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Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach debate -
Wednesday, 14 Sep 2022

Banking Issues: Discussion

I ask members to ensure their mobile phones are switched off. I ask speakers to identify themselves by name for the record of the committee. At the previous meeting we approved the minutes of the meeting of 13 July 2022.

We are meeting with representatives of AIB to discuss ATM services, branch banking and other matters. I welcome Dr. Colin Hunt, Mr. Jim O'Keeffe, Ms Helen Dooley and Mr. Adrian Moynihan to the committee.

I remind everyone of the notice on privilege. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. Witnesses attending remotely from outside the parliamentary campus have been made aware that full privilege may not apply. They are again 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 statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with the note on privilege.

I invite Dr. Hunt to make his opening statement.

Dr. Colin Hunt

I thank the Chairman and members of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach for inviting AIB to meet with it today. The invitation specifically refers to the committee's wish to discuss recently announced proposed service changes to branches, but we are of course happy to consider any areas the committee wishes to cover that also affect the bank, our customers and the wider economy.

With me representing AIB are Mr. Jim O'Keeffe, managing director of retail banking, Ms Helen Dooley, group general counsel, and Mr. Adrian Moynihan, director of group transformation.

I will begin by addressing the controversy that arose in July regarding AIB’s proposal to remove cash services from 70 of our branches. That announcement caused widespread public upset. We abandoned the plan within three days of its publication but today I again acknowledge the alarm it caused and reiterate our regret.

It is very important from AIB’s perspective that we clearly explain our position and this forum provides us with an opportunity to do so. Given that the way in which customers manage their financial affairs is rapidly evolving, it is incumbent on the bank to map out coherent strategies in response to those changes. AIB’s original decision to remove cash and reshape its services in 70 branches was based on a genuine effort to futureproof the viability of our branch network, keeping our 170 branches open nationwide while ensuring that our customers could continue to access cash services in their communities through our expanded partnership with An Post. This, we believed, would provide a resilient, cost-sustainable network into the future as customers’ banking requirements continue to develop and, in the process, generate revenue for An Post.

A great deal has been written and said about the bank’s decision and it is imperative that we illustrate the reasoning behind it. The Covid-19 pandemic had accelerated the decline of cash usage and visits to bank branches and had triggered a dramatic increase in customers’ adoption of digital banking services. In AIB’s case, from 2019 to 2022, there was a 35% reduction in the number of customer transactions completed in our branches. Transaction volumes involving our tellers fell from 9.9 million in 2019 to a forecast 5.8 million overall this year. The figures for transactions at our cash and cheque lodgement, CCL, facilities almost halved from 14 million in that three-year period to 7.7 million. ATM transactions fell from 15.4 million in 2019 to an estimated 12 million for all of 2022. Meanwhile, daily digital interactions increased to 2.9 million, compared to 35,000 customer branch visits. Customer preferences have in fact been changing since 2014. For example, that year over 19 million cheques were issued, but this number would fall to 8.7 million by 2020. This trend is irrevocable and it is going to influence the services required in the traditional model of the local branch. Against that backdrop and determined to keep our branches open in the community, we proceeded to further develop our relationship with An Post on the basis that the complementary service would allow our customers to continue to access the vast majority of bank services in any of the country’s 920 post offices. We genuinely believed that the "AIB at An Post” model, together with our digital banking options, were sufficient to meet our customers’ cash needs and expectations.

We were proven wrong in that belief and underappreciated the huge value that customers continue to attach to the presence of a fully-serviced local branch. Although digital platforms are perfectly sufficient for much of our customer base, it is clear that many also want continued accessibility to cash, cheque and lodgement services, as well as on-site support for larger and sometimes complicated transactions. We are witnessing a transformational shift towards an increasingly digital economy. We are in transition, but as I said on the day of our interim results at the end of July, AIB moved way too far, way too fast in proposing to withdraw cash facilities at 70 of our branches. I hope that our prompt withdrawal of the plan and assurances that the status quo remains have fully quelled customers’ anxiety. We will retain Ireland’s largest branch network, providing all existing services. The changes proposed in July are off the agenda.

What is not off the agenda, however, is the maintenance of our close connection to our customers and our communities. The geographic scale of our network ensures that there is an AIB branch in 95% of the locations that Ulster Bank and KBC are leaving. These branches are staffed by our people who understand customers’ needs at a very local level and who can provide tailored advice and support. The primacy of customers’ interests is central to our success. It is incumbent on the business to meet their expectations so that they can enjoy peace of mind that their finances are being looked after safely and professionally.

I do not have to remind this committee that a well-functioning and secure banking system capable of withstanding shock is of vital importance to our customers and the economy at any time. This is particularly the case in the present moment when we are all dealing with the consequences of the protracted global pandemic and now the impact of the human tragedy and economic upheaval inflicted by the war in Ukraine. We are acutely aware of the effects of rising inflation and the cost-of-living crisis being experienced by so many of our customers.

As I mentioned earlier, AIB Group reported a positive set of financial results for the first six months of the year, signalling the bank’s ongoing capacity to support the Irish economy. For example, we were in a position to fund €5.4 billion in new loan finance from January to June this year, representing a 20% increase on the performance in the prior year period.

As one of Ireland's pillar banks with 2.8 million customers, which is a number that is growing very rapidly now, AIB is intrinsically linked to the Irish economy. Over the past decade, the bank's balance sheet has been transformed with the ratio of loans to deposits falling from around 130% to 60% so we now have a surplus of resources, and a massively reduced exposure to bad loans, due to the large amount of restructuring and customer solutions implemented over the past decade. Our strong balance sheet, capital strength and the consolidation of a growth strategy that closed off a number of customer product gaps means we have a reshaped business, delivering improved returns and capacity to make the necessary investment in our physical and technological infrastructure. The bank is now very well positioned to adapt to economic strains and the challenges that lie ahead. In addition, that financial capability allows us to provide extensive support for Ireland’s major infrastructural needs, including housing and meeting the country's onerous emissions targets.

Meanwhile the exit of Ulster Bank and KBC from the market, which triggered the mass migration of customers in search of a new financial relationship, means that by half year the bank had opened more than 205,000 bank accounts, which represents a 110% increase on the same period last year. We expect the figures to peak through this month and into October. Facilitating the smooth arrival of new customers involved the continued recruitment of 700 temporary staff, and our continued investment in our digital capabilities means that approximately 70% of personal customers can now open a new bank account digitally.

In April, when AIB last met this committee we outlined our capacity and readiness to welcome customers from the departing banks. Our 170 branch locations and three contact centres have been resourced in order to reduce call and branch appointment waiting times. A customer now waits an average of four minutes for a response from our contact centre and 12 days for an appointment with a member of branch staff in order to open new accounts. Support for vulnerable customers through the change process is supplemented with a dedicated helpline in addition to one-to-one service.

The unprecedented transition of almost 1 million current and deposit accounts, involving many millions of direct debits and standing orders, involves huge disruption for customers. However, given the levels of investment in personnel and technology that we are making, we will minimise customers’ problems in transitioning to their new financial arrangements.

Finally, I again thank the committee for the opportunity to address a number of important questions. The banking system is changing. Customers are moving in ever-growing numbers from a reliance on the service of traditional market players, which are banks, An Post and credit unions, to a combination of digital, card usage and electronic fund transfers. In the midst of the transition consumers continue to use cash. The future banking landscape will include new entrants, business models and technologies that will further challenge the incumbents so we must invest in all of the skills, expertise and infrastructure required to compete. To date, new entrants to the market are smaller in scale with far lower cost bases than the traditional banks. However, in the final analysis the customer and staff relationship is the lifeblood of AIB's business and, regardless of the radical changes occurring across the banking landscape, we will endeavour to provide the services that ensure that this is protected. We are very happy to answer questions.

I thank the chief executive and call Deputy Barry.

I have a question for whoever wishes to answer. I want to talk about the closures but before that I will talk about the main topic of conversation in this country today which is the costs of living and people's concern about what will happen with their mortgages in the context of interest rate increases. It would be fair to say that there is the potential, in terms of mortgage hikes, for this matter to become, alongside energy, the single biggest area of concern, one even above the extras that people are being forced to fork out for food and the other necessities of daily life.

We have seen some ECB increases and we have seen the response from the banks here. However, no one is under any illusion that these will be the last of the increases. We could be looking at a series of increases over a relatively protracted period. What is the policy and approach of AIB towards either absorbing these increases or passing them on?

Dr. Colin Hunt

It might be useful to highlight the context in which these rate increases are being introduced by the ECB. It is to counter a significant increase in reported price inflation across much of the world. The rate increases are designed to encourage saving and discourage borrowing as a means of reducing inflation pressures. Banks are an essential part of the monetary policy transmission system.

In respect of what is currently happening in terms of rate increases, at the start of this year no one could have envisaged the number of rate increases that seem likely over the year. As was said, there was a rate move of 50 basis points, 0.5%. We responded to that by not increasing rates where we have discretion in terms of borrowing and by eliminating negative interest rates on the deposit side. In terms of the shape of our mortgage book, which accounts for more than half of the lending book of AIB Group, approximately 52% of that is fixed. An increase in variable rates at any point in time will not impact on those borrowers. Approximately less than 20% are tracker rates and the residual, nearly 30%, are on standard variable rates. Substantial work done has been done in recent years to increase the range of products available to customers to give them real choice in what product they want to use when borrowing for a mortgage. The vast majority of customers coming into us now are choosing fixed rates.

A 75-basis point, 0.75%, increase in rates was announced on Thursday last week and it seems there will be further rate increases. The President of the European Commission has indicated that there will be at least two increases, but less than five, and, therefore, interest rates will be significantly higher, in all likelihood going forward, than they were at the start of this year. Further rate increases are expected in October and December.

When Dr. Hunt says rate increases will be higher-----

Dr. Colin Hunt

I am talking about official interest rates.

-----is he talking about the ECB?

Dr. Colin Hunt

Yes. I am talking about official interest rates. The Deputy will be aware of what we did in respect of the first 0.5% increase. We are currently considering our response to the most recent rate increase. I am conscious of the fact that AIB is the biggest mortgage lender in the country, with a mortgage market share of somewhere in the low 30 percentage points. I am conscious of the shape of our lending book in that more than half of it is fixed, but we have not yet gone through the process of considering our response to it. I am equally conscious of the struggles people are facing at this time.

When Dr. Hunt says AIB is considering its response, can he provide an approximate timeline for when a decision will be made, such as in the next week or by the end of the month?

Dr. Colin Hunt

It will be over the course of the next number of weeks. I cannot give a definitive timeline and it would be inappropriate of me to do so.

The fact that it is being considered indicates that it is not automatic that AIB will respond in the same way to this increase as it did the previous increase. It is a significant measure to absorb. AIB is considering the possibility, at least as one of its options, of increasing the rates on the basis of this increase.

That is not ruled out.

Dr. Colin Hunt

It is not ruled out, but it would be inappropriate of me to give advance notice of a proposed change in interest rates that has not yet been proposed to me.

If we are looking at the context of at least two and less than five, as I think Dr. Hunt said, ECB hikes in the next period, how many of those increases does he think AIB could absorb? When does he get to the point where he thinks the bank has to say, "Maybe we need to make increases here"?

Dr. Colin Hunt

Between two and five rate hikes is not my view;, it is the ECB president's view. It would be foolhardy on my part to predict when this process of monetary policy tightening or rate increases will come to an end but we will look at every official increase in interest rates as it happens. There may be fewer than five; I am not going to predict-----

Could AIB absorb five?

Dr. Colin Hunt

I am not going to comment on whether we could absorb two, three, four or five. Every one will be looked at in isolation. We are already facing quite a significant increase. We are required, as part of our capital structure, as is every systemically important institution like us across the European Union, to raise a certain amount of capital in the form of what is known as the minimum requirement for own funds and eligible liabilities, MREL. We issue bonds to the market to comply with those very sensible requirements. They ultimately protect depositors in the event of banking failure across the system. The yields on our own bonds on issue have increased by between 2% and 4.5% since the start of this year.

What that would mean in effect is that, if the ECB hikes rates and AIB does not pass them on, that would mean a cut in AIB's profits, all other things being equal. To get an idea of what might be absorbed, will Dr. Hunt remind us what the pre-tax and after-tax profits were for the bank in the last year for which those figures were recorded?

Dr. Colin Hunt

I do not have those numbers at my disposal at the moment, to be honest. I cannot recall. What I can say is that for a-----

I have never met a banker before who did not know how much profit their bank made the previous year.

Dr. Colin Hunt

I am sorry. I have so many numbers in my head at this stage that those numbers are not uppermost. I can obviously get them to the Deputy quickly, but-----

Can one of Dr. Hunt's team give us the figures?

Dr. Colin Hunt

We will get them to the committee. What I can say is that an increase of 1% on a parallel basis across every single product, that is to say, variable and fixed, would generate additional income for the bank of approximately €360 million. That is assuming it is applied on a parallel basis across all of the products and it is an impact on the income line rather than on the overall profitability.

Before I ask a brief question about the branch closures, I would like to say that people are hurting very badly. People are looking at options of heating or eating this winter. Some people will not be able to heat their homes properly or put food on the table properly. Banks are recording high rates of profits at the moment. The banks should absorb the ECB increases and not pass them on. If they feel they are not able to do it, we cannot afford to leave them in private ownership and we need to look at full-scale nationalisation.

On the issue of the closures, I would like to ask a question. The board made a disastrous decision, which was a complete misjudgement of public opinion. Has the board that made the decision to make those closures been changed in its make-up in any way since that disastrous mistake was made, or are the same personnel on the board today? Have there been any changes since the decision?

Dr. Colin Hunt

It was the executive team of the bank that brought the proposal to the board.

That went to the board in June. When it became abundantly clear to us that this was of great concern to a significant proportion of our customers, we went back to the board to seek approval to reverse it. It is the same board that approved the initial decision.

For the information of members, Deputies Richmond, O'Callaghan, Doherty, Durkan, Danny Healy-Rae and Senator Higgins have all indicated. Please be conscious of your time. We have a particular slot for this meeting. I call Deputy Richmond.

I thank everyone for coming in for this detailed presentation. I would like to pick up where Deputy Barry left off. Obviously, it is a bit past the time when we were to be here primarily to talk about branch provision and the temporary decision to remove cash services. Dr. Hunt mentioned in his opening statement that there was an underappreciation. Are there any other areas where the public mood, or more importantly, the mood of AIB customers has also been underappreciated? He said this was a miscalculation. There was a very quick mea culpa and there has not been a change in that, but a massive calculation was taken and launched into with quite a bit of effort, only to be rolled back quickly. Has the lesson been learnt?

Dr. Colin Hunt

Had we appreciated or anticipated the reaction, the proposal would never have been made. It was the reaction, which was unprecedented in terms of the volume of customer complaints, that made it abundantly clear to us very quickly that we were going to have to reverse course on this. We reversed course within three days of the initial proposal having been made. I regret that we caused concern and alarm for our customers. I heard our customers loud and clear. I heard with a volume I have never heard before. What we were trying to do was to do something fundamentally different. There are financial institutions across the world that are significantly reducing the size of their branch footprint, but we wanted to do something different, which was to remain fully embedded in the communities we serve. I have said on numerous occasions that the best brand ambassadors we have are the people who serve on the front line. We underappreciated the importance of cash. We heard the message; we got it loud and clear. We made the reversal and this is now settled business. I think on the morning of our results I said that we moved way too far, way too fast. I continue to believe that we got ahead of our customers. I think it is inevitable that banking is going to look different in 2030 from today. There is an inexorable move towards an increasingly digital offering, but we are not going to get ahead of our customers again. We did on this occasion and I am very regretful that we did and that we did cause that concern and alarm.

The question must be asked then: why was the level of preparation not put into place to prepare for this change, given the backlash that came? Dr. Hunt has been very open with his regret in that regard, but surely this could have been foreseen. What level of preparation was put in to engage with customers that this was on the horizon, namely, genuinely working with customers rather than trying to sell them things, trying to convince them that banking is changing and that AIB wants to bring them along to modernise and provide them with a better product and service but also to future-proof the model of banking? There must have been a serious gap in the preparation for this move that led not only to the seismic size of the backlash, but such a quick reversal. What work has been done by the bank to realise why this mistake was made and how can Dr. Hunt ensure that it will not be made in other areas or, indeed, related areas? He said, rightly, that there will be less demand for cash services in branches, but there are people who need to be brought along in the process to embrace digital. They need to be not just sold something, but educated and included.

Dr. Colin Hunt

We are in the business of bringing a relationship back. I could sit here all day and talk about all of our various strengths with regard to our capital position, our balance sheets, our profit and loss statement and so on. The big strength of our institution is that we have 2.8 million customers. We are not in the business of transactions. We are in the business of relationships because they are core to the way we view ourselves and the way we view our importance in the country. The lesson for us arising from this matter is that we cannot get too far ahead of our customers. We cannot damage that relationship by getting too far ahead of them too quickly. That is the big lesson from the experience of those few days in July. A huge amount of work over many months went into preparing for this. We worked hard with An Post on an agreement to increase significantly the range of services that we offer through its offices around the country. We have 170 branches. An Post has 920 post offices and we were transforming the volume of services that we were planning to offer through them. No shortage of analysis went into this. No shortage of data were considered when we were building this proposal. When it was launched, however, it became abundantly clear extraordinarily quickly that the customers did not want this. Once that became clear, we set about reversing our position. It took three days to go through governance, which accounts for the delay between the decision being announced and it being reversed. However, we corrected the mistake as quickly as we could. I reiterate that I deeply regret that the proposal was made in the first place.

Dr. Hunt has very clearly drawn a line under this and that is to be welcomed but the importance of the customer is the crucial lesson. As regards relationships, data and engagement, an obvious lack in terms of real engagement with customers is evident. My final question is in the related area of customer demand. I have one small question about AIB's engagement with the local authority purchase scheme and perhaps the lack of engagement by AIB compared to the other banks. Is that something that is going to be rectified in a timely manner?

Dr. Colin Hunt

I will take that away and look into it. I will come back to you directly on that.

I call Deputy O'Callaghan.

I will raise two issues that arose during the summer: first, the imposition of an €83 million fine on AIB by the Central Bank that was announced in June; and second, the decision that has been discussed already to propose the removal of cash services from 70 AIB branches that was announced in July. In the Central Bank investigation, AIB admitted to 57 regulatory breaches in total, including multiple instances of failing to act honestly, fairly and professionally in the best interests of its customers. Does Dr. Hunt agree that this finding is a very serious development and that to have a bank in Ireland that has behaved dishonestly in its dealings with its customers is an extremely serious issue?

