Dáil Éireann Debate, Thursday - 20 February 2014
31. Deputy Michael McGrath asked the Minister for Finance his views on whether the lack of competition in the banking sector is leading to increased fees and charge as well as greater use of cash in the domestic economy; and if he will make a statement on the matter. [8381/14]
View answerI accept that the level of competition in the Irish banking sector has reduced as a result of the recent decisions by ACC and Danske Bank to withdraw, following the withdrawal of Bank of Scotland (Ireland) some time ago. Over time, I expect that the restructuring of the banking sector and the recovery of the economy will present opportunities for the entry of new market participants well positioned to be confident in the future profitability of an Irish branch or subsidiary. The Government continues to work to create an environment conducive to the entry of such new entrants through a number of initiatives and have led the debate at EU level on the mechanisms to promote alternative forms of financing for SMEs.
The Government has also taken steps to ensure that the Irish financial market is accessible to any financial institution considering establishing in Ireland. In seeking to reduce the barriers to entry which are specific to the Irish banking market, Section 149 of the Consumer Credit Act (as amended), which provides for the regulation of bank fees and commissions has been disapplied for three years in the case of new financial service providers setting up in Ireland.
As the Deputy is aware bank fees and charges are subject to regulation under Section 149. This section came into effect in 1996 and currently requires that credit institutions, prescribed credit institutions and bureaux de change must make an application to the Central Bank if they wish to introduce new customer charges or increase any existing customer charges in respect of certain services. Section 149 does not cover interest rates; it applies to fees and commissions only.
My Department recently published a review of the regulation of bank fees and charges which is available on its website www.finance.gov.ie. The review concluded that it would not be appropriate to repeal section 149 at this time. The lack of competition in the banking sector means that the removal of section 149 would give unfettered price setting power to the incumbent banks. However, the report recommended that the issue should be revisited when competition in the banking sector has improved significantly. It is my view that the current regulatory regime offers appropriate protection to consumers against unjustified increases in bank fees and commissions.
It is true that Ireland continues to rely heavily on cash and other paper payment instruments. This has significant implications for cost competitiveness, security and consumer choice in Ireland. The efficiency of Ireland's payment systems infrastructure could be improved if greater use were made of secure and efficient electronic payments, leading to a reduction in the proportion of transactions involving cash and cheques. The Deputy will be aware of eDay which is on 19 September 2014. The announcement of eDay was made by Minister of State Brian Hayes last September so as to give Government Departments, Local Authorities and other state agencies sufficient time to prepare for it. eDay is the day from which these authorities will no longer accept cash or cheques from businesses or make payment to businesses by way of cheques. It is expected that this initiative will yield savings to the authorities and, alike, to the businesses.
