish market? How do we provide more options for customers? I know Ms McDonagh does not necessarily want to hear about competition but people on the street want to know where they can get cheaper mortgages, cheaper lending and perhaps a different type of service. What is the future of the sector? What opportunities and challenges does Brexit present to the entire banking and financial services sector?

I appreciate Ms McDonagh has two minutes to answer two big questions, but perhaps she could give a minute or two of insight on where she sees her bank going in those areas in the future and what ordinary people like me and many other committee members who happen to be customers of Bank of Ireland can expect.

Ms Francesca McDonagh

I realise I am not going to do that very good question justice, but I certainly would want to be part of an ongoing discussion about the future of Irish banking, as I said in my opening statement. I will outline what I see as the three challenges facing the European banking sector which are not unique to Ireland and I will outline a couple that are more unique to Ireland.

First, there is a need for digital investment across all banks in Europe and the UK because of customer preference. That requires investment and the cost to digitise and modernise banks and to remain competitive against new entrants into the banking market. The second is a lower for longer interest rate environment and in the European case negative interest rate environment. Traditionally, banks have made revenue from holding excess deposits or at least having a cost for holding deposits. That has now changed and it is an expense for a bank to hold deposits. Some of those we pass on to larger deposit customers, and we can talk about that, but that is a reality that has significantly reduced revenue streams for all European banks. The third, and perhaps this is not common across all of Europe but it is for some markets, is muted credit formation. Part of that is uncertainty about Brexit and part of it is Covid-related. Some of it will be dissipated, hopefully, by economic recovery and Brexit in the rear view mirror, but there has been muted credit formation, particularly in Ireland. Banks are losing money on deposits and they are not necessarily growing their lending books.

Two features are specific to Irish banking. One is size. There are two big banks, although in a relatively small market. Retail requires scale and economies of scale. That is why one may see that smaller banks in a small market are not able to achieve minimum profitability hurdles and they may divest. We have seen that over the years.

The last point I wish to make, which is quite topical, is the relatively high-risk ratings attached to Irish lending because of the last global financial crisis. That means more capital must be held for every euro that is loaned, for example, for an Irish mortgage. That results in a higher level of pricing in mortgages. Irish banking may have relatively high mortgage pricing but that does not necessarily mean it is profitable.

As a result of all of the above, the Irish banking sector is challenged in achieving the type of returns that shareholders expect over a period of time. Our response to that is to innovate and digitise, which we are doing, be more cost-efficient, and we have done that, and grow. Up to the Covid pandemic we were growing our lending book and I very much hope to support the growth and recovery of the Irish market. There is also diversification of income, such as growing our wealth and insurance business, and increasing the profitability of our UK subsidiary. Those are the challenges we face. I would be happy to continue the discussion with the benefit of more time at the Deputy's convenience.

I thank Ms McDonagh and Mr. Kelly for attending and for their submission to the committee. I have three questions about bank closures, staff and the relationship with An Post. In my constituency of Wicklow, Bank of Ireland has decided to close three branches in Carnew, Tinahely and Rathdrum. They are three vibrant and strong communities in south Wicklow. Many rural towns and villages have been given a new lease of life with working from home, and many companies are saying that people can work from home permanently. It brings an added vibrancy to those towns and villages, and brings greater footfall.

However, the bank's decision in that area is a blow to that part of Wicklow. Customers and businesses there have an intergenerational relationship with those bank branches. Businesses have had a relationship with the bank for three or four generations. The cluster of banks Bank of Ireland is going to remove from that area will deprive the area of a basic necessity for a community, which is a bank branch in the locality. It is at a time when those areas need that flexibility, support and the continued relationship they have built up with the bank over generations. Flexibility and support are needed by many local businesses and communities as we emerge from Covid. They are under tremendous pressure.

I understand the pressures Bank of Ireland is under with online banking. The bank drove that as well, because it asked people to go online and it provided that facility. I understand the pressures of that, but Bank of Ireland has removed branches from areas that do not have a very good broadband connection, particularly in rural parts of south Wicklow. That is a problem. The bank is expecting people to use online banking, but they are in areas that do not have good broadband at present.

Will Bank of Ireland reassess the closure of some rural branches based on the positive impact, if there can be a positive impact, that Covid might have on those rural towns and communities and the Government's policy on towns first and the drive towards the regeneration and revitalisation of rural towns and villages? It could even be for a reduced number of hours. Could the bank look at all those rural branches and especially that cluster in Wicklow? The bank has created a void in Wicklow where people have no bank branch at all. National broadband is being rolled out over the next two to three years. Would the bank consider holding back on closing some of those branches until that banking catchment has high-quality access to broadband, to bridge the digital divide that exists whereby people do not have access to broadband?

The third issue is the staff. Does the bank provide an opportunity to staff in those branches to upskill to other areas within the bank, such as the back-office systems, IT operations or other developing areas of banking as the banking model changes? Is that the first option the bank would offer to those staff?

My last question relates to An Post. We have all received communications from the postmasters. Bank of Ireland suggests there is an offering in that regard, whereby An Post could provide that offering for transactions. Will the bank be directly involved in those negotiations with An Post? Many of the postmasters tell us that the return they get from offering those services is inadequate. We are seeing bank branches closing down and unless the postmasters get a return for providing that service, we will see rural post offices close down as well. If An Post is to provide those services, it must be adequately resourced and paid for doing so.

Ms Francesca McDonagh

I will respond to the Deputy's first questions as to whether we would reassess and our views on the challenges of national broadband coverage. I will ask Mr. Kelly to talk about the specifics of Wicklow, how we are supporting colleagues in the branches that are due to close, whether in Wicklow or more broadly, and the An Post discussion.

We will not reassess closures. I will explain why. We have not taken this decision lightly. We have looked at the behaviours and preferences of our customers over a long period of time, even before the Covid pandemic. I will give the Deputy a perspective on all the customers in the 88 branches that will be closed. Three out of four of them have not set foot in the branch in the last 12 months. There has been a seismic reduction in volumes since even before Covid. We are not in the business of closing busy branches. We are responding to a shift in customer behaviour. I know it is disappointing for communities, but it is not a surprise that people are shifting to online consumption, whether that is of entertainment, groceries or how we buy many things, including banking. Obviously, there is an element in local villages and towns of a re-emergence, with people working from home, and nearly 80% of our colleagues are working from home, of people who will shop local or go local. However, we are seeing, particularly as the country reopens, that people are keen to get back into pubs, restaurants, cinemas and local gyms, but they are not necessarily looking forward to going back to bank branches. They have already migrated to a more digital experience. It is a little like the fact that once one discovers Netflix, one will not necessarily go back to DVDs. We see that shift as permanent and established. We have not come to this decision lightly. We have looked at a great deal of analysis and at footfall trends over a number of years.