Dr. Colin Hunt

I agree that it is a very serious issue. When I became CEO three and a half years ago, one of my priorities was to work with the Central Bank in bringing the tracker mortgage examination and enforcement to an end. It concluded with the statement to which Deputy O'Callaghan refers and of course a fine from the Central Bank of €86.7 million. That examination relates to issues that go back all the way to the autumn of 2008. I regret that this ever happened. My priority and that of the board on which I serve has been to conclude this matter to the satisfaction of the Central Bank. That has now happened. I will ask Ms Dooley to give more detail on this.

Ms Helen Dooley

As Deputy O'Callaghan has outlined, 57 breaches were admitted as part of the AIB settlement and a further 36 breaches were admitted as part of the EBS settlement. The size of the fine reflects the seriousness of those breaches. As the CEO has just outlined, we moved as quickly as we could to remedy the customers' situation. Some of those customer payments were made this year, which is why the Central Bank statement refers to some of the breaches continuing. That is because AIB was rectifying accounts up until March 2022. However, the size of the fine does reflect the seriousness of the breaches.

Does Ms Dooley agree that this was not simply a one-off act of dishonesty by AIB but that it constituted a campaign of dishonesty against its customers?

Ms Helen Dooley

The publicity statement issued by the Central Bank outlines the breaches in some detail. We are precluded from saying anything other than what is in the settlement agreement. We have accepted the terms of the settlement agreement, and as I have mentioned, the size of the fine does reflect the seriousness of the failings.

Dr. Colin Hunt

As an institution, we have focused on correcting the wrong that was done and on ensuring this can never happen again. In an organisation with the complexity of our organisation, in terms of our products and the number of our customer relationships, we will make mistakes. However, when we make mistakes we will be open and transparent about the fact that we have made mistakes and correct them as quickly as possible.

This was not a mistake. We do not need to go beyond the Central Bank findings. AIB has admitted to the Central Bank to failing to act honestly in its treatment of customers. That is not a mistake. Does Dr. Hunt agree?

Dr. Colin Hunt

I do not think it was a mistake. As the general counsel said, that is in the statement. The group has admitted these contraventions and we are not going to go beyond the statement.

When did the bank first become aware of this failure to act honestly?

Ms Helen Dooley

In 2015, we started to investigate issues with regard to tracker mortgages. However, shortly after we had begun our investigation, an industry-wide programme was stood up by the Central Bank. In the course of that investigation, as is reflected in the settlement agreement, failings and breaches of regulatory obligations were found.

I was not a member of this committee in April 2019. We had the same Chair and some other members were on this committee then. When AIB was before the committee at that stage, it consistently denied that the 6,000 prevailing rate customers were entitled to tracker mortgages. They were simply deemed not to be impacted and there was a simple admission of a service failure. Has AIB's view changed on that now as it is before the committee some three and a half years later?

Ms Helen Dooley

As part of the settlement with the Central Bank, it is acknowledged that AIB applied the Ombudsman's decision to those customers. The Ombudsman found in favour of a customer and we applied that decision at speed for the circa 6,000 customers in the same circumstances. That is all I am permitted to say on the matter.

I am not looking for names, but I am asking generally: has anyone been sanctioned as a result of AIB's admission that it failed to act honestly with customers?

Ms Helen Dooley

With any matter of this nature, as with the proposal to remove cash from branches, we conduct a full lessons learned review.

We have done that on an ongoing basis and taken all necessary steps where we have found individual actions to be lacking.

Has anyone been sanctioned?

Ms Helen Dooley

It is a matter for the Central Bank whether they take individual enforcement action.

Has the bank itself conducted any internal disciplinary actions?

Ms Helen Dooley

I am not at liberty to say whether specifically for this, but yes, the bank does undertake disciplinary sanctions up to and including dismissal where conduct or action is inappropriate.

I will move on to the second issue, which is the aborted attempted closure of the cash services from branches. The witness will be aware that, prior to the announcement in July 2022, there were other branches which were made cashless. I think it was being done on a trial basis and one of the branches was in Blackrock in County Dublin. Is it proposed to alter the decision made in respect of other branches that was announced prior to July 2022?

Dr. Colin Hunt

The changes were made in those 22 branches 12 months ago. It is not a directly comparable situation because where there were ATMs they were retained, and where there were cash and cheque lodgement machines they were retained. I think there were two branches where cash was withdrawn and Blackrock was one of them. It has alternative options in terms of ATMs adjacent to it, and an An Post branch is very close to it. We do not propose to revisit those decisions.

How does a customer lodge a cheque? Do they have to go to Dún Laoghaire to lodge a cheque. It cannot be lodged in Blackrock at present, as I understand it. Is that correct?

Dr. Colin Hunt

It can be cashed in the post office.

I commend the witnesses institution on reversing the decision that was made. Sometimes when institutions make a decision, they feel obliged to stick with it. I do find it alarming, however, that so many talented and informed people could have made this decision without having wider consultation. I am conscious the ultimate responsibility for this rests with the board and there are a very large number of people on the board, including a very large number of non-executive directors. I am concerned as to how in touch the non-executive directors of Allied Irish Banks can have been with the public and Irish banking for it to permit such a decision to be made. Is there any substance in my concern?

Dr. Colin Hunt

I deal with the board frequently and the board is ultimately and collectively my boss. We are very lucky to have a very experienced and very diverse board in multiple ways, including people with domestic and international experience. On the face of it, the proposal was soundly based, but we were wrong, and I have admitted it was wrong. Ultimately, the board was being asked to approve a proposal we brought to it. I and the board performed, and continue to perform, our function very well and we are lucky to have as experienced, diverse and accomplished a board of directors as we have.

Are many of them based outside Ireland?

Dr. Colin Hunt

We have a number of directors who are based overseas, but who are expert in different aspects of banking.

I thank the witnesses.

It was interesting to hear the issue Deputy O’Callaghan raised of the renewed concerns on the tracker mortgages. We saw in June the concerns around the question of compound versus simple interest. It is worth noting that those concerns were raised in this committee in June 2021. Yet, they were still having to be unpacked going into the summer of 2022. This is a question of what is listened to. We talk about what was not recognised. These things have been flagged widely and issues have even been flagged in this committee.

I will raise the issue of the other decision, which is the one on which I will probably focus because I think the other ruling has already been unpacked quite substantially, and that is the question of that decision process leading to the proposal for the closure of a number of banks and the shift to digital services.

In June 2021, when the committee met AIB, I and other members asked whether excessive emphasis was being placed on the figures for digital transactions taking place during the Covid-19 pandemic and whether there had been a proper estimate of the extent to which those transactions were taking place digitally not as a matter of preference but of medical necessity. In addition, a large number of financial activities relating to banks had been placed in suspension. We specifically highlighted the need for AIB to recalculate what it was framing as the preference of customers and to give a proper weighting to Covid. What mechanisms will AIB have in place to respond at an earlier point to questions, issues and concerns that are flagged by customers, trade unions or Oireachtas Members? Since that meeting in June 2021, it seems there was no shift in how AIB acted and made decisions in the six to eight months thereafter on the basis of concerns that had been well flagged a year previously.

Dr. Hunt stated the necessary transition would still happen. I am a little concerned that this matter is being viewed as a public relations failure, rather than a failure to meaningfully consider the needs of Irish society. In that context, 42% of people in Ireland have below average digital skills and more than half of those aged between 65 and 74 have never used the Internet. Those figures are a reality check.

Financial abuse affects older people and people with disabilities in particular. The idea of not being able to directly access a local bank branch or cash payments affects and exacerbates vulnerability to financial abuse.

What is happening with regard to AIB's internal mechanisms for listening better and assessing specific issues of financial vulnerability that have been exposed? The digital transition is simply not happening at pace. It is not simply a matter that it needed to be promoted quicker. It is that it is not where a large section of the population is at.

I attended a briefing by the Irish Human Rights and Equality Commission, IHREC, today and one of the issues it spoke about was banking and related equality issues. In that context, given that the State is the largest shareholder in AIB, it strikes me that if this decision had been equality-proofed, it certainly would have highlighted issues such as the digital divide, the vulnerability of particular persons to economic abuse and its implications for financial independence. Is there equality screening in place? Has AIB looked at some of the tools that have been developed under the public duty for equality and human rights to see how it could apply them to its major policy decisions? Will that be taken on board going forward?

Dr. Colin Hunt

On the Senator's point on access to branches, the proposal was all about maintaining access to branches while removing cash services from them. The physical footprint of the organisation was to remain unchanged. Now, not only is the physical footprint unchanged but the services are also unchanged. As I said, that proposal is now off the agenda.

In terms of digital transactions, there has been an ongoing move to improve or broaden the range of products and services that are available on our mobile applications and online.

There is very little you cannot do now on our mobile applications. If you look at what we are seeing in customer numbers, on an average day, we have something in the order of 2 million interactions with our customers on the mobile application. We have 35,000 physical visits to our branches - I think 35,000 was the last number I saw. The key message we got was that there is a significant cohort of customers that want to have continuing access to cash. We heard it and we took the action that was required, which was to reverse the earlier decision. I am going to ask Mr. O'Keefe to come in on the vulnerable customers dimension, which is what Senator Higgins referred to on equality issues.

Mr. Jim O'Keeffe

I would like to give reassurance that in everything we look at now, we have a very progressed vulnerability programme within the bank. We have a dedicated helpline to support customers. We identify customers who may need assistance in the background so that we are able to pick that up, depending on what is happening. Any programme, including the programme we referred to, takes into account the steps we would need to take with vulnerable customers. To give a sense of that, already this year, in terms of customers who would be in need of support in that way, outside of ordinary support, we have recorded something in the region of 2,500 customers that we have assisted. That is where we would pick up on various regulations or guidance, in terms of how it is being built in. There is a very heavy training programme for all of our staff at the front end to ensure that people can identify customers with vulnerability. Regarding those in the circumstances described in terms of financial abuse, obviously that is something that is a big focus of ours as well because of the very nature of our business.

Again, the policy decisions at the macro level, whatever way they are identified, do not seem to have really reflected those concerns. I am concerned. The same figures are being cited again around what can be done digitally. It is not a matter of what can be done digitally, but of who can do that and who will be working in that digital space. I have highlighted that just over 40% of the population lack basic digital skills. That is a very significant cohort of persons. It does not seem that that was given a proper weighting and it does seem that, despite warnings directly from this committee, excessive weighting was given to statistics gathered over the period of Covid-19. I would like to know, somewhat similar to what Deputy Richmond was asking, what has been learned, not to simply draw a line over it and move on but because we do need to look at how this was addressed.

On the issue of compound interest versus simple interest in the calculation of repayments under the tracker mortgage scandal, what have been the processes in that? That was flagged in June 2021 and we saw a new claim being made in mid-2022 on that. I would like to know what AIB is going to do differently. I do not want to hear something vague about "generally listening", but what are the new mechanisms AIB will be putting in place? This was a significant error of judgment and potentially a failure of service.

Dr. Colin Hunt

Let me reassure the Senator that the lesson learned is "do not move too fast in front of your customers". There is an evolution going on out there. We will continue to offer a full range of services to our customers in multiple ways: in-branch, by phone and online. The choice will remain the customer's as to how they want to engage with us.

On the specifics of the simple versus compound interest question, we were applying the terms of the Financial Services and Pensions Ombudsman, FSPO, decision in that one case to the letter.

We applied the recommendation made in relation to that case not only to that single customer, but to the entire group.

The question relates to the letter and to the spirit in that regard.

I have one last question. The question relates to non-performing loans and AIB mentioned that it has reduced its exposure to bad loans and non-performing loans. Many people are concerned that we are going to see a lot of people facing temporary financial challenges. What mechanisms or other measures are in place to ensure that effectively good loans do not fall into the category of bad loans or non-performing loans over what will be a difficult 12 month period for many families and SMEs?

Thank you, Senator. I call Mr. O'Keeffe

Mr. Jim O'Keeffe

Unfortunately customers face difficulty every day, so even though we have significantly reduced the legacy issues of our customers in difficulty, we have a team of people who are available and are proactively going out to customers in some instances to identify issues. When customers come through, we have a suite of solutions that support customers in the short term. One of the lessons that we learned from the previous crisis was that we needed to build in a lot of information systems to give us early warning of stress coming into customers' performance. We are not seeing anything coming through on that but we are watching it very closely. However, it is part of our day-to-day activity to support customers who are in arrears. We see at the moment that the vast majority of those who receive early support come back out of arrears and we bring them through as performing.

Some people have needed a period of support during Covid and now might need an additional period of support building on that, as they adapt to a very different inflationary and supply chain context. Is consideration being given to specific measures to support them and allow for those stressors so that we do not have people falling out of-----

Thank you, Senator

Mr. Jim O'Keeffe

I can confirm that there is. As we face into this, there is some difference in that when we were going through Covid, there was a systemic hit right across the board as regards salaries and income. In this case it is peculiar to individual customers. We still have more than 1,000 people in our financial solutions group who are able to deal with customers in that regard. That is working well for us today. It is unfortunate in a lot of ways, but we have built up a real core competence on that side of the house. We have technology, websites, etc., to support customers as they come through. It is something that we, no more than members here, are watching very closely to ensure we have the right supports in place.

Thank you. I call Deputy Doherty.

Thank you, a Chathaoirligh. I welcome our guests to the meeting. I will start with the decision to close key banking infrastructure, 70 branches across the State, that has thankfully been reversed. Can AIB inform the committee at what board meeting that decision was taken?

Dr. Colin Hunt

The board meeting at which the decision was taken was at the end of June 2022. I cannot remember the precise date.

The June board meeting. Were any officials or representatives of the Department of Finance present at that board meeting?

Dr. Colin Hunt

No officials from the Department of Finance attend any of our meetings.

However, a member of AIB's board was nominated by the Minister. Is that correct?

Dr. Colin Hunt

Two members of the board were nominated by the Minister.

Were they present at the meeting?

Dr. Colin Hunt

Yes, they were.

Do the board packs still go to the Minister for Finance?

Dr. Colin Hunt

The board packs are circulated to the members of the board and to the Department of Finance roughly a week in advance of the formal meeting.

Did the board pack of the meeting in June, which decided to close down 70 branches across the State, contain a note that effect?

Dr. Colin Hunt

We were not closing the branches; we were removing cash.

Removing cash. Closing them for cash purposes.

Dr. Colin Hunt

The proposal to the board was to remove cash services.

Was that proposal in the pack that was sent to the Minister the week before the board meeting happened in June?

Dr. Colin Hunt

One common board pack is distributed to the directors and to the Department of Finance.

In that board pack was there an agenda item with a note in it suggesting a proposal to withdraw cash facilities from 70 branches across the State?

Dr. Colin Hunt


And that went to the Minister for Finance, the Department of Finance, a week before the board meeting.

Dr. Colin Hunt

It would have been shared with the Department of Finance a week in advance.

Did Dr. Hunt receive any communication at all before the board meeting or between the board meeting and when the announcement was made public, either from the Minister for Finance or any of his officials or representatives on that matter?

Dr. Colin Hunt


None. Is Dr. Hunt aware whether the Minister for Finance or any of his officials read these board packs?

Dr. Colin Hunt

I am sure that the officials read the board packs.

Let me put it this way; on any occasion when the board pack which goes from the bank before the board meeting takes place, has there ever been communication from the Department of Finance before the board meeting has happened in the past year?

Dr. Colin Hunt

I cannot recall off the top of my head.

Dr. Hunt cannot recall. Okay. Are the board packs addressed to a specific individual within the Department of Finance, or to the Minister?

Ms Helen Dooley

They are made available digitally through a secure intranet-type connection with the Department of Finance.

Is there a key person that -----

Ms Helen Dooley

It is the shareholding unit of the Department of Finance with whom the intranet interfaces.

So, Des Carville or somebody of that nature.

Ms Helen Dooley

It is the shareholding unit in general.

So that would be the first communication on the proposal by the bank to withdraw cash services, that would the week before the board meeting of June, yes?

Dr. Colin Hunt


When was the first communication with the Minister or his officials that the decision was taken?

Dr. Colin Hunt

I believe that some AIB officials met Department of Finance officials on the Friday before the announcement to tell them we proposed to make the announcement on the following Tuesday.

Okay. Were any issues raised at that stage, on the Friday?

Dr. Colin Hunt

Not to my knowledge.

In a different guise, in a different era, Dr. Hunt was a special adviser to a former Minister for Finance, so he knows how this area works. Was he surprised at the reaction to the decision of AIB, at a political level, or did he feel that he had approval given the silence from the Minister's officials?

Dr. Colin Hunt

I was not seeking approval, it was a commercial decision on the part of the bank. We went through the appropriate governance structures within the bank and we were giving advance notice that the announcement was coming. So it was not a case of me seeking approval. As to whether I was surprised at the political reaction, it is safe to say I was very surprised at the customer reaction. That is what was uppermost in my mind because as I said what we had a volume of complaints come in, the like of which I have never seen before. Within 24 hours of the announcement being made, as the letters landed within individual customers' houses, they made it abundantly clear to us that they did not want this to happen.

So within hours of the announcement being made and the letters landing, what was Dr. Hunt's initial reaction to that? Had the bank decided at that stage that it needed to change track?

Dr. Colin Hunt

A decision of this nature was not arrived at lightly and was pretty carefully calibrated in terms of asking what we needed to do to be different, how we continue to have real physical presence in the communities we serve and how we continue to have people living and working in the communities that we serve. That was the basis for the decision and we got it wrong.

I know that the bank got it wrong, and has made the reversal, it happened within a three-day period in fairness. I am trying to figure out, with letters starting to come in straight away within hours of this announcement, when Dr. Hunt, as the CEO, or the board said "maybe the official decision was not taken but we need to change tack".

Dr. Colin Hunt

I think that-----

Was it on the third day, the second day, was it within the first 24 hours?

Dr. Colin Hunt

The announcement was made on a Tuesday and the customer reaction started to become very apparent on the Wednesday morning.

It became clear to us that we were going to have to do something. We considered a number of options and ultimately decided that the best course of action and the one that met our customers' expectations and customer needs was to do a full reversal, which we did within three days.

Does Dr. Hunt have any idea what the Government reaction was to the letters it received in regard to this, in particular the Minister for Finance?

Dr. Colin Hunt

We were contacted by a number of politicians who made representations on behalf of their constituents and our customers but the vast bulk of what we saw coming through came directly from customers.

I was one of the politicians who contacted AIB to ask it to reverse the decision.

Dr. Colin Hunt


Did the Minister for Finance contact the bank?

Dr. Colin Hunt

The Minister for Finance did not contact me directly but it was apparent that it was causing disquiet in Government circles. Of course, the Taoiseach made his comments as well from Singapore.

We see from the freedom of information, FOI, releases that the day after the announcement, which, as Dr. Hunt said, was the day the bank was starting to make the decision to change track, the Department reached out looking for speaking points. Was it not the case that the bank answered some of the concerns it was getting?

Dr. Colin Hunt


Okay, and AIB provided speaking points stating it was an arm's length commercial decision and access to cash services would be through the post office and so on, all the stuff that was in the press release. If that was the conversation with the Department of Finance on the day Dr. Hunt says the board started to change-----

Dr. Colin Hunt

I did not say the board. I was referring to me.

Yes. Is that the communication that was taking place with the Department? Was the Department in any way in tune? It is hard to understand this because we have a Department and a Minister who, based on all the written records, did not raise an issue with AIB. The Minister was aware, or at least his officials were, before the board made the decision that this change, which caused uproar, was going to happen. Not only was AIB's board completely out of touch or ahead of public opinion, as Dr. Hunt put it, but so was the Minister and his Department. Did anybody on the board dissent from this decision?

Dr. Colin Hunt

We do not divulge the nature of board discussions. As with any commercial entity or company like ours, we are going to have-----

Is Dr. Hunt concerned that he leads an organisation with a board that is so out of touch with his customers' opinion that it was forced within three days into a massive U-turn that made international headlines and was completely unaware of the insensitive decision that it took? This was days after the bank was given the largest ever fine for the shenanigans that went on in it with the tracker mortgage scandal. Is he concerned that his board, which is majority State-owned by Irish taxpayers, is so out of touch with where people are at?

Dr. Colin Hunt

As I said earlier, we have a very experienced, accomplished, energetic and involved board. We believed the basis on which we made this proposal was sound. We made the proposal to the board and when it became clear, as it did very quickly, that this was causing significant levels of concern among our customer base, I went back to the board and stated that the executive team wanted to reverse course on this. The board fully supported that position.

I will get on to other questions in a moment. We can see the indicators for AIB regarding what is being achieved in terms of profitability and market share. That is very important and the board and Dr. Hunt are driving all of that. However, we have heard from Dr. Hunt's predecessors. We have been in these rooms or rooms similar to these during the tracker mortgage scandal, which I will touch on, and we have heard chief executives of the bank giving us the story that they were so sorry and they were going to have a customer-centred approach and would back-brake. How can the bank have a customer-centred approach when it is so out of touch with the reality for its customers? It might be a good approach in terms of its profit margins, which are important for ensuring we have a stable banking sector.

However, in respect of where people are at, the bank got it drastically wrong. That is what I am concerned about. I am concerned not only about the individual decision. I am also concerned that the decision was out of touch with where the public are at. How can we have a customer-centred bank if we do not know where the customers are at? That is my bigger question.

Dr. Colin Hunt

The key for us was quickly realising this was wrong. It was the wrong time to proceed. We had got ahead of our customers. We went way too far way too fast. It was in response to our customers that we reversed our decision within three days. As I said, the reversal of a decision of this nature needs to go through various levels of governance. Our reversal of the decision was a result of listening to our customers.

The State holds the majority of shares in the bank. There was political uproar. The Minister for Finance did not say anything about it but there was political uproar. It was a major issue. The bank is State owned. Its customers have been complaining about other matters on which the bank did not change tack. I have listened to our guests' commentary. They have said they got ahead of their customers and will not get ahead of them again. It seems nearly the case that the customers must catch up to the realisation-----

Dr. Colin Hunt


Will our guests give me a guarantee that cash services will not be taken out of those 70 branches? If they do, I will withdraw my comment.

Dr. Colin Hunt

As I said earlier, we are, in my view, going to see a significant evolution of the banking system globally in the next ten or 20 years. We will continue to provide our customers with the services they want in the way they want them for as long as I am CEO of this institution.

Is Dr. Hunt giving a commitment here and now?

Dr. Colin Hunt

That is the only commitment I can give.

As long as Dr. Hunt is CEO, cash services will be there if the community wants them.

Dr. Colin Hunt

It is off the agenda. It is not off the agenda for this month or this quarter of the year; it is off the agenda in perpetuity. For so long as our customers want us to deliver services to them in this way, we will do so.

I welcome that statement. Did the bank inform the Central Bank of its decision?

Dr. Colin Hunt

We would have formally engaged with the Central Bank.

Would that have happened when it was a proposal or after the fact?

Dr. Colin Hunt

I am not quite sure. I will ask Mr. Moynihan about the timeline for that.

Mr. Adrian Moynihan

We engaged with the Central Bank. In line with the regulatory requirements, we must provide notice within 24 hours of us making the decision to make those changes. We complied with those requirements.

What type of analysis did the bank carry out in respect of the impact the decision would have had on those customers, including vulnerable customers, using the sites and services? Did it consider the impact of the decision on customers? Did it consider the commercial rationale, the cost of the closures, the likely savings made and all of that which underpinned the decision? Did the bank carry out an analysis on the impact on customers?

Mr. Adrian Moynihan

We conducted detailed customer impact assessments. We examined it at a customer segment level. We looked, for example, at vulnerable customers. We also considered the decision across all of the 70 locations to see what the customer usage levels were and examined if the range of available alternatives in those locations was sufficient to meet customer needs. That was the key driver of the expansion of our offering with An Post. In the context of making changes to those 70 locations, we were expanding the services significantly through 920 post office outlets. There was a level of detail involved. However, as Dr. Hunt said-----

Would it be possible to share that detail with the committee?

Mr. Adrian Moynihan

I believe due to commercial sensitivities we are not in a position to share it at this point.

Okay. Can our guests share with the committee following this meeting its current branch and cash service distribution throughout the State and how it has changed in the past decade?

Mr. Adrian Moynihan

We will.

I wish to place on the record my strong view. I will be taking steps through legislative proposals to enure banks of a certain size and customer base have a geographic requirement placed on them which includes cash services. What is Dr. Hunt's opinion in that regard?

Dr. Colin Hunt

I have already given the Deputy my personal commitment in this area.

Dr. Colin Hunt

It comes back to the core purpose, which is ultimately to be a relationship bank. We are very proud of the fact we have a network that is the most national network of any institution in the State today. Other institutions took other decisions in regard to how they were going to deal with the evolution of the banking industry. We remain very firmly attached to that network. We remain very strongly of the view that the branches that we have, the length of and breadth of the island, are key not only in terms of what happens within them, but because of what it represents on the main streets of towns and cities in the country.

I go back to the early days of Covid. So many of our customers and so many businesses were forced to close. We took a very deliberate choice. We had the option to stay open or to close. We took the decision to keep our doors open because of the visibility of a business being active at a time of huge stress for the country. We have an exceptionally strong attachment to our network, to the people who work there and to the customers we serve there.

That decision to keep them open is very welcome. Let me finish on the key point of interest rates. Just like in the time of Covid, AIB’s customers are under huge pressure now. I note the fact the previous interest rate hike of 50 basis points was not passed on by the bank, and I think that was the right decision. It was asked earlier, but the bank's profits were €477 million in the first half of the financial year, its new lending increased by 20%, its total income increased by 8%, its net interest income increased by 2% and its balance sheet was further de-risked with a further reduction in non-performing loans, NPLs, which is welcome. I spoke earlier in regard to the decision or the driving force behind Dr. Hunt and the board, although I do not support some of those decisions on the selling off of NPLs. That said, AIB is in a strong position in the time ahead. It has increased its market share in the mortgage market, given the exit, it has grown its personal customer base and, in March, it announced it is going to start to pay back €213 million to shareholders through dividend payments and share buyback schemes. Is it not the time to again stand with AIB’s customers, recognising that its costs of funds are quite low, that it is not paying any interest at all on deposits at the moment, or I do not think so, and it is funding most of its lending from deposits? Is it not time to send a very clear signal to people who are really worried that it will be absorbing this latest round, as, to be fair, it has done in the past with the 50 basis point increase?

Dr. Colin Hunt

It is fair to say that the bank had a positive performance in the first six months of the year. Equally, it is fair to say that we are collectively peering into a period of great uncertainty that lies ahead. The great thing is that, on foot of the work that we have done, working with our customers in many instances over the course of the past number of years, we are in a strong position. The people of this country know full well, because they have experienced it, the consequences of one of the pillar banks being in a weak position. We are in a very strong position as we go into this period of uncertainty and we stand ready to support our customers during this period of uncertainty.

We will evaluate every official interest rate increase emanating from the European Central Bank on a case-by-case basis. We will evaluate it in terms of deposit rates and borrowing rates. I am not going to, because I cannot, give any indication today as to what decision we will ultimately make because we have to go through governance and that has to be communicated in a particular way.

However, I am deeply conscious of the fact that we are looking into a period of uncertainty - and that everybody in the country is impacted - and of the way the world is impacted by that uncertainty and vulnerability.

It is important that Dr. Hunt takes this opportunity to explain, for people who do not understand the intricacies of banking, that if one passes on that increase of 0.75% for variable-rate mortgage holders -and, potentially, it will spill over into fixed-rate mortgages - his bank will make a profit and be in a stronger financial position. Its profits will increase.

Dr. Colin Hunt

Our net interest income will increase.

According to the Central Bank, Ireland's banks get more of their profit from net interest income than any other banks in Europe. Is that not the case?

Dr. Colin Hunt

That is the case.

Irish banks stand to benefit most from these interest-rate increases from the European Central Bank.

Dr. Colin Hunt

Over the course of the past ten years, the fact that we had such low reliance on fees and commissions and such high reliance on net interest income was one of the drivers of the weakness of the Irish banks on a relative basis, compared with other European banks. It is the case that because of the structure of business and the heavy reliance on interest, as distinct from fees and commissions - other banks have far higher fees and commissions than we do - we are more sensitive than other banks to increases in official interest rates once they are passed through.

It means the banks are in a better position to absorb them.

Dr. Colin Hunt

I will not have the debate here. The debate has not happened yet, but I wish to-----

I will finish on this point because I understand Dr. Hunt cannot make a decision that the board has not made and that he cannot communicate it here, but can I impress on him to make the right decision? His bank should absorb these costs and not increase its profitability, which would be the consequence of passing them on to the customers. The decision should be made quickly. His bank should communicate that to customers. It got it wrong on tracker mortgages, on branches and on the investigation into the scandal relating to tracker mortgages, which I did not even touch on. Some of the payment continued during that period. His bank got it right by absorbing the 50 basis point interest. It can get it right again. That would be a customer-centred approach.

We will leave it at that.

If the Deputy wishes, I can pair with Deputy Farrell.

I do not know if my Whip would be too happy with me.

I do not think we will get agreement on that one. We had better come back.

We have to go to vote.

We will finish at 4 p.m.

That is all right. I will not take too long.

I will not take too long. You know me - short and sweet.

Deputy Durkan will pair with the Chair.

I am sorry about this but we have to go to the House for a vote.

We will resume our meeting. Deputy Doherty had concluded. I call Deputy Matthews.

I thank the witnesses for their attendance here today. My first question relates to something Dr. Hunt said in reaction to the decision to reverse AIB's decision to withdraw cash services. He said that it was too far and too fast. I apologise if Dr. Hunt has already covered this or answered this question. Is this still the trajectory that he would intend to go, but at a slower pace and incrementally? Is that still the likely market for AIB's cash services ahead?

He has answered this question already.

Dr. Colin Hunt

No, this matter is not off the agenda. However, it will be off the agenda for the next few months or quarters.

Dr. Colin Hunt

Yes, but I cannot predict what the industry will look like in 2030, 2035 or 2040, how we will be transacting or what mechanisms we will be using for transacting. However, we will not get ahead of our customers in relation to this, so it is off the agenda.

We have had the banking groups before the finance committee several times. We are aware of the market, the sector that the banks are in and the pressures that are there. There is a drive to push people online a lot of time, and that is across much of the retail sector. We see it in our main streets, where many of shops are not there anymore. I am sure that the same applies to the banks, as there are costs involved there as well.

In my own constituency of Wicklow, especially in the more rural parts in the south and in the west, we have seen the on-street banking provision completely gutted. Bank of Ireland branches have closed down and AIB in Blessington has reduced its services. A certain level of banking services should be provided to an acceptable standard and level for a population or geographical area. If we leave it to each of the individual players to say, “It is not for us, we are pulling out”, then there would be nothing there at all. It creates a void in huge geographical areas, as well as a real difficulty for people. Should there be some set standard that sets out the amount of banking services that shall be provided in a certain geographical population area? While those might not be in the form of permanent, on-street retail, they could be, for example, mobile or monthly. There should be the same level of service but there might not be the same frequency of provision of that service. Does Dr. Hunt understand where I am coming from?

Dr. Colin Hunt

I do. The industry as a whole is going through an extraordinary volume of change at the moment. I am not going to give free advertising to competitors by giving names of companies that are providing banking services but it is coming in multiple forms. There are digital-only banks and non-bank lenders, which all have an exclusively digital way of interacting with their customers. Right across the industry, not only in Ireland but globally, there is an ongoing move to reduce the number of branches. As I said earlier, we want to do something different. We look at the network and the physical presence we have as a distinguishing feature. We have the biggest network in the country and we will continue to have the biggest network in the country. This proposal was never about reducing our physical presence because we think that is a distinguishing feature. We think it is important from a competitive perspective because it shows we are there and embedded. Our staff live in the community. They are members of the local GAA club, golf club or whatever. They are actually living in these communities. For us, that is very important. This was never about us reducing our physical footprint. It was about us doing things differently within our existing physical footprint. That is now off the agenda.

On mobile banking, we have a number of mobile banks that are active in places like Kerry, Galway, Donegal and Mayo. They visit towns on a frequent basis but not five days a week.

Mr. Jim O'Keeffe

Our mobile banks cover four routes and visit 29 communities. On Dr. Hunt's point, we see the need for that engagement in the community and that has served us well. However, it is not feasible to have that physical presence all the time. We have talked about the reversal of the decision. On the other side of it, we have a partner there that we have worked with for 20 years, which is An Post. We have been providing banking services to An Post for 20 years, very successfully. We do a large volume of transactions through An Post. As we look forward, we need to ensure it is part of that discussion as well as being a key utility. That is not in any way to undermine the decision we have made and how we are going to move forward. There is that need for cash in the community and there are roles to play for a number of us.

I am glad Mr. O'Keeffe brought up An Post because the Government moved recently to support the postal network and ensure its survival in many areas, which would otherwise have been difficult. Going back to the mobile banking, how would a community or an area, or maybe public representatives, engage with AIB, for example, to get it to consider an area for mobile banking provision? Places like Carnew, Tinahely and Rathdrum have no bank anymore and Blessington's service is reduced. Those three towns did not have AIB branches; it was another bank. There is a requirement for some sort of mobile banking down there. How does somebody engage with the bank and get it to assess an area to see if the demand from the population and the geographic spread meets the criteria for it to supply a mobile bank where there is no banking facility?

Mr. Jim O'Keeffe

The best thing to do is for us to take the matter away because our local market people are engaging all the time in the community and will have a much better understanding of it locally. I know of the geography the Deputy has spoken about. I will take that away and maybe we will engage offline.

That is perfect. South and west Wicklow could be taken as a standard and we might see what could apply to that.

I thank the witnesses for being here this afternoon. I have a few questions on digitalisation and the proposal to go digital, as well as about closing some branches. What would the witnesses say to the suggestion from some quarters at the time that the decision to close the branches was revenge, given that it came so quickly after a major fine being imposed on the bank?

This was the bank's response. That is one question.

A separate question relates to and arises from the previous points made. Do all the bank branches that were deemed necessary or pivotal to the operation of the bank remain closed or open? For example, as the last speaker said about Blessington, County Wicklow, which is in a constituency adjoining mine, a cattle market exists there that very often depends on cash. Ulster Bank has closed there, while AIB is still closed and services have not resumed. They say it is a busy town and serves a significant outlying area in County Wicklow. The nearest branch is Naas, where there is difficulty in getting parking and there are long queues.

I ask for answers to both questions, addressing the revenge factor first.

Dr. Colin Hunt

The Deputy prefaced his question by saying that we were closing some branches. We were never going to close branches. We had a proposal to withdraw cash from branches.

I am aware of that.

Dr. Colin Hunt

This proposal was reversed within three days of being made. There is no question of this being revenge or in any way tied to the fine. It was something we had considered for a very long period. If we go back to December 2020, I was speaking about reimagining the branch network and what happens within it, and being committed to the network because I really believe in it. I started my banking career in a branch. I am very strongly attached to the bricks and mortar that carry the AIB name and host AIB customers and staff.

Somebody usually pushes a decision of that magnitude. Who pushed it? Was it pushed by the board, by Dr. Hunt or by somebody else?

Dr. Colin Hunt

The proposal was something that was worked on by the executive committee and went before the board, but it was not in any way a response to-----

Did Dr. Hunt have influence over the executive committee?

Dr. Colin Hunt

I chair and lead the executive committee.

That answers the question. Dr. Hunt had a good idea of what would happen in respect of the reaction because he has a good knowledge of banking.

Dr. Colin Hunt

I did not anticipate the scale of the customer reaction. If I had anticipated that, the proposal would never have seen the light of day.

It was down to Dr. Hunt's position in the final analysis. He made the decision and he stood over it.

Dr. Colin Hunt

I was ultimately accountable for the final decision. Equally, I was accountable for the decision to reverse the initial proposal within three days.

I welcome that. It was a pity it did not happen three days sooner in which case it would not have happened at all. Dr. Hunt has considerable political knowledge and experience from his previous positions. To what extent did he examine the possible political implications, given that the Minister for Finance is a large shareholder in the bank and the bank, with the assistance of the people of this country, was bailed out by the Minister a number of years previously? Was Dr. Hunt completely shocked at the reaction in those circumstances?

Dr. Colin Hunt

I am, as are all my colleagues, deeply conscious of the financial and general debt we owe to the Irish public for bailing out the institution, comfortably more than a decade ago. I am very much-----

And grateful for it.

Dr. Colin Hunt

We are deeply indebted to the Irish people and extraordinarily grateful.

Was it not then peculiar that the bank's way of rewarding the Irish people was to arbitrarily determine, "Sorry about that but you are going digital whether or not you understand it or it is convenient for you"?