That is how we got to this decision, which I appreciate is a difficult one. We think it is a reflection of customer demand.

On national broadband, I appreciate that there may be challenges. After the closures, our network will contain 169 branches, 103 of which are located outside the main urban city centres. It is not the case that branches will only be seen in urban areas and not in rural Ireland. We will maintain a presence across the country and if an individual has poor broadband, we still have 169 branches, access to 900 An Post outlets and a contact centre that operates 24-7, 365 days a year. There are alternatives for people who are not able or do not wish to engage with us digitally, but we are seeing that the vast majority of all ages are. I revert to Mr. Kelly to talk more about Wicklow specifically.

Mr. Gavin Kelly

On the branches in Wicklow, I have spent time in all three locations that are affected. I understand where the Deputy is coming from in terms of the impact on communities. The deal with An Post is key for us because we have seen usage in all three locations drop over the last number of years. There are 23 post offices and five remaining Bank of Ireland branches in County Wicklow. Carnew, Rathdrum and Tinahely are closer to locations in Wexford as well, so we have ensured good coverage so customers have access to a branch and to a post office. In the three locations in question, the distance between some of the post offices and the three branches is less than 100 yds. That is an important factor in our decision but we will work with the groups involved. The other thing that is important is that while the branch might be closing, our support for the community will not change in terms of business advisers and youth advisers doing education in schools, for example. All those supports will continue in Wicklow and in all others all counties as they are today for the next number of years.

I cannot comment on the relationship directly between An Post and the postmasters but I will give a view. I am involved in the negotiations on the contract with An Post. As a number of these services are added together, they get a scale effect for the postmasters. We are contributing to that but the committee would have to talk to the post office about the contract they have directly with postmasters.

We are conscious of the impact on staff. As Ms McDonagh said, there will be no compulsory redundancies for staff. We have invested significantly in upskilling staff over the last year. A number of staff have been helping and supporting our contact centres, which can now be supported from working from home, or they can reallocate to other branches. Staff have that choice and we are working through it with them ahead of the change in September. Staff will be protected during this change. If they want voluntary redundancy, we have that available since last year and will support that.

I will follow up the questions relating to An Post, specifically in respect of the level of engagement and analysis done in terms of post offices. Was an analysis carried out to establish whether the An Post branches in the affected areas are able to offer the full suite of services? In my constituency, Galway West, the Oughterard branch is the last one in the village and it is set to close. I have spoken to a number of businesses that have raised serious concerns. They feel that the An Post branch is far too small and already far too busy to deal with their custom as well. Ms McDonagh mentioned that there been a drop in footfall but, in the context of that branch, businesses have told me that it lost some of its services previously and that they were brought back because of the level of demand in the area.

On ATMs, Mr. Kelly mentioned that if there is no other ATM in the village, then the existing ATM will stay. On the Euronet sale that Bank of Ireland completed, I was contacted by a number of constituents who received letters stating that if they had their ATM-only cards, they would only be able to use the ATMs in the branch. How will people with ATM-only cards be impacted? Oughterard is located in a rural area and it is a fair distance to the next branch. Where will that leave them?

Ms Francesca McDonagh

I will ask Mr. Kelly to talk in more detail, particularly about ATMs. In developing the partnership with An Post we carried out extensive analysis of usage. We reintroduced some services to branches three years ago. I appeared before this committee and talked about the additional 100 colleagues who were put into the front line in order to improve service. We did that and, as a result, complaints about branch service have gone down by nearly 80% since 2018. We are dynamic in how we adapt our services. I cannot talk about the branch in Oughterard, but branch ATM and cheque usage has declined 50% since 2018. Even since we made those changes, we have seen customer behaviour change. I will revert to Mr. Kelly to talk in more detail.

Mr. Gavin Kelly

In the context of Oughterard, three branches will be closing in County Galway but we will have 15 remaining locations in that county. There will also be access, by means of the post office contract, to 66 post offices across the county. We have a lot of coverage. The services we are looking at in post offices will be cheque lodgement and cash withdrawal, with some access to coin services. The coverage from post offices will be there and should be sufficient to cover the needs of our customers, as well as the remaining 15 branches in Galway and 169 throughout the country.

I am aware of the concern regarding ATM-only cards. We are contacting any customers who still have those cards and they will be upgraded to debit cards, which will allow full access to facilities at ATMs, as the Deputy referred to, operated by Euronet. Part of the reason for giving six months' notice is so we can have one-to-one consultations with customers over the course of the next number of months to ensure that everybody's service continues as they wish, notwithstanding the changes we have talked about. They will be able to continue that service and bank in the way they choose, post the changes in September.

I thank Mr. Kelly. Galway is the second largest county and three branches are closing. If we take the example of the branch in Oughterard, the nearest branch in Clifden is 46 minutes away. There needs to be context in relation to that as well.

I have two other questions. The first is on closing the gender pay gap. We had conversations regarding limits of €500,000. In the context of the gender pay gap, it is a very real issue. What work is ongoing with regard to closing that gap? Second, can the witnesses confirm if permanent staff who have availed of voluntary redundancy have been replaced by staff on temporary contracts?

Ms Francesca McDonagh

People who work at Bank of Ireland know we are passionate about gender diversity and representation. We have made a commitment to being 50-50 in terms of senior management appointments, both promotions and external hires, by the end of 2021. At the end of last year, we were at 47-53, so we have made more progress. We were the first - and I think only - bank to proactively disclose the gender pay gap in Ireland. In the UK, we are required to, as are all companies. In Ireland, we voluntarily provided that information and disclosed it as part of our 1 March results. The gender pay gap currently stands at 23.8%, which is a slight improvement year on year. It does not mean men get paid more for doing the same jobs as women but the average male colleague will be paid 23.8% more than the average female colleague because there are fewer senior women. Our 50-50 target is a specific action to address that. Hopefully, I have answered that question adequately.

It is part of my personal objectives in terms of the organisational score cards of Bank of Ireland.

I thank Ms McDonagh. I call Deputy Nash.

With regard to the staff who took voluntary redundancy, have they been replaced by staff on temporary contracts?

I ask Ms McDonagh to give a short answer to that question.

Ms Francesca McDonagh

I can give a very quick answer. Flexibility is an important part of our resourcing. If people have left the bank on voluntary redundancy and we have a short-term need for service for our customers, whether that is because of seasonality or other factors, we will on occasion use contract colleagues to provide operational and front-line support in particular. We have a mix of predominantly permanent but also some temporary colleagues within the bank. That is a normal flexible resourcing model that we deploy.

I call Deputy Nash who has three minutes.

Ms McDonagh should know that I have got very limited time because I am not formally a member of the committee but we can elaborate further on some of the issues I hope to explore with her today when we meet over the next period.

On the bank's treatment of those who are on the employment wage subsidy scheme, EWSS, and previously the temporary COVID-19 wage subsidy scheme, TWSS, across the sector, and I have been very vocal on this over the past year, I have detected a trend where applications from all workers on the EWSS have at the very least been delayed. From the information I have from applicants across the country pertaining to a number of different banks it seems to me that since the Revenue list was published earlier this year banks are using that list as a charter to blacklist or blackball applicants who are working with firms that are on the EWSS when they may not be benefiting from it. Can Ms McDonagh elaborate on Bank of Ireland's position on mortgage applicants who are employed by firms on the EWSS?

Ms Francesca McDonagh

Absolutely. It is a pleasure to see the Deputy here and I look forward to our meeting. We do not have a rule that we just apply blindly. We look at applications on a case-by-case basis. What is important to us is to approve a mortgage or a loan that is sustainable for the individual. In terms of people who are in receipt of some form of income support that we would see as temporary or is in a sector that is temporarily impacted by, for example, lockdown, if there are other sources of income in the family we would always look at assessing that on a case-by-case basis to ensure that the underlying mortgage repayment is sustainable for them, not just in the next three months but in the long term. There is not a hard and fast rule on it; it is case-by-case.

I talked earlier to one of the Deputy's colleagues about the progress being made in mortgage growth in terms of market share and the €2.1 billion drawdown of new mortgages in 2020. I did not mention the absolute number but that is 9,200 individuals. The majority of those would be first-time buyers. Some of them would have been in receipt of EWSS or equivalent income supports. It is case-by-case.

In the limited time I have I am honour bound to express my reservations about the way in which the bank approached the bank branch closure issue. One of the branches in my constituency in Dunleer, County Louth, was affected. There is significant disquiet in that community about the impact this will have on local commerce and the local community generally. We would ask Bank of Ireland to review that, at least until such time as the pandemic passes, when it can to a more realistic assessment of the optimisation of its bank branch network. I have a very clear question. Did the 88 bank branches in this jurisdiction receive any guarantee that there will be no more bank branch closures over the next several years?

Ms Francesca McDonagh

We have not closed branches just because of a change in behaviour during the pandemic. This has been a seismic shift over a number of years. The digital dawn is in the rear view mirror in terms of people changing their behaviours. We have not entered into any of those decisions lightly. We appreciate and recognise the impact which is why we have the partnership with An Post as a very key alternative for all customers. The coverage, access and opening hours are longer than any of the 88 branches we are closing.

In terms of the Deputy's question on whether I can make a commitment that we will guarantee that we will never close another branch again, he will understand that I cannot. I am not looking to change our physical footprint on a regular basis. This is a very big decision. It is the first major change that we have made to Bank of Ireland's network in a decade but for me to sit here as a retail bank CEO and guarantee no changes forevermore is not possible or realistic. It would not be authentic of me to make that sort of statement. We will always look to adapt our services to customers' preferences and demands but the branch network changes we have announced, and they are not closing until September at the earliest, are appropriate as we look to the future of the Irish banking sector.

Gabhaim míle buíochas leis an bhfinné as an gcur i láthair. I thank Ms McDonagh for the presentation so far. The line that hops off it for me is the one which states: "We stand alone as the only majority privately owned Irish retail bank." That is the elephant in the room here. It shows the continuing disaster, which is the Irish banking market, that we are so amiss with competition within this particular sector. Mario Draghi said that the Irish banking market is a quasi-monopoly. He is not far wrong on that. That quasi-monopoly status allows Bank of Ireland to operate in the manner that it does because customers have no option in many ways but to do business with Bank of Ireland in the manner they do.

Ms McDonagh mentioned the transition of people from physical banking to online banking but I would posit that Bank of Ireland has actively sought to push people out of bank branches in the past number of years. Seven or ten years ago there would have been ten spaces for people to work with tellers. That was very quickly reduced to one and people were left 20 deep in queues trying to get near the teller and so on. There was an active project to reduce customers coming into banks in the past number of years and that has, in part, led to the transition to online banking.

The cuts in the number of bank branches in the country are savage and they will have a savage effect on Irish society. It is deeply disappointing given the quasi-monopoly position Bank of Ireland has within the particular sector. My first question is on the differential in the mortgage interest rate in Ireland vis-à-vis that in other European countries. Ms McDonagh mentioned capital requirements and the risk effect in part accounting for that differential. What proportion of differential is accounted for through capital requirements and the risk effect? Does Bank of Ireland's quasi-monopoly status also add to that differential?

Ms Francesca McDonagh

With respect, I recognise the Deputy's perspective. He talked about the manner in which we do business. The manner in which we do business is that we are the largest lender to the Irish economy. We have been for the past ten years. We have a 1.7 million customer base. We are the largest lender, with more than 50% of the market share, to Irish small and medium enterprise, SMEs. Last year, we had a 30% reduction in complaints about, for example, current accounts, which is the manner in which many customers will engage with us. We were seeing the highest level on the net promoter score, which is an industry way of measuring satisfaction. We have also fundamentally changed the culture of our colleagues, going from a very low level to leading global financial services benchmarks in terms of our colleagues' engagement and the cultural embedding. The manner in which we run our bank is as a competitive entity and we take great pride in how we support our customers, colleagues and communities.

In response to the mortgage pricing, we often see comparisons with other banks in Europe that would offer, say, a 1% mortgage. The Deputy will see that our rates would vary. They are fixed rates. In terms of the latest on our pricing, we would see a green mortgage, for example, being approximately 2.6%; Mr. Kelly can confirm that. I would make a few comparisons here. One is that many other bank markets like the UK have an application fee which is not included in the interest rate but is an effective charge. We do not have application fees here. It would not be unusual to see fees of £999 or £2,000 for a fixed rate long-term mortgage so that comparison does not exist.

Another key element to the Deputy's point is around the capital requirement. In Ireland, the risk ratings attached to Irish mortgages for 2020 was circa 30%. That would compare to a market like the UK, which is at 10%, or Portugal and Italy, which are at approximately 17% and 20% respectively. The more capital that is associated with a loan, the more expensive it is to basically provide that finance. Then, as a result of the historical performance of Irish mortgages-----

I apologise for butting in. I know my time will run out very shortly. My question was about the proportion of differential that the lack of competition in this market actually makes.

Ms Francesca McDonagh

I do not agree that there is a lack of competition so I will not attach a differential substance-----

It is a two-pillar bank.