Dr. Colin Hunt

Like other financial institutions, we have been increasingly moving along a digital path.

The strong preference on the part of the vast majority of our customers is for digital engagement. That is abundantly clear. We failed to recognise and appreciate the importance of cash for a number of our customers. We thought we had mitigated the impact through a careful and well-considered agreement with An Post to expand the range of services we offer through their 920 post offices. That was my view; I thought we had mitigated the impact.

Dr. Hunt mentioned that for the duration that he holds his position, it will remain as it is now..

Dr. Colin Hunt


There will be no reintroduction of the proposal. I know that Dr. Hunt cannot decide what happens next. Is that leaving the door open for any successor to change it all and go back to square one?

Dr. Colin Hunt

I can only be held responsible for the actions that the bank takes while I am in a leadership position. I made a commitment at the time of our interim results. I reiterated that commitment today. I strongly believe that AIB will continue to offer services through a mix of channels, in an omni-channel way rather than an opti-channel way, as they say. This will be through branches, telephone and digital. We will engage with our customers in an omni-channel way and I do not envisage a situation where that will change. As time passes, we will see an increasing shift towards digital. That will happen-----

Is Dr. Hunt aware-----

Dr. Colin Hunt

-----but we will not get ahead of customer preference again.

I accept that. I am glad Dr. Hunt mentions that. However, is he aware that technology does not always work? It lets us down. It let me down earlier today. We have to accept that technology does not always work. Does he not accept that?

Dr. Colin Hunt

From our perspective, we invest heavily in ensuring the resilience of our technology to the tune of approximately €300 million a year-----

Does the bank now have a policy in the event of anything of a major or minor nature coming down the tracks that the chief shareholder will be advised accordingly? I cannot remember exactly what date the decision was taken but on the previous Friday, AIB alerted the Department of Finance that it was coming down the tracks on the Tuesday. Friday is the last working day of the week, so there was only one working day coming after that, which was Monday. That was a last-minute call. I would not advise it again. However, I will move on to the next question.

How many of the people who were in agreement with the original decision, of whom Dr. Hunt was the chief mover, remain on the board?

Dr. Colin Hunt

There has not been any change to the board. However, ultimately the board was opining on a recommendation that was made------

That is not the question I asked. I did not ask about a change to the board. I asked how many of the people who were party to that decision still remain on the board.

Dr. Colin Hunt

There has not been any change to the board so they are all-----

So they are all still there.

The question has been asked and answered previously.

We did not go through that question previously.

Deputy Doherty raised the question earlier.

I am trying to get at it from a different angle, as is my wont. I will move on.

What was the bank's attitude to tracker mortgages? Did the bank feel it was losing money as a result of tracker mortgages and if so, how did it come to that conclusion? The banks said at the time that they were losing money because of tracker mortgages; they were losing nothing at all. They were getting the money at a preferential interest rate and they wanted to add on an extra when passing it on to the consumer. How much does the bank value the consumer? Does the bank have valued customers? Are all people being treated equally or does the bank have valued customers who receive different treatment? How have they been catered for in the past 12 months and how will they be catered for in the future?

Dr. Colin Hunt

I will run through some of the points. I hope I cover them all. The relationship we have with the Government and the Department of Finance is governed by the relationship framework, which was put in place at the insistence of the European Commission when we were bailed out.

That is right. I am aware of that.

Dr. Colin Hunt

We comply with that framework to the letter.

On the bank's attitude to trackers, the decision to withdraw trackers was made in autumn 2008, some 14 years ago, long before I joined AIB. To contextualise it, the decision at that time was based on the fact the world was going through a major financial crisis. The decision to withdraw trackers was taken in that context. I am not here to apologise for that decision at all. We have obviously had a long engagement with the Central Bank, which concluded with the fine we received in June this year. I will not go beyond that.

In relation to valuing the customer-----

Dr. Colin Hunt

I am not permitted to go beyond that.

Dr. Hunt is not permitted to make any comment on it at all. Was it not a matter of revenge? Many people throughout the length and breadth of this country think it was.

Dr. Colin Hunt

That is the first I have heard of the word "revenge". Certainly, there was no link at all between the two events. I can assure the committee of that.

One occurred five days after the other.

For clarity, we have Deputy-----

Dr. Colin Hunt

Can I answer the questions relating to valuing customers?

Sorry, yes.

Dr. Colin Hunt

We value relationships. Our greatest strength is the fact we have 2.8 million customers. Some 40% of Irish individuals and 40% of Irish businesses have their primary banking relationship with us. It is our underlying strength. We treat all our customers the same. Customer fairness is very important to us. As a practical example of that, when AIB has cut interest rates in the past on our standard variable rate, we apply that not only to new borrowers but to our existing borrowers. There is no differential between front book pricing and back book pricing. That is an indication of the equality of treatment we give to our customers. That extraordinary customer base is our greatest single strength in this country.

Like the Chairman, I engaged with the bank many times on behalf of customers after the financial crash. I did not always walk away full of hope afterwards.

For clarity, I call Deputy Farrell, followed by Deputies Healy-Rae and Tóibín, in accordance with how they indicated to the clerk.

At least three speakers will probably follow me in the 30-minute period so I want to get through these five questions, if that is okay.

The tracker mortgage scandal did not just relate to historical cases but also to more recent cases. Will the representatives advise us of the final date for which the bank was fined?

Ms Helen Dooley

The breaches the Central Bank referenced in the settlement agreement as continuing up to March 2022 relate to us rectifying a small number of customer accounts, that is, less than 20. These accounts, prior to March, were uncovered in the past six months. The rectification took place up to March. That is what is referred to in the settlement.

Okay. Is Ms Dooley concerned by how recent that date was?

Ms Helen Dooley

No. It was as a result of us checking and rechecking that we uncovered these accounts and took immediate steps to rectify them.

Okay, but 20 is still quite a significant number. Is Ms Dooley aware of any Garda investigations into any current or former members of staff regarding activities related to the scandal?

Ms Helen Dooley

We are not aware of any.

As regards the potential increase of interest rates, what stress test does the bank apply for new mortgage holders? Is that stress test being reviewed in light of the increase in interest rates? Has the bank done an analysis of current mortgage holders and the number of whom may fall into arrears in the event of an interest rate increase?

Dr. Colin Hunt

I will ask Mr. O'Keeffe to come in in a minute, but we comply with full with the macroprudential rules of the Central Bank in relation to mortgage underwriting. At a general level, the standard of underwriting across the bank - by underwriting I mean the bank evaluating a loan application - is of a far higher quality than it would have been in the run-in to 2007 and 2008.

I would hope so. But I know that-----

Dr. Colin Hunt

It is fundamentally different. It is a far more conservative stance and as a matter of course, we stress the book for increases in interest rates. One of our key focuses at the moment is monitoring early warning indicators for signs of financial distress with which we can engage with our customers on a one-to-one basis. I will bring Mr. O'Keeffe in now.

Mr. Jim O'Keeffe

As a matter of course, we stress-test for 2% and as we go forward, that is something we have under review in terms of changing that at the moment. In light of where we are seeing interest rates go, that is proving to be prudent. The vast majority of our customers are opting for fixed rates at the moment. Consequently, as Dr. Hunt mentioned earlier, the majority of our book, in terms of the size of our book, is over 50% fixed rates, which is also a good position for customers to be in as a lot of them would have gone on to those rates in recent times, be they three, four or five-year rates.

As for what is coming through in terms of customers being in difficulty or distress, I mentioned earlier that unfortunately, there is a routine situation in any event where customers find themselves in difficulty for different reasons that are outside the environment we find ourselves. We have not seen any uptick in relation to that activity yet. However as Dr. Hunt mentioned, we analyse all types of data which is which is something completely peculiar to what we did when the financial crisis hit. It is similar to what we did when Covid-19 hit, so we are able to see spending patterns on accounts, credit cards, turnover, unpaids etc. that would give us early warnings in terms of what would happen. That gives us the ability in some instances to reach out to customers in advance.

I must say something that we saw throughout Covid-19, which was transformative from what we saw through the financial crash and which Deputy Durkan also mentioned, namely, that in respect of engagement with the banks, customers are now really willing to come forward and identify early that they may have a problem. We have already seen customers do what we would call financial planning; they are looking at their circumstances, they can see some stress coming into their lives and we are able to put in place solutions with them and work with them in that regard.

Thank you. I am aware of time pressures. I would like to hear the witnesses' thoughts on an issue. It is not scientific but given the higher interest rates, there is some concern that will dampen economic activity. That could lead to falling property prices, which would be the collateral underlying these loans. Do the witnesses have any concerns in that regard?

Dr. Colin Hunt

If you go back to when the start of Covid-19, when the pandemic arrived here, you would not have predicted what happened to the economy. You would not have predicted the pace of the recovery or what happened in relation to house prices. The biggest challenge we face as a society is the gap between housing demand and housing supply. It is not so much the demand; it is the housing supply catching up but not yet bridging that gap. That is going to remain an important feature in terms of the stability and strength of the housing market. That said, affordability will be impacted by a number of factors. If you think about it, there are a number of variables working here. Wages, taxation, energy costs and interest rates all will play a role in predicting what will happen to affordability. It is something we are monitoring very closely. However it would be foolhardy for us to predict what will happen to house prices.

I am not asking Dr. Hunt to predict. I am just saying it is a concern and Dr. Hunt has said the bank is monitoring that.

Dr. Colin Hunt


I have a final question on the Irish language. There does not seem to be the ability to do online banking through Irish.

First, there are many people whose main language is Irish and who understand Irish best. Second, we want to promote the Irish language. Has the bank given any consideration to putting online Irish-language facilities? It would be a very good thing and it could lead the way on it.

Dr. Colin Hunt

I think that is an excellent suggestion.

That is great. I cannot wait to see it.

I call Deputy Danny Healy-Rae.

First, I thank the delegation from AIB. While I thank them for reversing their decision, I do not thank them for thinking of it because it would have stripped bank branches, such as those in Kenmare, Cahersiveen, Dingle, Castleisland and Killorglin of cash. It was a ridiculous idea and it frightened the living daylights out of ordinary, country people in those glens and valleys around Kerry. It was reprehensible to think that people from Valentia Island would have to come into Killarney and Tralee, which are 55 or 60 miles away. People were outraged that this may have been the scenario they were facing into the future for the rest of their days.

I am glad that on that Friday, Deputies Mattie McGrath, Michael Collins and I visited the AIB headquarters in Molesworth Street and I have no hesitation in saying that we were prepared to stay there for a long time. Had the decision did not come through and had there been no change, we maybe would still be there today. People and entities make mistakes. I heard Dr. Hunt saying on a number of times on the radio that in his time, he will not go back to that idea. I ask him to make that commitment before members at this important Oireachtas committee and to again give that undertaking to those people who were going to be affected by this idea to strip the bank branches of cash. What kind of a bank do you have? Do you have a pub with no beer? A bank branch with no cash certainly would not serve the people who I represent and who I know across the length and breadth of the county that I represent. It was a scandalous idea. That is the first thing that I ask Dr. Hunt to commit to here today, that is, to say he will not go back to that idea while he is in charge. I hope that for that reason alone, he will be charge for quite a while.

The other question I have to ask relates to the fact that the people bailed out the banks ten or 12 years ago, as did the Government. As I understand it, the Government has a 70% share in AIB today. How long before the decision the bank came out with was made or before it was publicly announced did the Government know about it? I ask this because the Minister for Finance, Deputy Donohoe, said he was blindsided by it. The media came out the following day to say the issue had been resolved but that the Government had been aware of it for a considerable amount of time before the announcement had been made. Was the Minister blindsided or did he show a blind eye to it? There is no shadow of a doubt that it would help Revenue’s case to collect more revenue, if everything was transparent. If, for example, you bought a box of matches, it should show in a document somewhere that you bought that box of matches.

The worry I have is how much involvement the Government had in that decision. I ask the witnesses to tell us what they know about that.

Again, both of those questions have been answered but if the witness would like to give a short response to Deputy Healy-Rae.

I am sorry, Chairman. I was listening to it first in my office and then came down to the committee rooms for a while. As I had to go into the Chamber then, I have missed things-----

That is fine, it is okay.

-----but I would like to hear that again.

That is central. The other thing is the bank made a lot of hay about its partnership with the post office. I do not know what arrangements were made with the post office but in my county, post offices have closed in recent weeks. The post office in Headford has closed. I see no extra staff hired or looked for in branches like Kilgarvan, Kenmare or Sneem. One person operates those post offices and in O'Briens in Glenflesk, and they do their best to manage the work they have to do with the pensions and different things. No extra staff, equipment or anything was put into those post offices that I know about. I am amazed to hear all this talk about the partnership with the post office because we have been fighting since I was elected and before that to get more services into the post offices and yet we have seen Departments telling people to go to their bank with their requests, instead of going to the post office. We have been fighting against that and have been looking for more services to be put in post offices but I have seen no improvement early this year, late last year or at any time during the summer in staff, personnel or equipment in the post offices. The representatives might explain what that partnership is or what kind of a love affair it is because I cannot see anything or I have not heard anything to tell me there are joined-up efforts between AIB and the post office.

Dr. Colin Hunt

I will answer very quickly in relation to the issues the Deputy has raised and I will ask Mr. Jim O'Keeffe to come in on the partnership with An Post.

The commitment is real, it is hard, it is off the agenda and is not coming back on the agenda. This is not a proposal that will be revisited in my time.

Second, in respect of the bailout, the State continues to have a 63.5% shareholding in the institution. We are very much focused on repaying the amount of money the State put into us. We have paid over €11 billion in cash terms at this stage and that remains a key focus for myself and my colleagues, both the executive committee and on the board. Our relationship with the Government in terms of communication about such matters is governed by a relationship framework that was put in place at the time of the bailout at the request of the European Commission, I think. We complied in full with our obligations under that relationship framework.

On the partnership with An Post, this is not something new or something that has been cooked up in the past few months. This is something that has been going on at AIB for over 20 years. It has been a very successful partnership and what were doing in this most recent iteration, was further broadening the services customers could get in post offices under a service we called AIB at An Post. It was about significantly increasing the number of things people could do with their AIB account in a post office.

Mr. Jim O'Keeffe

The proof of the pudding on the An Post piece is that we do millions of transactions through An Post today. Notwithstanding what we were embarking on with the new initiative, we had already built up the transactions we do with An Post over a long number of years and very successfully. Customers find it positive from the perspective that the post offices are open for longer hours and on Saturday mornings, so there are a lot of benefits from working with An Post. When we have gaps in our own service we are able to point to An Post as a support. I am not arguing with the Deputy that it may not be as active a partnership in the post offices he has described. To be honest, I do not know the level of activity we have in the post offices he has mentioned but overall, millions of our transactions are done with An Post.

One of the items that will remain, as agreed at a central level with An Post, is the expansion of services that will allow people to lodge up to €50,000, withdraw up to €1,500, lodge cheques and seek coin facilities in the post offices. Notwithstanding the commitment Dr. Hunt has given to the initiative that is off the table, we will still leave in place that expansion of services and the new capability with An Post which allows customers to have a choice between An Post or AIB if they want to carry out activities during the extended opening hours or on Saturday.

In relation to the specific locations, while I cannot comment on individual locations, there was, and is, a great partnership with An Post. There was to be a transitory period as we moved to the new model which is completely off the table now. I expect that An Post was going to undertake some activities during that period of time. That is probably as much insight as I can give on that.

I assure the Deputy that we do millions of transactions with An Post. We have expanded the services with An Post and we continue to see the company as a very good partner, notwithstanding that we will be on location in our own branches, as Dr. Hunt has outlined.

We only have ten minutes left.

I will finish up. Post offices are busy as it is but I do not envisage them taking on the cash load that would fall to them if those banks I mentioned in Kerry closed. I see something wrong with the idea that An Post could manage of all that. In relation to the answer Dr. Hunt gave about what the Government knew, he stated an agreement was put in place in 2011 as to how the bank would tell the Government what it was done. Where do I find that? Does Dr. Hunt know what information was given to the Government about this proposal before the bank made the announcement?

We went through of all that in detail earlier. As we are approaching the end of the meeting and Deputy Tóibín still has not contributed, I ask Dr. Hunt to give a short answer.

Dr. Colin Hunt

The proposal would have been included in the board papers for the June meeting and circulated to all non-executive directors and the Department of Finance.

That was in June. I thank Dr. Hunt and also AIB's staff for looking after us on the day we visited the bank's headquarters on Molesworth street.

Fáilte romhaibh go léir anseo inniu. AIB's after-tax profits in the first half of this year were approximately €500 million. I imagine after-tax profits well in excess of €1 billion are expected this year. Net lending is increasing by billions of euro and the bank's exposure to non-performing loans, at only 4%, has radically reduced. In addition, AIB does not yet pay corporation tax. Is that correct?

Dr. Colin Hunt

We pay taxation in a number of forms, including through the banking levy, but we pay corporation taxes. There is a corporation charge this year.

Is it not the case that past losses still allow the bank to write off profits currently to reduce the tax exposure?

Dr. Colin Hunt


AIB is in rude health at the moment and I imagine that is something to be proud of in Dr. Hunt's position. It is far more profitable for banks to operate online than to have a physical presence and it is an objective of the bank's shareholders for the bank to be profitable. There is no doubt that the decision to withdraw cash services from these banks was made on the basis of increasing the bank's profit and making it more competitive with potential new entrants that only have a digital presence.

It is fair enough to say that. The only problem with this is that it has a human cost. The debate society has to have on this is bigger than AIB. Many people are living more isolated lifestyles than even before. I am talking about people who no longer have a post office or pub to go to and who have no Garda station or bank in their village any more. These people are not talking to people from one day to the next. There is also a significant increase in the incidence of mental health issues in society. There is definitely a correlation between people becoming more insular and the incidence of mental health issues. As a partner in the society we live in, I believe AIB has a corporate responsibility to ensure a baseline of human activity with customers. Does Dr. Hunt agree?

Dr. Colin Hunt

I believe that the bank has not only a regulatory licence to operate, but a social licence to operate. I am very conscious of the role we play not only in supporting the Irish economy, but in supporting Irish society. I will go back to a point I made earlier, which was that this proposal was about protecting our physical presence. Other institutions all over the world are cutting their branch networks. This was a better-----

AIB closed 15 branches last year.

Dr. Colin Hunt

No. We amalgamated six branches in particular areas. For instance, in Dublin we had branches on Westmoreland Street, Dame Street and Grafton Street. You could have thrown a stone between these three branches. They were there for historic reasons going back to the formation of the group in 1965. In that instance, we decided to close the Westmoreland Street branch.