Ms Francesca McDonagh

With respect, I do not agree with the Deputy. We will compete. We have grown our market share by being competitive in terms of our service. We have invested heavily in our judicial offering for mortgages, for example, and developing new relationships with the broker channel. We will see much publicised new entrants come into the market with a differentiated offering. I cannot attach a premium to our pricing because there is a lack of competition. With absolute respect, I do not agree with the Deputy that we are operating in an uncompetitive market.

Okay, I thank Ms McDonagh for that. I appreciate her response. I will ask a final question. Ms McDonagh mentioned that Bank of Ireland paid back the State in full. In fairness, I give the bank credit for it. That must be accepted. The bank, however, has probably also benefited from a significant amount of corporation tax foregone over the last ten years. Can Ms McDonagh give us an idea of how much corporation tax has not been paid over the last ten years by Bank of Ireland as a result of the laws we currently have?

Ms Francesca McDonagh

Companies in Ireland, and this is not a special treatment of banks, can defer-----

I understand the law. I just want the figure.

Ms Francesca McDonagh

I just want to put that into context. It is often associated that it is banks specifically that do not pay tax. That is not the case. We pay tax. We have a tax deferral for losses carried forward for some of our group companies. Between, for example, 2017 and 2019, however, we paid €190 million during that period, €97 million of which was corporate tax and €94 million of which was related to bank levies. Payments of €79 million in 2019, for example, equated to 14% of our underlying profits from Irish business in the year.

I asked a question about foregone corporation tax over the past ten years. Does Ms McDonagh have a figure for that?

The Deputy's time is up. I thank Ms McDonagh.

Ms Francesca McDonagh

I do not have that number to hand in terms of exactly where we are but we are happy to provide an outline.

I understand the banking levy is coming to an end. Is there not an argument for the banking levy to continue given the enormous amount of corporation tax forgone?

Ms Francesca McDonagh

That is a matter for the Minister for Finance. I am not aware that the levy is necessarily ending. That is not something I can influence or decide on, nor would it be appropriate.

I thank Ms McDonagh. I call Senator Davitt.

I thank the Chairman. I thank the CEO for appearing before us today. I have one question. I am coming from a slightly different angle because many of my questions have already been asked. As the CEO of a bank, would Ms McDonagh perceive, from listening to many of the questions today, that there is a panacea and a pot of gold to be got out of Irish banking?

I am curious as to why is Ulster Bank is leaving. While I know Ms McDonagh will not specifically answer that, why is Ireland not seen as a better place for banks to come and do business I note that Avant Money has recently come into the Irish market and has rates of 2.35%. I would like to hear Ms McDonagh's thoughts on why Ireland is not such a great place for banks to do business. Why are we trying to streamline and make cost savings at all costs? Bank of Ireland has a big loss this year and Ms McDonagh is telling us the bank is trying make money, which is why it is cutting back on jobs. That is just a first departure. Ms McDonagh might keep that in her mind.

Second, did Bank of Ireland avail of the TWSS or the EWSS for its staff?

Ms Francesca McDonagh

The answer to the second question is "No". We did not apply for subsidies or request any Government or State support for colleagues who are full-time employees of Bank of Ireland.

To answer the Senator's first question, again, it is worthy of a broader debate. I cannot talk about Ulster Bank. Questions about Ulster Bank should be directed to it or NatWest. We have, over the years, seen smaller banks enter and then exit the market, although in some cases, they were here for a long time. It goes back to the point about being a small bank in a relatively small market such as Ireland. It is difficult with the investment in technology and branch network, fixed costs related to regulatory compliance and the cost of doing business, particularly in a low-interest rate environment with muted credit formation. It is difficult to meet minimum hurdle rates that shareholders expect. We would, therefore, see the cost of capital and expectation for investors as being approximately 10%. Our return on equity target was approximately 10%. That has been incredibly difficult in a low-interest rate environment and we were loss-making for the first half of last year. Banks not being able to achieve returns over a sustained period is not a good deployment of shareholder capital. That is the challenge.

Ireland as a place to do business is very attractive. A significant part of our economy relates to foreign direct investment, FDI. We bank two out of every three FDIs that come into Ireland. We will talk about the level of education and, obviously, the language benefit as a native English speaking country following Brexit as a differentiating factor, the relative youth of the population etc. We see a huge number of FinTech, pharmaceutical and financial services companies coming into Ireland. Ireland Inc. is, therefore, very compelling. It is one of the only economies in the world globally last year that actually grew despite the pandemic because of those international companies.

On banking specifically, the European banking model is challenged. That does not mean it is not possible to grow and support the economy, which is what we are endeavouring to do. We have invested in digital platforms. We want to grow as the country recovers. We would have grown our lending book for the last three years until we got into the pandemic. Brexit is in the rear-view mirror. There was increasing optimism around Irish businesses and households about recovery. We have a 15% increase in deposits because some people whose income has not been so impacted have been obliged to save as there is no opportunity to spend money. Some parts of the economy, therefore, will be looking to have an increase in consumption. Some people will use that for deposits for houses.

There is, therefore, cause to be optimistic but the dynamic is not a pot of gold. It is a challenging environment and that is reflected in our financials. The opportunities are also reflected in my cautious optimism about the future, however. I believe the relationship between the State and the sector needs to be revisited and normalised. I appreciate the past but our focus is firmly on supporting the future of Ireland.

I am curious as to why Bank of Ireland did not seek to draw the TWSS when it had a loss of €374 million.

Ms Francesca McDonagh

To be honest, Irish banks seeking additional State support has not been our focus. We have been focused on supporting our customers. We were in a very strong capital position going into the financial crisis and we have maintained that strong capital position during the crisis. We have not required State support. That is a reflection of the regulatory regime having been fundamentally transformed since the previous financial crisis. Our focus has been on supporting our customers.

Perhaps if it had, the bank would have kept the branch network open a bit longer.

Ms Francesca McDonagh

No. The difficult decision around branches is not to make a bit more money or save. It is about transforming and adapting our business to where customers want to bank with us and increasingly, that is on digital platforms.

Yes, I appreciate that.

Ms Francesca McDonagh

I will give the Senator one data point to bring this alive. In the first three days of the week, that is, Monday, Tuesday and Wednesday, we will, in only three days, have had more access and more log-ins to our mobile app than we had visits in an entire year to the 88 branches we are closing. That is just to give the Senator an idea of seismic shift. This is not nickel-and-diming, with a few inches here or there. This is about a shift in customer behaviour.

I appreciate that. The bank's business app is very awkward to use for whatever that is worth.

Ms Francesca McDonagh

I thank the Senator for that feedback. We will endeavour to continue improving.

I thank both witnesses for appearing before the committee. Ms. McDonagh said on a number of occasions the reason for the 88 branches being closed is that the bank was responding to changes in customer preferences, in that they want to do more of their business online. Am I not correct in stating it is also the bank’s preference to see more customers move to doing their banking business online?

Ms Francesca McDonagh

This is not a carrot-and-stick situation. We are responding to a change in consumer behaviour. Let us park banking for a moment. The way people consume media, newspapers and food ordering has shifted. I have no doubt even the Deputy may be purchasing some items online. Banking is not immune to that. Even though we may enjoy going shopping not everyone necessarily enjoys going into a branch. If customers can find a more convenient instant way, for example, to apply for a loan, they will do so. We are the leading provider to the agricultural sector. Some 80% of our loans in the agricultural sector are done outside of branches. We bank 40,000 farmers. When we speak to farmers we hear they would prefer one of our mobile advisers to visit them within the restrictions that would be allowed, and this would have been pre-Covid. They would rather do their business online or by telephone so that they can spend their day running their farm. This is about customer behaviour.

I am sorry to interrupt Ms McDonagh but while I am not criticising the bank for that also being its preference, I would have thought it is the bank’s preference to try to encourage more people to do their banking online. There is nothing wrong with that. I assume it results in a reduction of costs for the bank. The reason I am asking about this, and I would be interested to get Ms McDonagh’s comments on it, is that if these preferences continue, to follow her logic it inevitably must mean that a branch network for banking in Bank of Ireland in Ireland in the future is very much under threat. I know Ms McDonagh cannot give guarantees that branches will remain open but if banking practices by customers continue to be done online, what will be the purpose of having branches?

Ms Francesca McDonagh

That is a very good question. It has informed our decision to maintain 169 branches. A very large percentage of our social colleague base work every day on the front line - and they have done so throughout the pandemic - and do an exceptionally important job. Even though many customers prefer to do banking online, we still see many customers who want to come into a branch. Some of those embarking on a mortgage advisory journey for first-time buyers will prefer to come into a branch. Also, some customers when dealing with insurance, seeking wealth advice, dealing with life events such as a bereavement, making a complaint or making certain transactions would rather come into a branch. We are keeping 169 branches because they will have footfall and sales and service volumes that support that model because customers are telling us that. I am not proclaiming that we will be in a branchless society for the foreseeable future.

Ms Francesca McDonagh

Branches play an important role but, unfortunately, there will be fewer of them based on customer behaviour.

It is good to hear that because it is a concern of mine and I am sure of other members that the closure of 88 branches may be a precursor to more branches being closed, which is not something any member of this committee would want to see.

One of the advantages of having local branches is that local bank managers have a good knowledge of their community and area. That is of much use to a bank because such people will have a good assessment as to whether somebody would be a reliable borrower of money as opposed to somebody based centrally in Dublin examining an application who may not have that level of information. What level of autonomy do local branch managers have at present when it comes to requests for business loans of, say, up to €100,000?

Ms Francesca McDonagh

I will ask Mr. Kelly to respond to that question. It is not as if business is just being done out of a faceless building in Dublin. We have a significant number of colleagues who are mobile who do not work in the branch but go to the workplace or the home, within Covid parameters, where we are able to support the customer.

Does Ms McDonagh think those mobile transitory individuals would have as much local knowledge as, say, a traditional bank manager who lived in a town and knew the people in the town?

Ms Francesca McDonagh

I will pass that question to Mr. Kelly.

Mr. Gavin Kelly

It is a good point in the context of trying to get the balance right as we see customer preference move more to online and telephone banking with that local expertise and knowledge. That is the reason, as Ms McDonagh said, we made a move a few years ago to move all our advisers out and about to meet customers and train them up in specific areas of expertise such as agri-advisers or other business or mortgage advisers. For example, our agri-advisers spend quite a bit of time on farms advising customers. I can give the Deputy a specific example of the way behaviours are changing and how we can support our customers. I met a customer at the National Ploughing Championships a few years ago who wanted to make a branch appointment for a loan application. I was able to put him in touch with our contact centre in Kilkenny where he was able to apply for the loan and by the time he got back home from the National Ploughing Championships in Offaly he had the money in his account. That is what is happening. Some 80% of applications are being made over the phone or over the Internet. We have developed a skills set and expertise in Kilkenny and in Dublin where we have our contact centres. Our staff in those centres are dealing with multiple applications day in, day out and become deep experts on lending applications for certain sectors. That is then augmented by support on the ground. We are out in communities. We still have business and other advisers who meet customers at their premises. Most of the meetings that happen face to face, which is the minority of our meetings, take place on business premises. We have what we believe is the right balance. The key word as we move forward with these changes is "balance". We have the balance between the local knowledge and the local boots on the ground, to use that phrase, supported by people based in contact centres with deeper expertise and good Internet applications and service. We seek to get that balance right, although it is not always the case in that we might overdo it in one channel or the other. We are striving to adapt to customers' needs and behaviours to get that balance between that local approach and the central support.

I thank Mr. Kelly for his reply. I urge the bank to try to retain that local knowledge, which is invaluable. Although certain businesses and certain other sections of society may think we can move on from that and that we have expertise that operates centrally, in all walks of life we can see that local knowledge carries huge weight and is more valuable in the long term to banks and other businesses. I thank the Chairman for giving me that time.

I listened to Ms McDonagh's presentation. She said that the bank is maintaining ATMs where there would not be an alternative in the town or village concerned. Bank of Ireland has an ATM in both Kilkee and Milltown Malbay in County Clare. There may be an ATM maintained but it will no longer be an externally accessible ATM, rather it will be in a local supermarket, which obviously closes after normal business hours. Do Ms McDonagh accept that for such communities there is a major difference between having an ATM in a supermarket given the withdrawal limits, lack of lodgment possibilities etc. and an externally accessible ATM?

Ms Francesca McDonagh

I thank the Deputy for his questions. I might pass those to Mr. Kelly.

Before Ms McDonagh does that I might ask her a few more questions.

Ms Francesca McDonagh

Sure.

Ms Francesca McDonagh

The bank closures would have to be notified to the Central Bank. When is the last time Ms McDonagh met the Governor of the Central Bank and how many times has she met him since she took up her position or since the pandemic stared? I would like to understand more about the relationship between the Central Bank and banks in Ireland.

Ms Francesca McDonagh

Shall I answer that question and then ask Mr. Kelly to deal with the ATM question?

I have one more question and Ms McDonagh can choose how she wishes to answer it. With regard to the proposed purchase of Davy by Bank of Ireland, which Ms McDonagh said is at a very preliminary stage, is she concerned that if it is purchased, it will effectively result in a windfall for the Davy 16 and that a bank, which is 14% owned by this State, will purchase a stockbroking firm, some members of which were found to have acted improperly who will get a windfall as a result of this purchase? How does Ms McDonagh propose to change the culture, which has been much criticised at Davy?