There were 15 branches closed last year. Another element to this is that Ireland is also undergoing a spatial crisis. The capital is overheating and the commuter belt is sprawling into Ulster, Connacht and Munster, with all of the focus on the capital, while regional towns and villages are emptying out. There are towns in my constituency where you could play hurling on the main street at midday because everybody is commuting out of them. The economic heart and soul of these towns is being ripped apart not just by the closing of banks, but by the closing of all of the other facilities. The closure of banks is a part of that jigsaw as regards creating energy. If you live in Athboy, you have to travel to Navan or Mullingar to do your banking. People are therefore not going into Athboy. They will not get their hair cut there and will not go to the pub for a pint or to the restaurant for a sandwich and so on. There are major problems in this regard. I would like the question of breathing new life into towns and cities in the country to be at the front and centre of Dr. Hunt's bank's corporate responsibilities to ensure that these towns and cities remain viable.

The other element in all of this is the lack of competition. One of the reasons banks can get away with closing banks or reducing cash facilities is that we have an enormous banking crisis. There is now very little competition. The banking system is concentrated in so few hands that AIB is operating as an oligopoly. I studied economics in UCD, and the current situation is very close to an oligopoly market. That means that suppliers have enormous power. The banks can dictate most of the interactions they have with customers and those customers simply have to take it. There is great inertia with regard to changing banks. There are 500,000 Ulster Bank and KBC accounts still open. Those banks are leaving the market. That shows how inertia affects the banking market. The bank has to take into consideration the very great power it has. That power was given to it by the State because the State specifically set up a pillar bank system that gave the banks market control and market share and created an imbalance between the banks and their customers. That is not AIB's fault but the fault of the Government for allowing it to happen.

What is the Deputy's question?

My question relates to creating more competition. Would AIB support the development of local public banking? Part of this relates to getting cash circulating in these small towns. I think of Castlepollard in Westmeath where the community had to chase the bank to have an ATM fitted in the local branch to keep cash circulating. How can AIB help with the circulation of cash in towns and villages around the country? I am not talking about the mobile bank that rolls in for a few hours because, to be honest, that is tokenism.

Many of these towns are really serious about their development. A rolling bank visiting for a few hours a week is not good enough. Credit is the lifeblood of small businesses. How can more credit be circulated in small towns and villages?

I will ask one final question. The bank's fees have been massive for the last while because of low interest rates. Given that interest rates are increasing, will it be cutting fees for users? The bank has not increased its interest rate recently. That is obviously welcome but people looking in from the outside will assume that the bank must previously have had a cushion built into its interest rate if it did not have to move with the European rate. Is that the case? Sin é.

Dr. Colin Hunt

I will try to answer as many of those questions as I possibly can. At the start, I mentioned a figure of approximately €500 million in the first half. It was very close to that. Much of this was driven by the unwinding of a provision we had taken in respect of potential losses arising from Covid.

With regard to our regional commitment, this obviously remains in terms of the physical presence of branches but we are also investing in regional hubs to provide more and more functions outside of the nation's capital. We are very much in the business of providing credit to our customers. Ultimately, we are a credit institution and we live and die by the success of our customer relations and providing our customers with levels of credit that are affordable.

Our fees and commissions are a fraction of those charged by other European banks. They are already very low compared with those of other institutions, and particularly European institutions, right across the product range.

However, AIB's interest rates have been higher than those in Europe so the balance----

Dr. Colin Hunt

I was speaking about fees and commissions. The interest rates are a function of many factors including the capital we are required to hold because of the losses made on loans given during the boom years.

It is also down to the lack of competition in the sector.

Dr. Colin Hunt

Competition comes in multiple forms. I said that earlier. In every single product area, there is non-bank competition. There are international card providers. There are non-bank lenders in the mortgage market. We also see it in corporate banking. In every single product area, there are multiple competitors. The difference is that they are not a one-stop shop. I had a number of driving motivations when I became CEO of the bank. I wanted to deal with the legacy issues including the legacy matters but I also wanted to make AIB a full-service institution so that we could meet all of our customers' financial needs. That was my campaign slogan and that is what we have been doing in recent years. We have been making sure the bank is strong, robust and capable of operating right the way through the cycle and in a way that allows us to fulfil the needs of our customers regarding all of their products. That is where my focus has been. With regard to the 0.5% increase the European Central Bank decided upon, our reaction was not to change our interest rates on the lending side but we did change them on the deposit side, where we got rid of negative interest rates. We have not concluded on the most recent interest rate move, but I am very conscious of what is going on externally. I am not going to indicate where we are going to end up in that regard but it is something we will be considering over the coming weeks. I am very conscious of the external environment.

We have to conclude our meeting, but I want to put three things to the witnesses. I will be brief. Under legislation, personal insolvency practitioners are obliged to open accounts for their clients. Whoever their clients may be, they open the accounts in the course of assisting them.

My understanding from correspondence I have received is that the banks are refusing to open those multiple accounts in relation to personal insolvency practitioners, PIP. Is that the case and, if so, why? I have correspondence that relates to AIB, Bank of Ireland and others in terms of them refusing to open the account.

Mr. Jim O'Keeffe

I am somewhat surprised because we chatted here previously about the personal insolvency system. We have been a big driver of trying to increase the number of times we agree to personal insolvencies. We run a high percentage in that regard. I do not have any examples of where we have refused to open the accounts. I presume this is to do with moving the accounts. It may be to do with switching across from Ulster Bank and KBC, which are leaving.

No, it is not. It is to do with a PIP opening an account for a client, such as a solicitor's account in the name of a client.

Mr. Jim O'Keeffe

There is no policy or anything in place that would suggest we should not be doing this at the outset. I am not so sure about the particular details. If the Chairman wishes, however, I can take it offline and make sure there is no wider issue. We will sort it.

I will pass it on to Mr. O'Keeffe. One of the purposes of asking Dr. Hunt in today was to discuss with him the future of banking in Ireland and what he sees as being the future. There is no point in getting into that now. Does Dr. Hunt have any paper or work done on what he thinks banking will look like in general terms over the next ten years that he could share with us?

Dr. Colin Hunt

Typically, what we do is look at strategy in a three-year cycle. However, we are beginning to think about what the bank is going to look like and what the industry will look like in ten years' time. That is something on which we are only beginning to formulate thoughts and opinions. Of course, there are any number of different scenarios taking into account developments on a European scale, but also developments in terms of the likely evolution of customer preferences.

With regard to the evolution of ATMs, that was not a decision the bank just took in isolation. I am sure there was an overall view taken by the bank. There must be a similar type of view or strategy being discussed relative to how banking is now developing both online and offline in branches, with services and so on. That is what I am asking Dr. Hunt for. Surely, a bank the size of AIB is strategising about the next ten years.

Dr. Colin Hunt

Yes, we are. We are actually doing that.

Can Dr. Hunt give us an idea of where the bank is focusing? Deputy Tóibín raised a question on the community bank. It constantly comes up here, as does the use of credit unions and regulation from the Central Bank of Ireland. It might inform the committee members if we can get each of the banks not to tell us anything about their commercial end of things, but generally how banks are being viewed both in the European Union and worldwide, and particularly then how they are going to introduce the types of developments we are seeing elsewhere into the banking system in Ireland. Do the witnesses have any information that would help us view that? We did not touch on it today but it is something to which we will come back. It would be helpful if we had a basis for that conversation in terms of a view the bank is taking. As I said, It need not be specific decisions the bank wants to take.

Dr. Colin Hunt

I am very happy to share with the Chairman our submission to the retail banking review group.

Okay, that is fair enough. I believe that will be published shortly.

Dr. Colin Hunt

I understand it will be before the end of this year.

We will see how much fluff is in it. We may have to come back to Dr. Hunt to remove the fluff and give us the facts, not on the AIB submission but generally.

Dr. Colin Hunt

I remain at the committee's disposal.

The last thing I wish to ask Dr. Hunt, and he would not leave the room unless I asked him because he would feel the meeting was incomplete, is about EBS. I listened to other colleagues ask Dr. Hunt questions and to the responses he gave. They spoke about a campaign of dishonesty against AIB customers and AIB failing to act honestly. Dr. Hunt's general response was to address those comments. He talked about being fair to customers. I have gone through all this with Dr. Hunt previously. We heard from EBS tied agents who previously appeared before the committee, some of whom have since passed away.

I know a very heavy legalistic approach is being taken in that regard. I propose to hear again from those individual cases and bring the issue to a level of awareness that will force the bank to do something because I feel that nothing is happening there. I am sorry; there may be something happening but it is not happening at speed and the tied agents feel hard done by. If Dr. Hunt is cleaning up the act of the bank arising from all of the past issues, surely he is going to put some speed into the process to resolve the EBS tied agent issue.

Dr. Colin Hunt

I thank the Chairman. I will ask Mr. O'Keeffe to respond.

Mr. Jim O'Keeffe

In fairness, this was very clearly discussed at the previous meeting. We took away from that meeting our commitment that we would have an open mind on how we would go about it, as Dr. Hunt referred, to the point that we want to deal with these issues in an open and transparent manner. We have engaged. There is a third party operating with that grouping at the moment on their behalf. We have engaged extensively with that. To open out the process, we have also agreed a process of mediation in that regard. I understood from the work we have been doing, and we have been monitoring this very closely, that the agents on the other side were pleased with the progress we were making and the appointment of the mediator, etc. We felt that would give transparency and openness to the process to deal with it as a group and progress it quickly.

Well, it has not.

Mr. Jim O'Keeffe

Let me take that away because I understood-----

Rather than sit here now and argue the toss with Mr. O'Keeffe, which I will not do, I am going to ask the committee next week when we are discussing our work programme to put this as a main item on the agenda to bring about a resolution. The members may not like it, and AIB may not like it in terms of the resolution that might be found but, for God's sake, the agents were there with the EBS. Why would AIB hang them out to dry? Why does it not make the process simple and less legalistic? I understand there will be legal issues in it but it is not beyond the bank to find a resolution to it. It would mean that we will not be discussing this repeatedly. The next step will be to have a full hearing here with the tied agents and then to ask for a response from the bank. The bank has all the machinery at its disposal; these agents do not. They do not have the money or legal backup the banks would have but they are reasonably determined. I am anxious to see fair play in this.

I will go back to Dr. Hunt who said the greatest single strength is treating everyone fairly. If that is the greatest strength to the bank then it should please treat the EBS tied agents fairly. That is what I ask the bank to do. I will leave it at that. We can come back to the issues again. Mr. O'Keeffe might come back to me on the insolvency issue, however. If AIB makes its submission on banking for the future available as much as it can, it would be helpful to the committee. I thank the witnesses for their time today.

I would also be interested in that reply on the insolvency issue.

It will be made available to the committee. I thank the attendees very much indeed.

Sitting suspended at 4.04 p.m. and resumed at 5.05 p.m.

We are joined by Mr. Gavin Kelly, Ms Aoife Leonard and Ms Susan Russell from Bank of Ireland. I remind everyone to turn off their mobile phones. I have a note on privilege. Witnesses who are physically present or who give evidence from within the parliamentary precincts are protected by privilege. Witnesses attending remotely may have limited protection. Witnesses are reminded of the long-standing parliamentary practice that they should not make charges against any person or entity by name or in such a way as to make him, her or it identifiable. Bearing all that in mind, we will open the meeting straight to business. I ask Mr. Kelly to make his opening statement.

Mr. Gavin Kelly

I thank the Chairman and members of the committee for the invitation to attend. I am joined by my colleagues, Ms Susan Russell, who is the director of retail Ireland, and Ms Aoife Leonard, who is the interim director of distribution, digital, strategy and operations.

Over the past decade, the way in which consumers and businesses bank has been changing rapidly. As a full-service retail bank, Bank of Ireland has been responding to this change in a range of ways. Today, we serve our customers through a mix of branch, digital and telephone banking services, along with a network of mobile advisers who can meet customers at a time and place that suits them. I will briefly set out further information in respect of these services and then we will be happy to take the committee's questions.

Bank of Ireland has an extensive nationwide network of 169 branches in Ireland. We recognise the importance of cash services to customers and communities in all parts of Ireland and we offer cash services at all our branches. Over 2022 and 2023, we will invest €13 million in upgrades and improvements to this network. In common with banks in many other markets, we have also seen a considerable change in branch usage. Between 2017 and 2022, in-branch transactions declined by approximately 54%. As a result of changing customer preferences, last year we made the first significant change to our branch network in almost a decade with the closure of 88 branches. As we discussed with the committee in March 2021, that decision was not taken lightly but reflected that we had reached a tipping point in customer preference between online and offline banking.

However, while making these changes, we also agreed a new partnership with An Post. This partnership maintained and significantly expanded access to local services including cash services. Our customers can now access a range of banking services, including cash lodgment and withdrawal and cheque lodgment, at more than 900 post office locations across Ireland. Over 90% of our branch transactions can be handled through the post office network and this partnership has resulted in more than 830,000 Bank of Ireland transactions at post offices since September 2021.

Regarding digital banking, Bank of Ireland’s mobile banking app remains by far the most popular way for customers to manage their banking, with 1.4 million customers now using the app. We have seen a 36% growth in mobile traffic over the past 12 months. We have also seen a significant increase in contactless payments, with transaction volumes having increased by 125% over the last three years. In the first six months of 2019, our customers tapped more than 70 million times, spending more than €890 million. In the first six months of this year, this had grown to more than 161 million taps, spending more than €2.6 billion.

Customers can access many different products online, with over 30 personal products available digitally, spanning all popular product types including accounts, cards, mortgages, and insurance. Some 94% of all applications for everyday banking products are now received digitally. We continue to improve our digital offering to support customers opening accounts or to apply for loans as quickly and efficiently as possible. For example, as Ireland’s largest lender to the agricultural sector, today, approximately 80% of our agricultural loans are applied for online or over the phone with approvals made within 48 hours in 70% of cases.

Our contact centres are central to our customer service operations since they are the hub for all telephone banking services. We employ 950 contact centre staff across our network. In August, calls to our main banking lines were answered, on average, in less than one minute. We always strive to serve customers as quickly as possible and we continually invest in our systems, processes and people to ensure we can do this.

We have also seen customer preferences change, with more requests to meet customers at their home or business. This is why we developed our network of over 630 mobile advisers, across mortgages and business banking, who are available to meet business and personal customers at locations that suit their needs. This also includes our bank at work team, which provides a range of services in workplaces across the country.

There will, of course, always be some customers who need additional support. Our vulnerable customer unit is a centre of expertise within the bank and provides support to customers and their families who find themselves in vulnerable circumstances or situations, including age-related or cognitive impairment, financial abuse, addiction or illness. In 2021, this unit supported 6,000 customers with a range of issues.

We have previously discussed with the committee the unprecedented change which is under way in Irish banking at present. In response, we have scaled up to support customers switching banks with an additional 655 resources across our opening and operations teams, contact centre teams, and mobile support teams. This has helped Bank of Ireland to open the same number of personal current accounts in the first six months of 2022 as it did in the whole of 2021.

We are also strongly supporting Ukrainians who need banking services, including providing guidance on transferring assets and assisting in the account opening process. We have hired more than 30 people, over half of whom are themselves displaced from Ukraine due to the Russian invasion, to support Ukrainian refugees to open accounts. Bank of Ireland has opened more than 4,000 accounts to date for displaced Ukrainians.

We will continue to offer a range of ways to bank through branch, digital and contact centres, and through the post office network. We will also continue to invest in our services and innovate to keep pace with changing customer preferences. As a full-service retail bank, with a 239-year heritage, we are committed to serving the needs of our customers and the Irish economy for the long term.

I welcome the witnesses. Mr. Kelly talked about his commitment to 169 branches. How many has Bank of Ireland closed in the last 18 months?

Mr. Gavin Kelly

We closed 88 branches last year. That was the first material change to our branch network over the last ten years or so.

Bank of Ireland did that in the middle of a global pandemic that was affecting customers. Does Mr. Kelly regret that decision to ignore the wishes of Bank of Ireland's customers, given what we have seen with AIB's U-turn?

Mr. Gavin Kelly

The decision was not taken lightly by the bank. We looked at the behaviours of customers using the branch. We had seen a significant decline in in-branch transactions and a significant increase in digital transactions.

There was a global pandemic. People were encouraged, for health-related reasons, to stay at home. They were encouraged not to go out to shops, banks and so on. Bank of Ireland did this in the middle of all that.

Mr. Gavin Kelly

For that reason, the trends that we looked at went back to 2017. We did not just look at what happened during the pandemic. We looked at the trends we had seen in branches from 2017 through to then. That tipping point was reached at that time. As I said, we had not changed our network of branches in the previous ten years. The decision was not reached lightly. We looked at what we believed was the right-sized network. For me, 169 branches providing cash services across the island of Ireland, supported by 900 post office locations specifically for cash services, is the right service for our customers.

Will Mr. Kelly give a commitment that Bank of Ireland will not close any of those branches between now and the end of this decade?

Mr. Gavin Kelly

I do not have a crystal ball, but we looked at and analysed this in 2021. I believe the network we have today is the correct size for our customers for the foreseeable future. I cannot give a commitment to dates.

What is the foreseeable future? Is it the next five years? AIB was able to say that it would not do anything that its customers did not want. It gave a commitment in this committee that it would not withdraw cash services.

Mr. Gavin Kelly

From my perspective, we will support cash services. I will commit to that as long as customers require cash services. I do not see the nature of that changing for the foreseeable future but I cannot give a commitment about how that might change in future. If customers need access to cash, Bank of Ireland will provide that.

Did Bank of Ireland do an analysis of the vulnerable customers who were using branches that it decided to close?

Mr. Gavin Kelly

Absolutely. At the time, each location and branch was analysed. We looked at the customers who were using those locations.

That is why the post office deal was so important to us. It provided access to those core services in those towns where we were closing branches.

Why did Bank of Ireland rip the ATMs out of the walls as well? The organisation did not just pack up sticks. It also abandoned communities that rescued it. I live in Bunbeg. Within 800 m of my home, there are three empty buildings that used to house three banks. They are all gone now. Bank of Ireland did not just move lock, stock and barrel. It took the ATM out of the wall as well. It was a cruel decision. Mr. Kelly speaks about access to cash, but how are people getting access to cash in that area?

Mr. Gavin Kelly

When we examined this matter, the decision was to close the branches, which included the ATMs.

Was that because Bank of Ireland wanted to sell the building?