Ms Francesca McDonagh

I will answer the Deputy's second and third questions. With the chairman of Bank of Ireland, I met the current Governor of the Central Bank of Ireland soon after his arrival.

That was a face to face meeting before any of us had heard of Covid-19. During the pandemic we had one very important virtual meeting with the Governor and two members of the team to speak about payment breaks and the industry's proactive approach to supporting households and businesses when they needed it most. That was at the beginning of the pandemic. Since then, I have had regular engagement with senior members of the Central Bank of Ireland through his team. Some of this is proactive. Other times it is on a quarterly or, at times, monthly basis for ongoing engagement. This is supported by engagement with the European Central Bank, through the joint supervisory team out of Frankfurt, on a regular basis.

When was the last time Ms McDonagh met the Governor?

Ms Francesca McDonagh

I met him virtually as part of the discussion on payment breaks at the start of the pandemic. I think that was in April 2020.

So not since, notwithstanding the bank's announcement that it will close 88 branches. The Governor of the Central Bank took no interest.

Ms Francesca McDonagh

I would not say that.

He has not requested a meeting with Ms McDonagh since.

Ms Francesca McDonagh

No but I have regular engagement with senior members of the Central Bank's supervisory team.

But Ms McDonagh has not met the Governor and nor has a meeting been requested by the Central Bank.

Ms Francesca McDonagh

I hope I have answered that. I met the Governor in April-----

No, sorry, since the announcement of the closures.

Ms Francesca McDonagh

Since then I have not had direct engagement with the Governor of the Central Bank of Ireland. I have had regular engagement with senior members of his team.

He has not requested a meeting in respect of the closures.

Ms Francesca McDonagh

No but I have had regular engagement with members of his team. Branch closures were discussed with our regulators but not with the Governor directly, which seems proportionate. It is a question for the Central Bank.

What seems proportionate to one person may not seem proportionate to people in Kilkee or Miltown Malbay but that is a different matter.

Ms Francesca McDonagh

I appreciate that. It is a question for the Central Bank in terms of its desire or not to have a proactive meeting with me. I have had regular supervisory engagement with the Governor's senior team as part of ongoing business and I spoke to them about branch closures.

Does Ms McDonagh accept that an external ATM is-----

Ms Francesca McDonagh

I will go to Mr. Kelly on ATMs specifically in the Deputy's area and I will come back with regard to Davy.

Mr. Gavin Kelly

We mentioned earlier there will be four locations where we will keep an ATM in the branch because there is no alternative branch in the town and Kilkee is one of these locations. We are committing to maintaining the ATM in Kilkee for this reason. With respect to Miltown Malbay, I am aware we will be closing the ATM in the branch. To pick up the Deputy's point, there are alternative ATMs in Miltown Malbay in supermarkets. To give a bit of perspective on what we are seeing happen with cash, so we believe it will be comfortable, customers will have access to an ATM during supermarket hours and they will also have access through post office opening hours. They can also use their card's cashback facility. As we know, the cashback facility has become incredibly popular but to take one step back from this, we have seen a 33% drop in cash over the past year. We could say this is because of Covid but to go back to what Ms McDonagh said earlier, I believe it is a service in which we will see a permanent shift. Keeping a bit of perspective on this, we have all become familiar with contactless transactions. In 2017, Bank of Ireland cardholders used contactless cards 70 million times. In 2020, this number was 170 million. There were 100 million more card transactions using contactless payments in 2020. We believe this is a permanent shift. It is something that will stick. Between contactless payments, the use of cashback on debit cards, the ATM facility in the local supermarket and the post office service, the people of Miltown Malbay will be catered for, although I accept we will not have an external ATM in Miltown Malbay.

Ms Francesca McDonagh

To respond to the Deputy's questions on Davy, there has been a lot of media speculation about our reported interest. I will not respond to media speculation. It is speculative at this stage; we know the decision by the board of Davy to initiate a sales process. That is starting and the announcement is days old. More generically, we look on a regular basis at opportunities to acquire businesses if they would add commercially and strategically to the value of the Bank of Ireland franchise, and this is true for any institution whether in Ireland or beyond. This is a fairly generic statement. It is not appropriate for me to respond to what could happen to the existing shareholders of Davy.

The Deputy spoke about culture. I cannot opine on the culture of an institution of which I am not part. For our own culture, I made a priority with my team to transform the culture at Bank of Ireland. We have made significant changes. We still have more to do and this is an ongoing piece of work but we have gone from being significantly below global financial services benchmarks, for example for cultural embedding, to now being at or above these benchmarks. I have already said that culture is not some sort of soft happy clappy motherhood and apple pie poster in a staff canteen, when we used to go to staff canteens. It is commercial. It is about ensuring the sustainability of a business model, customer loyalty, effective outcomes, regulatory compliance and, ultimately, a long-term sustainable profitable business. I have said this in the context of Bank of Ireland. I am a firm believer in the type of transformation we are undergoing.

On the culture I have one very quick question.

The Deputy's time has expired.

I thank the Chairman for allowing me in.

The Deputy is welcome.

I apologise for my invisibility. For some reason, my machine has not been operating properly. I welcome our guests and thank them for their candour and for their replies to the various questions. It has been quite informative.

Electronically-driven business is good and works very effectively and efficiently from the point of view of those who can operate it but there is a question of visibility. This is something the bank will have to address throughout the country, in urban and rural areas. I believe there is a necessity, in order to do business as a bank, to have a visible entity that people can identify with.

I fully acknowledge the activities of the banks' regional managers and its experts in the various fields of agribusiness and other businesses. Over the past five to seven years, I have used them in connection with various constituents who ran into difficulties and I thank the bank for having this facility.

I have also put my following question to the Governor of the Central Bank. As we move out of Covid there will be a surge or an attempt to revive the economy. I hope it will be very successful and we expect that it will be. Reference has already been made in the course of this debate to the fact that expert opinion is important. Who are the experts in this business? There will come before the bank a series of people who have been badly bashed by Covid, and the same people were bashed by the downturn in the economy with the financial collapse. I have had experience of the bank's performance in this area but it is hugely important from here on in that those who assess the viability of a project, particularly when the restrictions are lifted, know what they are at and that it does not always revert back to one person or to one or two people making a decision that impacts on the lives of those who have been in the particular business over a long number of years. These people have worked extremely hard. They have worked at building up their businesses. They have sweated blood and tears to keep them in place . It has not always happened and it has not been their fault. It was not necessarily the fault of the bank either. The fact of the matter is that we have reached the position we are now in. The bank's customers cannot take a further bashing. All I ask is that the bank is sympathetic towards them and allows them to make their case on the basis of their judgment and history, and their ability to survive where many others did not.

Ms Francesca McDonagh

I thank the Deputy for his positive feedback, which Mr. Kelly and I will share with our colleagues. I could not agree more with the point about the importance of visibility and physical identity and that is why we are maintaining 169 branches. That is very important for our customers and I do not foresee a branchless society in Ireland in the coming years.

We would be very mindful of supporting SMEs, particularly as we come out of the Covid-19 pandemic and the economy recovers. Since the start I have joined my colleagues in conversations with SMEs and corporates. We have spoken to the trade associations that have been most severely impacted, through no fault of their own; they have just not been able to trade. We have a long track record in SME lending and have sector specialists who are not only bankers but also practitioners in sectors like healthcare, agrifood, retail and many others. We will seek to support SMEs to come out of this, wherever possible. Brexit has created a huge amount of uncertainty and underinvestment in Irish SMEs. There are still non-tariff barriers that are impacting some elements of the supply chain but hopefully they are temporary in nature. The Covid-19 impact has been immeasurable but we are committed to supporting growth and recovery as we, hopefully, come out of this period.

I have a number of questions for Ms McDonagh, the first of which is on post offices. What type of analysis has the bank carried out on the benefit that will accrue to post offices arising from their dealings with the Bank of Ireland? What will each post office gain from the partnership? It has been suggested to us that the partnership will yield very little in fees to the post offices and will not make a difference in terms of whether the business closes or remains open. What happens when a post office with which the bank has a contract closes? Has the bank discussed that scenario with the post offices? The branches that have been identified to be closed by the Bank of Ireland over time in my constituency of Carlow-Kilkenny include those in Callan, Graiguenamanagh, Urlingford, Thomastown, Borris and Tullow. In each of those locations, there is a busy local economy strongly supported by the agriculture sector but at least one of the post offices has already been affected in terms of its viability. In our discussions with representatives of the post office network at a national level, we referred to post offices that would have struggled at the best of times and which have been challenged. What analysis has the bank carried out in each of those areas and what is the comparison?

The other issue in these areas is the availability of broadband. Again, in the county towns that are mentioned in Carlow and Kilkenny, the availability of broadband is bad and delivery is not likely to happen for quite some time. Even then, it may not be the fibre optic broadband used in more densely populated areas. What is the future for these post offices? Ms McDonagh has talked it up but at the end of the day, the partnership may be worth €1,000 to some individual post offices in fees but in essence, it will not make much of a difference. The bank is using this partnership to talk up the future of post offices.

I also wish to raise the issue of repossessions. How many decisions on repossession does the bank have right now? How many decisions on the repossession of family homes or similar properties are in the pipeline? Is Bank of Ireland expressing an interest in the Ulster Bank loan book? I am interested in the Davy issue from the point of view of the salary levels for higher executives that have been mentioned. On the one hand, we are talking about the difficulties in Irish banks arising from the crash and the interest rates that are being paid but on the other hand, we have enormous salaries being paid to higher executives. The two issues are not matching; there is room for salary increases but no room for interest rate decreases.

In terms of negotiations with customers who are in difficulty, I have a question that could be posed to every bank and not just Bank of Ireland. Where the bank is negotiating on the debt of a family, individual or business and there is a death by suicide, how does the bank separate that out and deal with in a more sympathetic and sensitive way? Has the bank learned lessons in terms of how to deal with people in trouble in the context of getting them over the line with a better arrangement? What has been the bank's experience in this regard?

I also wish to raise the matter of internal investigations. First, I thank Bank of Ireland for the engagement I have had with senior executives. While the engagement may not bear fruit, it has been positive in terms of the experience and understanding given to the customer from it. In one or two of the engagements in which I was involved, an internal investigation was under way. The external view on the debt was that it was affected by the tracker issue but the internal view was that it was not, very definitely. The two views were completely at odds with each other and while the financial services ombudsman service exists and issues can be referred on, I was surprised that the bank does not use an outside resource in the context of an examination of issues that arise between the bank and the customer or an understanding of the questions that are being asked of the bank.

Ms Francesca McDonagh

I thank the Chairman for his questions. I will ask Mr. Kelly, who has been leading the post office negotiations, to talk about that interaction and to respond on the more in-depth local knowledge about which the Chairman inquired. I will respond to the questions on our engagements with Ulster Bank, on repossessions and remuneration at Davy. Either one of us can respond on the tracker question but I will hand over to Mr. Kelly now.

Mr. Gavin Kelly

I thank Deputy McGuinness for his questions. A lot of consideration was given to the coverage of the post offices across each county before reaching a decision. In Carlow-Kilkenny, for example, there are 34 post offices between the two counties. Our negotiations so far have been directly with An Post and we would not be privy to the onward negotiations between An Post and the local postmasters.

As we said earlier, scale is important. We are not the first bank to use the post office but building up the scale and volume of transactions will make a significant difference to customers and to postmasters in terms of viability going forward.

The more services we can put into the post offices, the better. I believe we are helping and contributing towards that. Any other questions on that would need to be directed at the post office.

On the specific locations, in the south east we looked at counties Carlow, Kilkenny, Waterford and Wexford together. There was a strong affinity between the Graiguenamanagh branch and the sub-office in New Ross in the past. While there is a lot of rivalry on the hurling pitch between Kilkenny and Wexford, from an economic and banking perspective, we certainly see a lot of work and co-operation from the local economies as they support each other. That is the way we will run our business to give support to customers, as the Chairman said, in thriving counties. We believe we have adequate coverage across those four counties to ensure we support our customers as we move forward.

Kilkenny is a very important county to us. We employ almost 600 people and have a very large contact centre operation in Kilkenny. Making sure we support colleagues and customers in Kilkenny is very important to us and will be close to our hearts as we go forward.

Ms Francesca McDonagh

There was a question about broadband. We have made a significant investment in our mobile banking app, with a 50% increase in functionality. The app can be accessed without broadband through mobile networks, which have a different level of coverage.

I will now address the broader question of repossession and dealing with and supporting customers who have experienced loss, including death by suicide. For the past 12 months, we have paused all repossession orders. I do not have information to hand on historical or future numbers. We can revert offline in writing. We have not executed, implemented or progressed any repossession orders for the last 12 months, given the external environment and the challenges faced by customers during the pandemic.