Mr. Gavin Kelly

No. Importantly for us, we wanted to ensure that customers still had access to cash in those locations. That would either be through the post office or because there was an alternative ATM available to individuals in the majority of locations.

There was an ATM in the wall. Why did the bank not leave it there?

Mr. Gavin Kelly

It was because-----

I will give an example. The other building a couple of feet across the road had an ATM, but AIB did not take it out. Bank of Ireland decided to take out its ATM. In other areas, it took out ATMs with no other ATMs in the villages.

Mr. Gavin Kelly

When deciding to close the branch, the best decision for us was to close all of the services there as well, with alternative services to be provided through the post office or through any alternative ATM in the location. I would point out that we kept 169 locations open. Each of those has full access to cash and-----

How many ATMs has Bank of Ireland closed in the past five years?

Mr. Gavin Kelly

I do not have the total number. We also sold some ATMs as part of a deal that we did a couple of years ago. I can revert to the committee with the total number.

We now have a private company running 75% or 80% of ATMs in the State. Is that not the case?

Mr. Gavin Kelly

The company that we sold to-----

Mr. Gavin Kelly

The ATMs were sold to Euronet where they were in shops in those locations. In our branches, we still run our own ATMs. Most of them have external access for lodgment and withdrawal 24-7.

Bar the 88 that Bank of Ireland ripped out of the walls when it closed the buildings.

Mr. Gavin Kelly

At the 88 locations, the change was-----

Bank of Ireland has closed hundreds of ATMs. I believe the number of closures was 500 before it closed the branches, so it is approximately 600 at this point. There is a significant issue here and bankers know exactly what they are doing. If they want to change the fees that are charged for ATM transactions, they have to get approval by the Central Bank.

Mr. Gavin Kelly


The company that Bank of Ireland sold the ATMs to does not need that approval. Is that not the case?

Mr. Gavin Kelly

There was a change in respect of that company and it gave a commitment not to introduce fees for a period of time.

A "period of time", but it is not regulated in the same way in terms of its fee structures because it is not a financial institution. Is that not correct?

Mr. Gavin Kelly


It is a service provider.

Mr. Gavin Kelly

It is regulated differently.

That is the problem. As banks are packing up sticks in terms of providing access to cash, we are left at the mercy of a company that has given a commitment at this point in time, but we have seen in other jurisdictions the same company charging high fees for accessing cash. Someone who does not have a great deal of money and cannot go to an ATM to take out €300 or €400 but has to take out €20 or whatever is being screwed over, and it is because of a decision of Bank of Ireland. Mr. Kelly speaks about the bank's commitment to cash. Why did it not just leave the ATMs in the walls? Is it because it received a valuation or appraisal to the effect that, if the bank took the ATMs out of the walls, it would get more money when selling the buildings?

Mr. Gavin Kelly

No. For us-----

Was Bank of Ireland losing money on the ATMs?

Mr. Gavin Kelly

No. We examined what service we believed we could provide in terms of access to cash. That access is through our 169 locations where we have ATMs and through the ATM networks of companies like Euronet that supply a service through shops and stores. Cashback on our debit cards is another popular service that gives customers access to cash and also helps business customers. When we examined the matter, we felt that the access to cash across the country was appropriate, given what we were seeing in terms of customer demand.

That is like saying that Bank of Ireland is going to fold because AIB exists. They are in competition and Bank of Ireland should be providing a full service. Where rural Ireland is concerned, I am disappointed that Bank of Ireland closed the branches and then took away the ATM machines. It goes against the grain of access to cash as well as environmental issues. People have to travel on hour-long journeys now to get cash.

I have recently seen with my own eyes people queuing outside banks. It is crazy stuff. People cannot get into a bank with the queues that are outside them because all of the other branches are closed and Bank of Ireland took the ATMs out of the wall. It is ridiculous.

I wish to move on to the issue of interest rates because what are not ridiculous are the profits that the bank is making. Did it make €419 million in the first half of this year?

Mr. Gavin Kelly


We will not go into the fact that it is not paying tax on those profits. The bank has increased its lending by 7% and its total income from net interest has increased, so it is in a strong financial position for the time ahead. It has increased its market share in the mortgage market because of the withdrawal of other banks. Its personal customer base has increased. It has acquired Davy. In February, it announced plans to return €104 million to shareholders through dividend payments in a share buyback scheme. Will Bank of Ireland also stand with its customers and tell them that it will not pass on the mortgage interest rate increase of 75 basis points from the ECB?

Mr. Gavin Kelly

We have already announced that we will pass that on to tracker mortgage customers as part of their contracts. The last two changes were passed on. We constantly keep our mortgage rates under review. I am not going to comment today because we have not made decisions on further changes to those rates. I cannot give a commitment about decisions that have not been taken yet.

When will the bank make the decision?

Mr. Gavin Kelly

We keep our mortgages rates under constant review. We operate in a competitive market. We are conscious of the changes that are happening in the interest rate environment as well as changes that are happening for our customers. We make appropriate decisions at the time. Once we make those decisions, they are announced quickly, but we have made none at this moment and I cannot comment further on the matter.

All bankers keep variable interest rates under review. Is that a fair comment to make?

Mr. Gavin Kelly


This is significant. There has been a record increase of 75 basis points by the ECB. People out there are looking at the winter ahead, the energy crisis and the cost-of-living crisis, and they are thinking about Christmas and wondering whether, if they have a €200,000 mortgage over 20 years, they will pay €800 more in interest to Bank of Ireland. They want certainty but Mr. Kelly is giving them nothing. He is saying, "We will keep it under review", but he could say that at any time. I am asking about the ECB interest rate increase and, in light of that significant event, when Bank of Ireland will decide one way or another whether it will pass it on, absorb it as it did with the previous increase or pass it on partially.

Mr. Gavin Kelly

No decision has been taken at this moment. I will not set out a timeline because I cannot. It is not something that I-----

Has the board discussed the ECB interest rate increase?

Mr. Gavin Kelly

The board considers a range of activities. In terms of interest rates, that is not something that we have discussed in the context of changes-----

Does Mr. Kelly expect that, at the next board meeting, the ECB interest rate increase will be discussed and options will be thrashed out?

Mr. Gavin Kelly

No. It is something that we keep under review regularly as the management team, which I lead.

The Deputy has correctly pointed out that our customers are facing many challenges. We have found that speaking to us early is important. If customers want to talk to us, I would encourage them to come in. We will meet them at their convenience. If they want to have conversations with us about their mortgages, we will have them. As we have discussed with the committee previously, we have seen a significant move to fixed mortgages. For example, 60% of our mortgage book is on fixed rates where customers have locked in or fixed their mortgages and have certainty around their repayments. We are open to conversations. If customers want to talk to us, they should please come to speak to us.

What percentage are on variable rates?

Mr. Gavin Kelly

Just 10%, with 30% on trackers.

Bank of Ireland charges the highest variable rate in the market. It is crazily high at twice the European average. In fact, it is 1.8 times the rates of some operators in Ireland. Bank of Ireland is charging 4.5%.

Mr. Gavin Kelly

That is for certain loan-to-value-----

On 90% loan-to-value mortgages.

Mr. Gavin Kelly


AIB is charging 3.5%.

Mr. Gavin Kelly

Bank of Ireland has seen fixed rates as a preference and we have focused our conversations on that. We have discussed this with the committee previously. Some 60% of our customers have the certainty of a fixed-rate repayment. If any customer wants to speak to us about our range of products, including fixed rates, we will speak to him or her.

In all sincerity, it would be the height of madness to be on a fixed rate with Bank of Ireland, given what is available in the market from its competitors.

A person may as well go to an ATM, if one can be found, take out a couple of thousand euros and burn it, because that is what is happening. That person is just giving away money that should not be given away. Thousands of euro can be saved by switching to AIB or Permanent TSB. That is not even to talk about Avant Money, which has particular loan-to-value rates. Why would any of Bank of Ireland’s customers remain on a 4.5% interest rate when its main competitor charges 3.15% for the same loan-to-value product? Is the bank just taking a hand at them?

Mr. Gavin Kelly

We write to each customer every year, including our variable rate customers, to talk about the options they have on their rates. They will be shown the options on what I believe are the attractive and competitive fixed rates that are available to them. If they want to talk to us about those, we will certainly speak to them. We have seen over the past number of years customers taking up that option. Every customer is different, and they all have different needs. We find that in the conversation we have with customers, they will come in to speak with us and we will talk to them about options, including fixed rates, in due course.

Mr. Kelly’s bank knows that there is a cohort of individuals who will take out a mortgage, fix the rate - as 60% of them have done with his bank - come off a fixed period and end up on a variable rate period. Because of inertia, perhaps fear and not understanding rates, they will be on that rate, and Mr. Kelly’s bank is creaming it. Does Mr. Kelly believe that his bank's customers just like giving the bank more money than they should?

Mr. Gavin Kelly

As I have said to the Deputy, we write to our variable rate customers every year. If a customer is coming to the end of a fixed-rate period, they also receive communications on their options. Each individual customer is different. Many customers opt, when they come to the end of a fixed rate, to take up another fixed-rate product. Other customers may decide to consider their options. We provide a comprehensive suite of products that customers can choose from. We contact them regularly-----

Why would anybody who understands rates be on a variable rate with Mr. Kelly’s bank when they could be with AIB, which charges 1.35% less?

Mr. Gavin Kelly

As I said, every customer's situation is different-----

Why? Give me an example, please? Why would anybody pay Mr. Kelly’s bank thousands of euros more on a variable-rate mortgage than they would pay AIB?

Mr. Gavin Kelly

We have seen from our customers that they are happy with the service they receive from us. If they decide they want to fix, they will usually contact us. As I have said-----

Give me a financially sound reason, please, why anybody in this State should be paying 4.5% interest on a variable rate when they can get the same elsewhere in the market for 3.15%?

Mr. Gavin Kelly

From what we see, every customer’s financial situation is unique.

Give me an example of one-----

Mr. Gavin Kelly

It depends-----

There is no reason for it. Unless the customer wants to give money to Bank of Ireland for the craic, is there any sound financial reason why a person should have a mortgage at a variable rate with Mr. Kelly’s bank, when there are significant savings to be made? I say that because we know that this happens in insurance, in mortgages and elsewhere, where people, unfortunately, have a fear of moving or even of moving products and all that involves. Mr. Kelly’s bank is exploiting that fear deliberately. I put it to Mr. Kelly very clearly that his bank is doing this consciously because there is no financial reason in this world why a person should be with Bank of Ireland on a variable mortgage when one can get the same product from other competitors at nearly 1.5% less, which will save that person thousands of euro. A person with a loan-to-value mortgage of €200,000 with Bank of Ireland over a 20-year period would save over €1,500 per year if he or she were with AIB. Over the lifetime of the mortgage, that person would probably save €30,000. He or she would save a significant amount, Mr. Kelly’s bank is actually making that money because, in my view, it is exploiting the inertia of its customers.

Mr. Gavin Kelly

As I said, we write to our customers, including to our variable rate customers, regularly in order to present all the options that are open to them, including fixed rates and other options. Every customer is different and make different decisions depending on their circumstances at the time. We have seen, however, and this is evidenced by the number of customers we have on fixed rates, that there is a move of customers from variable rates who are looking for the certainty of fixed-rate payments. We continuously communicate with those customers and present the options to them.

What is the blended cost of funds for Bank of Ireland?

Mr. Gavin Kelly

That is not something we would disclose. Our funding comes from deposits and from-----

How much interest does the bank pay for its deposits?

Mr. Gavin Kelly

At this moment in time we pay an interest rate on our notice deposit accounts and on our regular savings products but we do not pay it on demand.

What is the interest rate? We know that the bank is charging 4.5% for variable rates. Most of the bank’s mortgages are funded through deposits. What is the rate that Mr. Kelly’s bank is paying on deposits?

Mr. Gavin Kelly

On our regular savings product - and we have 100,000 customers availing of that product - we pay .25% on it.

Mr. Kelly’s bank pays .25%. That is 16 or 17 times more that his bank is charging for the loan. There does not seem to be a sound rationale as to why his bank is charging 4.5%.

Mr. Gavin Kelly

From our perspective, and I am aware that we have spoken about this before, the costs associated with a mortgage are a great deal broader than the cost of funding our deposits. One also has the cost of capital we have to hold against those mortgages, which is significantly more than-----

This will take the bank's blended rate up to probably .75%, when all of this is rolled in together.

Mr. Gavin Kelly

We also then have the cost of credit, collections, etc.

And when all of this is rolled in together by the bank, will it then not be still less than 1%?

Mr. Gavin Kelly

No. I will not get into the numbers with the Deputy today but those costs are significantly higher than one would see in other European countries and we have to manage those into the interest rates also.

Why can existing Bank of Ireland customers not avail of its green rate?

Mr. Gavin Kelly

That is a new product that is available to new customers who join the bank. It has been very successful and approximately half of our new mortgage lending is now done on the green rate. We keep our products under review all of the time and at this moment in time we do not offer this product, or do not have immediate plans to offer it, to existing customers.

Why is that the case? Mr. Kelly has just spent 15 minutes telling the committee how the bank writes to customers to offer all of the products to become financially savvy, and all of the rest but the bank will not offer a product to its existing, loyal customers. It is only doing this to attract more profit. When a person is in as an existing customer, such a person is not getting this product.

Mr. Gavin Kelly

From the bank’s perspective, this is part of our new product suite. As I said, we keep our products under review all of the time. Clearly, we want to ensure that we can help customers transition to lower carbon footprints from their houses. We also have offers of loans for customers, who, for example, want to upgrade their house for insulation, etc. At this moment we do not have immediate plans to offer this product to existing customers but we keep our product offering under review all of the time.

What is the bank’s rationale for treating its existing customers in this way compared to new customers? How does Bank of Ireland defend the discrimination that it is engaging in? Does Mr. Kelly agree that it is discriminatory, in that existing customers cannot get a better product that new customers can avail of?

Mr. Gavin Kelly

From my perspective, we have a range of products on offer to both existing and new customers. I believe that it is appropriate at this moment in time but it is something, however, in a competitive and dynamic market that we keep under review. We look to see if we need to make changes. We have introduced changes to our product offering, for example, last year and it is something that we keep under continuous review.

Can Mr. Kelly explain something to the committee in simple terms. For example, I am a customer of Bank of Ireland, and I actually have a mortgage with the bank and it is fixed. Let us imagine that Bernard is a new customer. Explain why the bank would offer Bernard a better rate than me when I have been with the bank for the past 15 years.

Mr. Gavin Kelly

As I said, for our existing customers, the Deputy would be fixed into the mortgage. When the mortgage comes off the fixed rate, we will write to him a number of months in advance of that happening. We will present the Deputy then with the offering today-----

The key thing, however, is that the bank is not going to give me the product that it will offer Bernard, which has a lower interest rate. Why it the bank doing that to me and to hundreds of thousands of other customers?

Mr. Gavin Kelly

We offer a wide range of products to both new and existing customers. It is an appropriate range today. It is something that we keep under review where we look to see if we need to change those products from time to time. We have introduced new products over the past number of years and it is something that we continuously look at.

I am aware of that but the bank's board has this in place now. This is not about me personally but I am just using this example to try to simplify the issue here. The board has made this decision now. Will Mr. Kelly explain to the committee how the board justifies offering Bernard a reduced interest rate in a type of product that is not available to me who has a mortgage with Bank of Ireland, nor is it available to any of its existing customers?

Mr. Gavin Kelly

From my perspective, for an existing customer like the Deputy, if the customer is coming to the end of his or her fixed-rate period we will speak to him or her about the options that are available. I keep, and the team keeps, the product offering under review all the time and it is something we-----

Okay. It is the last question but I have to interrupt. We have heard that. The bank is keeping all that under review and it is going to write to us and all the rest. However, in the letter the bank writes to me it is not going to offer me the product it offered Deputy Durkan, which is a reduced rate that could save the bank's existing customers a lot of money. Why is the bank discriminating against its existing customers? We talked about a customer-centred approach but once you are in the door you are getting a worse product than somebody who is trying to get in the door. The bank is not looking after its customers. It is different. The bank is charging everybody the variable rate. The variable rate is the variable rate. This is discriminatory against the bank's existing customers. It is a terrible practice. Businesses are supposed to look after loyal customers. I will give Mr. Kelly one more chance to explain to me why the board is not the reason that he cannot say - because he cannot say on behalf of the bank - that we have got you, you are in there and are paying the fee and now we want Deputy Durkan's money. That is the reason, is it not? It is just profiteering. We have got you, you are likely to not move from us and we know the inertia in banking, so why would we offer something that would reduce our profitability when what we want is to capture Deputy Durkan? Is that not it, plain and simple?

Mr. Gavin Kelly

As I said, we keep our options open-----

Mr. Gavin Kelly

Under review. We write to customers regularly about options that are available to them and we speak to the customers and keep the product suite under review to ensure it is best value to existing and new customers.

Maybe at the next review the banks should end the discriminatory practice against its existing customers and respect the loyalty they have to the bank and give them the same product it is offering new customers. That is all I will say. I thank the Chairman.

I welcome our guests this evening. I happen to be a customer, by coincidence, having changed like a lot of other people did from one of the banks leaving the country.

I watched the ads about the transition from one bank to another and how smooth it is, but it is not. That is the answer to that question. It is just a humdrum, long drawn out year's work to get the account in a bank that is leaving the country closed and the new account set up. It took me the guts of a year and even then I had to threaten legal action because they just would not go away. I am not blaming our guests for that but I have the following observation. Business is all about competition and if you are the same as the others, as far as the customer is concerned, then there is a limit to what you can ever do. Thus, while it might be convenient for the banks to have this brotherly love, no competition and if you do such and such a thing we will do something else that will not affect you, that does not gain any business. There is nothing for a potential customer there. Previous speakers talked about the potential customers versus the existing customers. It would be a good thing for the bank, between now and the next time it is before the committee, to look at the points raised by Deputy Doherty and see to what extent, if any, it could incorporate them into its modus operandi. It would be important, and far better than all the ads. If the bank compared the cost it might be more cost-effective than the ads as well. That is my summation because I have always had a suspicion of ads, what they mean and what they tell you they do. I am aware there is a consistency about the expenditure the bank could not have in other areas and all that kind of thing but the fact of the matter is we are in the competition business.