On supporting customers in financial distress, we have a long track record as having the lowest level of non-performing exposures, especially of retail customers, within the industry. I will give the committee a perspective in terms of scale. For owner-occupier mortgages that are more than 90 days past due, Bank of Ireland has only 1.9% of customers in that situation, while the figure for the industry is above 6%. The Bank of Ireland figure is a fraction of the industry average. We are a big part of that industry and the average figure includes us. For buy-to-let mortgages, we have 4% of customers who are 90 days past due. The industry average for that sector is 16%.

We are in a far stronger position with regard to the quality of our portfolio and in the quality of engagement support we provide our customers. We engage with the customer and in nine out of ten scenarios we find a solution that is sustainable for and accepted by the customer. For the customers who are personally impacted and vulnerable, whether it is a circumstantial vulnerability due to bereavement, illness or other challenges, we have established a specialist vulnerable customer unit for all customers, whether they are in financial distress or not. The unit received 4,500 calls during 2020. We have a specialist team in our credit loan support, who are among our most experienced and specialist advisers, to support customers who have greater level of vulnerability or who have suffered a loss.

With regard to Ulster Bank, we take all opportunities to look at portfolios and acquisitions. Among the Irish banks, Bank of Ireland has done the most portfolio acquisitions in recent history. We did eight acquisitions of portfolios in the past five years. We are not being quoted as currently engaged with Ulster Bank. We focus on opportunities that add strategic and commercial value for our full stakeholder range. I hope this answers the Chairman's question.

I believe I answered the question on remuneration and Davy. While not referring to Davy specifically, if we were to acquire an entity that had normalised pay, we would seek permission, as part of the current requirement under the stakeholder engagement relationship we have with the Department of Finance, for us to maintain the existing remuneration arrangements in an entity if we were to acquire it. That is a generic response to the Chairman's question.

I have presented to this committee many times specifically on tracker mortgages. I made it a personal commitment to address the issue. We have a 99.8% contact and remediation rate with customers. In total, there are only 37 customers who we continue to trace. There were 800 customers before but we have successfully traced them. We have put a significant amount of effort and resources into this. We use an independent panel, which is a requirement of the tracker mortgage examination. These are senior, independent people who review any customer appeal if customers feel they have not secured an outcome from the bank that they feel is fair. If a customer makes an appeal, it goes directly to that independent panel. The customer also has the choice to go to the Financial Services and Pensions Ombudsman, which will review all complaints. We try to work with all customers and the numbers reflect our commitment to address the tracker issue. I hope I have addressed all of the Chairman's questions.

Is it possible to get the analysis around the post offices that I have just mentioned? Is Ms McDonagh willing to give some data to the members, in writing or in a response, as to why certain bank branches were selected for closure? Is information available on the impact of these closures on local economies? Will Ms McDonagh make the reasons for the closures known to us, especially in specific cases that we raise? Has the bank done an analysis of the impact of the branch closures and the use of the post offices on the local economy?

Ms Francesca McDonagh

We did a very thorough analysis before making such an important and material decision around branch closures and the new partnership with An Post. That analysis looked at footfall, usage, proximity of a branch to a neighbouring Bank of Ireland branch, proximity to alternatives, that is, non-Bank of Ireland competitor branches, and proximity to a post office outlet. Those criteria were applied consistently across the Republic of Ireland and in Northern Ireland. We are not disclosing an individual formulaic analysis because we have also applied commercial judgment in making those decisions. There has been in-depth analysis and robust discussion about those decisions.

I disagree strongly with the decisions in the cases I have mentioned, as do other Deputies in the cases they raised relating to their constituencies. My knowledge of the areas is that they do not have proper broadband, the post offices were stretched and the partnership, as mentioned by Ms McDonagh, offers very little for potential to move the post office from being on the verge of closing to continuing in business. It is a retrograde step in some of the areas mentioned. Bank of Ireland should be in a position to at least inform the local community as to its future and the reasons the decisions were arrived at.

The equity release product is causing a lot of concern among those who were involved in the purchase of that product. It is causing quite a lot of difficulties in families because the owner of the house who may be the parents may have entered into this arrangement without knowing the full financial consequences or exposure they would have. Families are now finding this out and it is causing significant distress. Given the numbers of people involved in this equity release product, is it possible for Bank of Ireland to review the matter and cap the interest rates or make some form of adjustment of the product for these customers?

I call on Senator Davitt to ask his questions.

My questions are very brief. Does the Government have a director on the bank's board at present, with its share holding? Did it have concerns about the bank's branch-closure policy at the board meeting?

Ms Francesca McDonagh

I ask that Mr. Kelly respond to the question about the equity release products, which is the life loan product. I will then come back in on the public-interest director question.

Mr. Gavin Kelly

Life loan is a product which we sold between 2001 and 2010 and, as was said, it provided equity release to customers. It was set up on a 15-year fixed rate. As customers came off that rate, they came on to a rate. We have a rate of 3% at the moment on those loans. We believe this is a competitive fixed rate which applies to customers with the product. Another thing which is important is that while customers do not make repayments on this product they are also guaranteed to be able to stay in their home for the rest of their life. This was an important part of the product when it was sold between 2001 and 2010 in order to meet customer needs at that time. The product has not been available to new customers over the past ten years but we continue to support customers who are on the product. If there are specific examples or if someone wants to talk to us, we have a dedicated line to speak to customers about life loan. We are only too happy to help and engage with customers on a case-by-case basis. My response just relates to the life loan. I am conscious of time. Ms McDonagh can answer the other question.

Ms Francesca McDonagh

I will be quick in my response. We have one public-interest director who sits on our board. The decision to close branches and enter into the post office joint venture and maintain 169 branches was a management recommendation to the board, which the board supported. That was an overall board decision. In terms of engagement with the Minister of Finance or the Department, I think the Minister is on the record as having said before the Dáil that these commercial decisions are being made by boards and management of private companies and are a reflection of the wider challenges the banking sector is facing, not only in Ireland but also internationally. I think there is a recognition there that we are adapting to the changing customer environment as part of our decision on branches. In my engagement with the Department, it was particularly interested in the offering of services through An Post, which was seen as a positive alternative service to all of our customers across a larger network of longer operating hours.

I thank both witnesses for their help and their honesty in answering questions.

On the case I referred to earlier which went through a tracker issue, if I were to bring it to Ms McDonagh's attention again can she look at it?

Ms Francesca McDonagh

Absolutely, yes. As always, with any case the Chair sends to us or to me personally I will endeavour to look at it robustly.

It relates more to the bank's legal firm. I want to encourage a settlement because of the health of two of the individuals involved. That brings us to the end of our meeting. I thank the witnesses, Mr. Kelly and Ms McDonagh, for their attendance. During the meeting, if we were short in terms of trying to bring in other members it was because of the timeframe and the Covid regulations, under which we are currently operating.

The joint committee adjourned at 5.42 p.m. sine die.