The other thing I want to talk about is the importance of the customer. There is not a great deal of importance any more in having customers in this country and particularly with the banks in general. That was seen by the way the personalised counter service that was available all over the country disappeared overnight. Of course it saves money but it loses money as well. There is no question in the world about it. There were lending institutions that give that a personal touch and that appealed to the customer on the basis the customer is an important person. There is no alternative to that. Nothing can replace the customer feeling when they go into a lending institution that they are welcome there, that they are going to the people they always went to on their own street in their own town and that they do not have to go anywhere else. I would like the bank to muse on that.

A useful advertisement to employ would be to offer to restore the ATM that was seized from the Houses of the Oireachtas in the middle of the Covid lockdown. I deemed that at the time to be a prelude to something else, namely, closing more of them down throughout the country, and that happened. It would be an advertisement. The excuse we were given at the time was that the ATM was not making money. Not everything is about making money, and not everything one does in a banking system is about making money. Some of it is about public relations and the degree to which the customer, or potential customer, is impressed by the way an institution does business.

In response the previous questioner, Mr. Kelly mentioned 2017 and 2020. The later was the most awful time in this country that ever was. There was nobody going anywhere; they were forbidden to move. Everybody who could was using the electronic system. It worked but it was not always ideal for some people, for reasons that are established. That is one for our guests from the bank. The bank is in competition with others, so let us see. Incidentally, it was said about the closure of the machine here that there were no people using it. I was often at it when there was a queue of customers. Whether the people who put it there were blindsided or whatever, I do not what the reason was but this is the Parliament and it was an important ATM. There are many customers in here - a captive audience - and it would be appreciated by them. There is something in lieu of advertising.

Before I go, I should mention that I, like the Chairman, had lots of interaction with Bank of Ireland during and after the crash. I am not saying this out of peevishness in the context of the witnesses who were before us earlier, but I was always treated with respect. Bank of Ireland staff at national and regional level were extremely courteous and helpful. They did everything they could to set up a situation and resolve the thing for the customer, with one exception. That was the bank's former chief executive, who has now gone elsewhere. He made a famous speech that immediately threw many of the customers I was dealing with into appalling fear they were about to be evicted from their homes and so forth. Tragically, some took their lives. It was a sad thing but it happened. The moral of that is simple, namely, nobody in that kind of position should ever loosely use their situation to drum up custom or improve their lot. They should think about the customer, and especially vulnerable customers, of which there were many up and down the country.

I will conclude by giving my thanks to those who were thoughtful, who listened and who tried to do something about the situation that developed. There were not many who did but the people I met in the Bank of Ireland did. They went to a lot of trouble to make alternative arrangements for people throughout the country. I am not only talking about this part of the country, but places all over the country. I did not always see that coming from other quarters. I thank the Chairman; I must attend another meeting.

I thank the Deputy.

Do not forget the ATM.

Mr. Gavin Kelly

I appreciate the Deputy's comments, particularly in respect of our staff. I wholeheartedly agree with him. I will take his comments back to our teams who have worked over the last number of years and continue to support our customers. He has given us some food for thought that I will take away. I thank him.

I thank Mr. Kelly.

I thank the Deputy.

We need the ATM the next day. Rapid action is what we go for in here.

I call Deputy O'Callaghan.

I welcome our guests before the committee. I congratulate Mr. Kelly on his interim appointment. By the way, when are we going to have the white smoke of a permanent appointment?

Mr. Gavin Kelly

There is no news yet. It is obviously a decision for the board. There is a process under way. It is well advanced but there is no news at the moment.

Mr. Kelly has probably been unlucky enough to find himself in the position of being interim CEO at the time we are having this meeting. If it had been on a different date he might have missed it.

I refer to the ongoing investigation by the Central Bank into Bank of Ireland and the tracker mortgage scandal.

Where are we on that? Bank of Ireland is the last bank standing. When does Mr. Kelly think we will have a conclusion of that?

Mr. Gavin Kelly

I cannot comment on the concluding date because that is a matter for the Central Bank but we are obviously co-operating with it. I cannot really talk about it until we get to that stage. The investigation is under way and we are co-operating fully with it.

Previously, Bank of Ireland had set aside €90 million. Has there been any increase on that or is it still the figure?

Mr. Gavin Kelly

We did increase that with a further provision of €33 million during H1 of 2022 in respect of tracker mortgages and we have utilised €7 million of that. That increase came through in our accounts at the end of that period.

Was that €33 million on top of the €90 million?

Mr. Gavin Kelly

Yes, that is the increase that came through.

So we are talking about €123 million in total provision. To talk about the Bank of Ireland variable interest rate, it is fair to say that, at 4.5%, it is unusually high for a loan-to-value ratio of 90%. One of the concerns that we have as a committee is that if someone is on a fixed rate and the fixed-rate term comes to an end, that person automatically goes onto the variable rate of 4.5% unless he or she writes back to the bank and asks for something different. Is that correct?

Mr. Gavin Kelly

Yes, at the moment, when customers are due to come off a fixed rate, we will communicate with them to present their options to them. If customers do not select another fixed rate, they will go onto the standard variable rate at that time. What we have seen from our experience is that customers engage with us and we speak to them. The majority of our customers, although I do not have the exact number, choose to fix again and pick another fixed rate with us.

Those who do not engage, and there must be some of them, automatically go onto the variable rate of 4.5%.

Mr. Gavin Kelly

There are three variable rates and the 4.5% rate is for a certain loan to value. They will go onto that but, as I said, what we have seen, particularly in the current environment, is that customers come and speak to us and do look to fix their mortgage again.

Instead of automatically putting them onto that high variable rate, why does the bank not fix them again for the term they had fixed previously?

Mr. Gavin Kelly

The Deputy will appreciate that that is a decision for the customer. Obviously, there are a range of fixed rates from one year to ten years. Depending on the customer’s needs, we discuss that with the customer. We see customers selecting from a range of interest rates. In the last 12 months, we see that customers are aware of the interest rate environment and they are starting to pick, say, a five-year fixed rate more than a two-year or three-year fixed rate. However, we cannot say to customers that we are going to transfer them onto another fixed rate.

What is the justification for Bank of Ireland charging a variable interest rate of 4.5% when we look at the other participants in the market, none of which charge more than 4%?

Mr. Gavin Kelly

We have had a focus on fixed rates for the last number of years. We believe a fixed rate gives certainty to a customer and to the bank. Some 90% or more of our new mortgages for the last number of years have been fixed rates. From our perspective, our focus for customers and in how we promote our rates is about fixing rates. I believe that is an approach that has stood to customers and ourselves, particularly when we see what is happening at the moment. Giving that certainty to customers around fixing their mortgage rate is something we have supported as our strategy over the last number of years.

Mr. Kelly mentioned earlier that 10% of mortgage customers have variable rates. Is that correct?

Mr. Gavin Kelly

Yes, 10% of our Irish mortgage book is on variable rates.

In terms of the recent announcement by the ECB, I am conscious that Mr. Kelly is not going to comment as to whether or not that is going to be passed on to customers, and hopefully it will not be. However, if the bank is charging 4.5% as a variable rate at present, I would have thought it would be astonishing if it increased that further in light of the recent changes from the ECB.

Mr. Gavin Kelly

As I said, I cannot comment today. It is not a decision that we have taken. We have not reached any conclusion or decision around what we are going to do around variable rate pricing or fixed rate pricing. Obviously, there is a contract with customers who are on tracker rates and those have been passed through in the last two changes. However, no decision has been made so I am not going to comment further on it until a decision is made, if a decision is made. If that happens, we will communicate it in due course.

One of the unusual things about rates is that when market rates are expected to rise, as they are now, we generally expect the fixed rates to be higher than the variable rate. Does Mr. Kelly agree with me on that?

Mr. Gavin Kelly

A number of years ago, that might have been the case. The Irish market has changed over the last four-year to five-year period. In our experience, fixed rates have been very good value for customers and, as I said, we have seen that 60% of our book today is on fixed rates.

Today, we offer a very competitive suite of products and customers are talking to us and continue to talk to us about fixing. The trend we are seeing, as described earlier, is customers electing for longer-dated fixed products, and they are going for five years where they might have gone for two last year.

The competitiveness of Bank of Ireland's fixed rates makes it all the more surprising that it charges a variable rate of 4.5%. Can Mr. Kelly understand the point that is being made?

Mr. Gavin Kelly

From my perspective, I would like to see customers on fixed rates, and we have seen that over the past year. Clearly, it is a choice for the customer and that is the way it is presented to them, and we discuss that with them. From my perspective, it gives certainty to us if the customer decides to fix for a number of years, but it also gives certainty to the customer on their repayment. If a customer fixes with us today for five years, he or she knows his or her mortgage repayment will not be affected for the next five years. In the current environment, that is significant.

Does Mr. Kelly think the Bank of Ireland offer of cashback to prospective customers plays a significant part in attracting business in the mortgage sector?

Mr. Gavin Kelly

We have a range of products available to customers. It is not just cashback and we offer non-cashback rates as well. What we have found from our research and from talking to customers, particularly first-time buyers, is that cashback has an appeal because it is gives them access to funds immediately after they draw down the mortgage, and they tend to use it for a new kitchen or investment in the house post the purchase of the house. We provide a range. Some customers do not want cashback and they get an alternative interest rate from us if that is the case. We have seen it as a very popular part of our product offering over the past number of years since we introduced it and the plan at the moment is to continue it as is.

If we look at Bank of Ireland's five-year rates, it offers a fixed rate high-value mortgage rate at 2.5% with no cashback and then the regular five-year fixed rate is at 3% but with €9,000 cashback. I can understand the immediate attraction of the €9,000 cashback but will the bank inform a customer of how much extra they are going to be paying on their mortgage if they avail of this cashback option?

Mr. Gavin Kelly

For every customer, when they apply for a mortgage and before they draw it down, we will first sit down and discuss the various rate options with them. We also present to the customer the total cost of credit and the total interest they will pay over the life of the mortgage. That is clearly called out in the mortgage letter of offer. It is something that the customer must discuss with his or her solicitor before drawing down the mortgage. Those conversations happen. To answer the Deputy’s question, it is very clearly called out what the options are and what interest is paid by customers on those rates.

In the letter, is it spelled out comparatively so the prospective customer will be informed as to the cost if they go for the high-value mortgage and the cost if they go for the cashback option?

Mr. Gavin Kelly

In the initial mortgage interview with the customer, we discuss those options. When it gets to the letter of offer stage, it would be for the product that the customer has chosen. We would have gone through that in detail with them as part of their mortgage interview but not in the letter of offer. That letter of offer would present the total cost of the interest for the product that the customer has selected. They will then discuss that with their solicitor before signing the documentation and before they draw down the mortgage.

I am not asking Mr. Kelly to commit to this but I think it would be more helpful for customers if they were apprised at an early stage in the correspondence as to the extra amount they are paying if they go for the cashback option. That is a comment and he does not need to respond to it.

Is it correct that Bank of Ireland has agreed to buy the entire performing mortgage book from KBC.

Mr. Gavin Kelly

That is right, yes.

Of course, KBC customers did not get cashback but they will face the higher mortgage rates that Bank of Ireland charges existing customers. Is that correct?

Mr. Gavin Kelly

No, we have clearly communicated to KBC customers that the interest rate they are on today is the interest rate they will come across on. If they are fixed or variable rate customers with KBC or, indeed, tracker rate customers, they will come across on the rate that they have with KBC today.

But they were subject to the terms and conditions that they had with KBC. Is that correct?

Mr. Gavin Kelly


That allows the new lender, namely, Bank of Ireland to increase the rate. Is that correct?

Mr. Gavin Kelly

That is if they are on a variable rate. Is the Deputy referring to the variable rate?

Mr. Gavin Kelly

From our perspective, if we took a decision to change our variable rates across the bank, it would affect KBC customers and we would discuss it with them when they came across. It would be from a different base. For example, if we were making a rate change for customers on certain loan-to-value rates the change would apply to the customers regardless of the rate they were on. If it were a 25 basis point adjustment or 0.25% adjustment , it would equally apply to the KBC rate. It would apply to the same customers in the same cohort as in Bank of Ireland. The rates would adjust in that way.

Does Bank of Ireland have any plan to end cash services in branches or to close further branches in the near future?

Mr. Gavin Kelly

No. We discussed this earlier. Last year's decision was not reached lightly. It was one over which we took a lot of time. I believe 169 branches with cash services are appropriate for the demands of our customers and a bank of our size today. Importantly, they are supported by 900 post offices. There are no plans to change it this time. I believe it meets the needs of our customers today.

I should declare a potential conflict of interest as I am with Bank of Ireland for banking and my mortgage. I want to follow up on Deputy O'Callaghan last question. People have different fixed rates depending on when they fixed and this is normal. Will persons who come across from KBC be on different variable rates to those who, perhaps with the benefit of hindsight, will say they made the mistake of getting a mortgage from Bank of Ireland in the first place? They are all Bank of Ireland mortgages now effectively.

Mr. Gavin Kelly

It is very important for us that there is certainty and a commitment given to KBC customers coming across. As part of bringing them across we are honouring the terms and conditions that are there. This will mean they will be on a different variable rate, to use the Deputy's point, to Bank of Ireland customers.

There will be two different variable rates. There will be a higher variable rate for the bank's own loyal customers than for the new customers from KBC.

Mr. Gavin Kelly

Different variable rates apply to our business today. As we bring across the KBC customers, they will be on different rates.

Are the different rates that apply today based on objective criteria such as loan to value?

Mr. Gavin Kelly

Different rates have applied historically based on when customers took out their loans. They are usually based on loan-to-value rates. It is part of this deal with KBC that we will bring customers across on this particular rate so it will be different. Customers will have the option to select one of our fixed rates. As I have said, this is the most popular choice for our customers today. KBC customers can also go onto these.

Would it be fair to say that even when exiting the market KBC sought to look after its customers in a way that Bank of Ireland does not? It sought to have the existing terms honoured, and its variable rates are lower than those that Bank of Ireland charges.

Mr. Gavin Kelly

Certainly from our perspective it is very important that we ensure KBC customers when they come across are treated appropriately. We are welcoming them and it is something-----

Earlier Mr. Kelly said it was because KBC insisted on this rather than because of any particular benevolence of Bank of Ireland, which it has failed to demonstrate with own customers.

Mr. Gavin Kelly

Certainly from my perspective it is part of the deal. This is something we agreed with KBC for when its customers came across. It is very important from a regulatory perspective with regard to how customers are seen to be treated when they come across.

The bank would not attach the same importance to its own customers.

Mr. Gavin Kelly

As I said earlier, I believe we have a competitive suite of products available today for our customers. We write to our variable customers every year and offer them-----

Mr. Kelly just said the bank would charge KBC customers a lower variable rate than the bank's own customers. Am I incorrect on this?

Mr. Gavin Kelly

No, the Deputy is correct. That is part of those customers coming across.

Mr. Kelly said 10% of the bank's customers are on variable rates and the other 90% are on fixed rates. For a variety of reasons the bank prefers fixed rates. The fixed rates are lower and it is obvious. What percentage of people who take out a new mortgage are on variable rates?

Mr. Gavin Kelly

To clarify, I said 60% of our total customers are on fixed rates, 10% are on variable rates and the remaining approximately 30% have tracker mortgages.

To answer the question on how many new customers are on fixed rates, I will get the exact number for the Deputy. It has been the case that for a number of years well over 90% of people take out a new mortgage on a fixed rate.

What percentage of people whose fixed rate comes to an end after the three- or five-year term choose stay with Bank of Ireland? How many leave once the fixed rate expires?

Mr. Gavin Kelly

I do not have the exact number. I will see what information I can get for the Deputy because I want to help. Some of the information is competitive and I will not be able to disclose it. When we write to customers the majority of them choose another fixed product with us. Some customers decide to shop around and may move their mortgage elsewhere. Other customers might stay on a variable rate for a period and then fix again. Each customer is different. People make different choices. What we see in the current environment is that more customers who come off a fixed rate decide to fix again. We are seeing the duration of the fixed periods beginning to get longer.

How long does it take? Can people fix again in advance of coming off a fixed rate?

Mr. Gavin Kelly

The date of coming off a fixed rate is clarified. We write to customers in advance so they can choose to fix again and go straight from one fixed rate to another if they opt for this.

Typically how long does it take for somebody who wants to fix a mortgage?

Mr. Gavin Kelly

I do not know the number of days off the top of my head. It does not take that long compared to taking out a new mortgage, when people are waiting for the sale to close. In these situations customers are sent a form with a new rate. Customers can speak to us about the options. Once the form is filled in we process it in the bank very quickly.

The bank charges various variable rates. When people come off a fixed rate they go onto a variable rate, which changes in accordance with loan-to-value ratios. How does the bank calculate the loan-to-value rates?

Mr. Gavin Kelly

The loan-to-value rate for customers who take out these rates is based on the-----

People who come off fixed rates and end up on a variable rate by default-----

Mr. Gavin Kelly

It is based on the loan-to-value ratio of the property when the customer applies for the product.

People might be on a loan-to-value rate of 4.5%. Not alone are they paying more than they would if they had a mortgage with the bank's competitors but they are also paying it on an historic loan-to-value ratio because, presumably, they initially fixed for three, five or perhaps ten years. The value of the home and the ratio of the loan to that value is entirely different now from the value on which they are being charged.

Mr. Gavin Kelly

As the Deputy knows, over that period the ratio will have increased and decreased. Certainly if customers taking out a new product or a new fixed rate come and speak to us about the loan-to-value rate.

Mr. Kelly knows it has increased considerably. This could be to the disadvantage of the bank given the latest news that house prices have exceeded the peak of the Celtic tiger. The bank knows that these values are now higher than they have ever been in history but it is charging loan-to-value variable rates based on much lower values.

Mr. Gavin Kelly

Our fixed rates have been simplified over the past year so we do not differentiate specifically for some of the loan-to-value ratios. Most customers are opting for these fixed rates. They tend to stay on a variable rate for a short period and then move onto one of the fixed rates. If customers want to speak to us about a loan-to-value rate, I will certainly facilitate it.

The bank has different fixed rates based on insulation.

Mr. Gavin Kelly

Yes, we provide a discount depending on the energy rating of the home.

It is quite a big difference, is it not? It is 0.3%.

Mr. Gavin Kelly

Yes, there is a 0.3% reduction when a customer who is taking out a new mortgage with us has a property with an energy rating of B3 or higher. Such a customer will enjoy this reduction.

What is the rationale for this? It is quite a big difference.

Mr. Gavin Kelly

Particularly for customers buying new properties, the rationale is to look at how we can help customers and incentivise a low-carbon footprint in properties and houses. This is the rationale behind the discount.

However, it is nothing to do with capability. Obviously, people with the lowest carbon footprint will probably have a heat pump system that takes in air and heats via under-floor heating etc. However, essentially, one is heating with electricity, which is as we know going up. Is this then a matter of commitment to the environment, rather than people's capability to pay back money?

Mr. Gavin Kelly

It is all to do with a commitment to the environment and to incentivise buying low-energy rated houses. Ideally, as the Deputy will know in relation to Government plans on carbon footprint and carbon output, ultimately the Government's ambition will be to move to carbon footprint per house. Maybe we could look at that in due course. At the moment we felt that the best way to incentivise low-carbon footprint is through energy ratings of houses. That is how we do it.

I remind Deputy McNamara, we have an agreement that we will finish at 6 p.m.

Okay, well can I just have-----

We have representatives of another bank waiting outside.

I am particularly interested in Bank of Ireland, because-----

But we are due to finish at 6 p.m. I will allow one more question.

Can I ask three questions? These are related questions.

Has Mr. Kelly ever been to Miltown Malbay? Has he ever been there during the Willie Clancy Summer School? Has he any idea that the impact of taking the bank out of Miltown Malbay has had? There is a post office there and the people who run it are excellent, progressive people. Inevitably, however, post offices close at a particular time. Even the supermarkets have ATMs, but they close at a particular time. One cannot lodge money at a supermarket. ATMs are very constrained in how much money they give out. Does Mr. Kelly have any idea why on earth anybody from a town like Miltown Malbay, Tulla or Kilkee would have any goodwill towards Bank of Ireland, given what it has done? It closed the branch but it left the branch in Ennistymon open, which is down the road. I put it to Mr. Kelly that the reason Bank of Ireland left the Ennistymon branch open but closed the branch in Miltown Malbay was because there is an AIB branch in Ennistymon and it had a competitor. Its customers had somewhere else to go in the case of people who lived in Ennistymon but they do not in the case of the people who live in Miltown Malbay. The same is true for Kilkee and Tulla.

Mr. Gavin Kelly

Obviously, last year we did not reach that decision lightly. To answer the Deputy's question, I have been to all of those locations. I have visited all our branches when they were open. All three of us who are before the committee today visited all 88 locations in the week before they closed to speak to communities, to be there and to represent the bank. This was not reached lightly. As I said, we looked at our footprint across the entire country. We wanted to ensure that we provided a service across every county, including in County Clare. We also support that with the post office, which is important for us because there are 900 post offices that can give access to cash to customers. As I said earlier, we saw a change. We had not altered our branch network in any shape or form for well over ten or 15 years before that, but we did reach a tipping point last year in terms of customer usage. We have strived since then and we continue to strive to support customers through the post office and through our existing branch network of 169 branches around the country which have full access to cash. We will continue to provide that service for as long as customers want it.

Mr. Kelly said that he met with community representatives in all of the branches. I do not expect him to know off the top of his head which community representatives he met in Miltown Malbay, Tulla and Kilkee, but can he provide the names of the people?

Mr. Gavin Kelly

As I said, I can remember in some cases petitions had been sent to us from branches and we would have responded to those. I visited all of the locations. We did not necessarily meet the community group in each location. If I was available and if somebody wanted to meet with us then we did take that up, but we did ensure that in each and every location we looked to speak to everyone in the town, area and community, whether that was through local representatives or us and some members of the senior team. From our perspective, however, this was all about making sure that we provided the right service and ensuring that we had a post office up and running and available in each of those locations before we made any closures.

Last, given the debacle this summer, does Mr. Kelly think that he got lucky with the timing of his announcement, compared with his competitors in AIB?

Mr. Gavin Kelly

I am aware that our competitors were before the committee earlier today and that they had been talking about that. I will say again that from my perspective, for a bank of our size that has 169 locations nationally that have full access to cash in all of those branches with external ATMs for lodging and withdrawing, those cash services are needed in those 169 branches. To me, that feels like the right size of a branch network for us today, but importantly supported by the 900 post offices.

I have more questions, but I appreciate the constraints.

I thank Mr. Kelly for clarifying that issue.

We will wait and see what developments emerge in the future. We do not expect anything to happen in the short or mid term on ATMs.

Mr. Gavin Kelly

In which context?

The taking away of the ATM service.

Mr. Gavin Kelly

The decision regarding the 169 locations was not reached lightly last year. For the foreseeable future, that is appropriate service.

Bank of Ireland made a submission, presumably on the future of banking.

Mr. Gavin Kelly


Could we have a copy of that?

Mr. Gavin Kelly

Absolutely. We will have a look and get that to the Chair. There was a consultation in Tullamore earlier this year and we were at that as well.

We want your views on the future of banking in a general way in order that we can undertake to examine the report when it finally issues.

Mr. Gavin Kelly


In the context of personal insolvency practitioners, PIPs, does Bank of Ireland open accounts for them? I received correspondence to indicate that PIPs who are representing clients are required to open accounts and are not being facilitated by Bank of Ireland.

Mr. Gavin Kelly

We have no policy of that nature. If there is a specific case, the Chair will appreciate I will not discuss it here. If he wants to send it to me, however, I will have a look at it.

Mr. Casey answered the complaint. He was the investigator. The complaint regarded the availability of this service. They are obliged to do it under legislation. Why has it not happened? Will Mr. Kelly check out the branch? I am sure Mr. Casey is aware of it.

Mr. Gavin Kelly

We absolutely will open accounts for PIPs. If there are specifics to that case and if the Chair is saying somebody responded, could he please send it to me afterwards and I will have a look at it?

I will send Mr. Kelly a copy of the email I received.

Mr. Gavin Kelly

Thank you. I appreciate it.

I mentioned to Mr. Kelly privately the case brought before us involving Tony Lawlor, who explained his circumstances publicly to the committee. As I said earlier, I am completely dissatisfied at the manner in which this has not been resolved and anxious to be able to meet with the bank to discuss Mr. Lawlor's circumstances and to try and reach a conclusion. Because he gave his evidence here, I am putting it on the record of the committee that we had that discussion and that I have sought a meeting. I know there is a legal position, a court order and so on, but in cases like this, every avenue has to be exhausted by the bank from a humanity and compassion perspective relative to his circumstances and given that he wants to resolve it. The matter needs to be taken back out of the hands of solicitors and looked at again to see what can be done. The fact there is a court order means there are other avenues which are not open to him. He probably made a mistake earlier in being a lay litigant. He missed a few appropriate legal points and opportunities to present his case to the courts. I ask for another opportunity to come to a conclusion on that.

We will suspend for five minutes. I thank Mr. Kelly and his colleagues for coming. It was a good exchange. We will talk to them again in the future.

Sitting suspended at 6.14 p.m. and resumed at 6.19 p.m.

I welcome the representatives of PTSB, Mr. Eamonn Crowley and Mr. Patrick Farrell, along with their colleague in the Gallery, to our third session.

I ask that mobile phones be switched off. I draw the attention of witnesses and Members to the fact that the evidence they give to the committee is covered by privilege. If they are on the Leinster House campus, they have full privilege. However, they do not have full privilege if they are outside the campus. They are reminded of the long-standing 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. If they observe that, we may continue through the meeting.

I call on Mr. Crowley to make his opening statement.

Mr. Eamonn Crowley

I thank the Chair and members for the invitation to meet them today. We submitted our opening remarks to the committee some days ago. I am conscious that we are moving into early evening and that members have been here for the afternoon, so we are happy to move to questions and any comments and remarks members have.

Will the witnesses talk us through their branch network numbers and ATMs? We have heard nothing but closures from AIB and Bank of Ireland. Will they also refer to the changeover with KBC, Ulster and so on?

Mr. Eamonn Crowley

Perfect. I will talk about branches and Mr. Farrell will refer to our ATM network and other aspects. We have a network of 75 branches but are taking on an additional 25 through the Ulster Bank transaction, which will complement our existing footprint. Those 25 branches are primarily in south Dublin, west Dublin, the north west and the west. For instance, we are retaining the branch in Shannon and rebranding it as Permanent TSB. Two of the branches will combine. We are acquiring the Eyre Square branch of Ulster Bank. It is in a better location than our own, so we will move to that location. In Cork, we will combine two branches. We will end up with a network of 98 branches, increasing our footprint quite extensively.

Mr. Patrick Farrell

Currently, we have 236 ATMs. These are self-service banking machines in our branches and ATMs outside branches. As Mr. Crowley mentioned, with the take-on of the 25 Ulster Bank branches, we will be putting in approximately another 80 ATM and self-service machines in the coming months. Similar to our branch network, we are expanding our ATM and banking machine services as well.

Presumably that is because of the customer base the bank has. Is it getting feedback from customers that they prefer the ATM and face-to-face meetings in banks?

Mr. Patrick Farrell

We watch our customer feedback on a weekly basis. Customers tell us they want to talk to people when they come into our branches. Our people are out front of house in the banking hall now. Many of the banking machines are quite state of the art, but the key is that customers are met by a person when they walk in, that they are welcomed and that they are asked what they are there to do on that day. Often, they are comfortable using the machines but they have the comfort of knowing that if they need help or assistance, as some do, that there is somebody there to give them a dig out. That is a real focus. It is not one size fits all. Some customers are very comfortable with digital, while others need that bit of extra help. We are investing in extra people as well as extra machines to facilitate customers and expand into the new communities Mr. Crowley talked about.

Permanent TSB made a submission on the future of banking. I ask, as I asked Bank of Ireland and AIB, if we could have a copy of that submission.

Mr. Eamonn Crowley


We want to get an overview on what the banks feel about the future before the final report is published.

I should declare a potential conflict of interest. I have a constituency office account. It is with Permanent TSB.

Mr. Eamonn Crowley

Are you happy?

I have nothing to complain about.

You are asking for trouble now.

Mr. Eamonn Crowley

If you are not, come and talk to us.

I am, actually. The face-to-face customer service is very good. Historically, I always found it very good with Bank of Ireland, whose representatives have left, but that bank has massively reduced the number of staff and services available. It does not hugely affect me but it affects many of my constituents.

Permanent TSB is taking on these new branches. How many new employees will it be taking on? Will it essentially have a larger network staffed by the same number of people?

Mr. Eamonn Crowley

The transaction we are taking on with Ulster has a number of component parts. More than 400 employees will transfer from Ulster Bank to us, including the full complement staff currently in those branches..

We will supplement the staff numbers in those branches with additional staff to ensure we are attracting more customers and providing the same service and, therefore, we are not going to cut staff in that respect. Indeed, 400 members of staff are coming over. They will not all be in branches. Approximately 150 will be coming into the branch network.

I am aware that perhaps two or three years ago PTSB cut the number of personnel in branches. It is not unique in that. I am not suggesting that it is; very far from it. How many branch personnel have been let go from 1 January in this decade?

Mr. Patrick Farrell

We had a programme back in 2020. I cannot give the Deputy the exact number. I will come back to him with the figures. Certainly, more than 100 staff would have gone. There were some staff that were perhaps long in tenure, etc. that were leaving us at that stage. If I bring it forward to this year, we have added approximately 250 staff to our front-line services, such as branches and customer-facing operational areas. We have also added another 120 staff to our contact centre this year. As Mr. Crowley said, the Ulster Bank staff will come over to the branches. Not only are we maintaining the services they had, but we are adding some additional services. Some of those branches close for lunch, etc. We will look at supplementing the staff in those branches as well to make sure we are giving an adequate service to those communities.

I would like to move on to the issue of mortgages. What are PTSB's variable rates at the moment? How many of its mortgage customers are on variable rates? Approximately what percentage of customers are on tracker, variable and fixed rate mortgages?

Mr. Patrick Farrell

Approximately 28% of our customers are on tracker mortgages and 20% are on variable rate mortgages.

Mr. Patrick Farrell

Yes, 20% of our customers are on variable rate mortgages. We have a number of different variable rates that make that up. More than 50% of our customers are on fixed rate mortgages.

What are the variable rates? How are they determined? Is it purely loan to value, or are there other considerations or objective criteria?

Mr. Patrick Farrell

A number of the rates are loan-to-value rates, ranging from approximately 2.95% up to our top rate, which is approximately 3.95%. There is a range, depending on the loan to value.

Are there other criteria, or is it just loan to value? Is it just purely an objective variable rate based on the loan to value?

Mr. Patrick Farrell

That is exactly it. Variable rates are purely loan to value.

What fixed rates is PTSB offering at the moment?

Mr. Patrick Farrell

We are very competitive in the market. We are on a growth trajectory, as the Deputy has probably heard from us previously. We are looking to grow the bank and increase competition. Our best rate in the market is 2.05%, which is a four-year fixed rate. We have different rates over different terms, ranging from about 2.05% up to approximately 2.95%.

Have the two recent ECB rate increases yet been reflected in PTSB's variable and fixed rates? Can the witnesses say whether PTSB is anticipating that they will be reflected soon? They can answer the first question but may not want to answer the second.

Mr. Eamonn Crowley

We announced publicly that we had not changed our rates as a result of those increases. We keep our rates under review. Obviously, I cannot talk about the future in that respect. We have not moved on the basis of a 1.25% change in rates. That is about maintaining a competitive position and ensuring that we are offering customers the best value they can get.

I do not have any further questions. Perhaps Deputy Durkan has some questions.

Do not encourage me, Deputy.

I thank the witnesses for their time. I appreciate that it is late. It is good that Ulster Bank is going to remain open in Shannon. There have been a lot of bank closures everywhere across Ireland, including in County Clare. It is good to see the PTSB bucking the trend.

Mr. Eamonn Crowley

We have invested in our Ennis branch as well. It is a very vibrant branch.

It is. It is in a great position.

Mr. Eamonn Crowley

We are very happy with it.

Deputy Bernard Durkan took the Chair.

As with the previous groups that we have had before us today, my only comment is that the banks should not forget the customers. PTSB must ensure that the bank has, at all times, the customers' interests first and foremost. That particular interest is what keeps the banking system, and every business, going. There is a tendency nowadays to become less personal in all businesses. There are a number of places that we, as the customer, ring up and we either do not get an answer or they will tell us that they will ring us back, in which case they might, or we might have to ring for an hour. It is not unusual now to ring a public office and ring for an hour, be cut off and have to start the process all over again. It infuriates people.

Another point I wish to make is that we live in a very competitive world. It is important that not all the banks sing the same tune at the same time. There will be some areas in which they will have to in respect of reserves and so on and so forth. However, it is up to the banks themselves to show the potential customers that they are aware of their existence, and that they are willing to encourage them

The customer is the sole root cause for the existence of businesses. If interest is lost in the customer, then the whole thing closes down. From what I can see, PTSB is recognising what needs to be done. I hope it continues. There were customers in danger. In most cases, they have moved on or the loans have been sold on, whether they were endangered loans or bad loans, as the case may be. There are still customers out there who are suffering as a result of the banking crash. I would emphasise the necessity, at all times, to be conscious of the need to help them out in any way possible, and not to cut them adrift and let them fend for themselves. I have not listed PTSB for any misdemeanours in that area, but I have listed other banks, and I have told them so. At the same time, we have all complimented those who have recognised the situation as it was for the customer.

Finally, a lot of people will spend a lot of time advertising. The best advertisement is a satisfied customer. No advertising is needed after that.

Mr. Farrell mentioned that 20% of PTSB customers are on tracker mortgages.

Mr. Patrick Farrell

It is 28%.

They are obviously in a good place. Banks, including PTSB, were trying to get people off tracker mortgages, legitimately and illegitimately for a long time. I do not want to go back into that. If all those people come off tracker mortgages now and get a four-, five- or seven-year fixed rate, they are going to have to pay more money. Their mortgages are going to cost them more, immediately, because they are suddenly on a fixed rate. However, the longer they remain on the tracker mortgage, the less attractive fixed rate they are going to get if they decide to come off the tracker and take a fixed rate. When is the optimal time for those people to come off a tracker mortgage and get a fixed rate? It is not a commercial secret to say that most bankers anticipate interest rates rising in the medium to long term. That obviously includes tracker rates. When is the optimal time to come off a tracker and move to a five-, ten- or 20-year fixed rate?

Mr. Eamonn Crowley

Not all trackers have the same margin. Some have low margins and some have higher margins because of when they were issued. Therefore, some customers on higher margin trackers - and this is not just for our bank, it is across the banking sector - would have to compare the ECB rate rise, which happens within 30 days, and is repriced in 30 days, plus their margin versus a fixed rate. That is a decision they would have to make themselves. It is not that all tracker products are at a very low margin. Some are at higher margins.

I was never on a tracker mortgage, so I was never aware of that. So, there are people already who, once this new rate increase kicks in, could be paying close enough to the lowest fixed rate available?

Mr. Eamonn Crowley

In effect, yes, or possibly over it. It is not just me saying that; there has been some commentary in the press as well that certain customers with trackers should look at moving to fixed rate mortgages.

I do not suggest they should but that is an area. The reference rate, which was zero, is now 1.25% because of the two recent increases. That plus the margin means the opportunity could be that they should go to fixed, but it depends on individual circumstances.

At some point tracker mortgages, even if there is a low margin, will probably exceed the rate that people could fix at now.

Mr. Eamonn Crowley

Absolutely. In 2009 and 2010 when the ECB increased rates, trackers were quite expensive versus standard variable rates. That was when Mr. Trichet increased rates in the late noughties. It is the nature of a variable rate and trackers are variable by nature.

I thank Mr. Crowley. The last point before I close the meeting relates to another advertisement. We had an ATM in this House, as colleagues know, and it disappeared during the Covid lockdown. That was a great time to justify the disappearance of such a facility because no customers were allowed anywhere near the place at the time. As I have said to previous witnesses before the committee, it might not be a bad idea. There is a captive audience in here. I know there were changes. Some were of necessity and some were not. I challenge the assertion that it was not being used in the past. I saw on numerous occasions a queue of people waiting to use it. If the witnesses want a positive ad for themselves, we will take back the hole in the wall and will not take it out with a JCB. These are the Houses of Parliament and the Houses of Parliament should have an ATM, not to make money but for the convenience of the customers. Do the witnesses want to respond to that?

Mr. Eamonn Crowley

I thank the Vice Chairman for bringing that to our attention.

Excellent. I thank the witnesses and members for their engagement. The committee will meet in private session at 12.30 p.m. on Wednesday, 21 September and in public session at 1.30 p.m. on that day with the Minister for Finance, Deputy Donohoe, and the Minister of State, Deputy Fleming, to further discuss the topic.

The joint committee adjourned at 6.31 p.m. until 1.30 p.m. on Wednesday, 21 September 2022.