Dáil Éireann Debate, Wednesday - 10 March 2021
266. Deputy Alan Dillon asked the Minister for Finance his views on the competitive nature of retail banking; his further views on the impact of the closure of a bank and the branches of another bank (details supplied) on banking in Ireland; and if he will make a statement on the matter. [12477/21]
View answerThe Government wants to ensure that the banking and financial system is one which will effectively contribute and support economic growth and employment. Competition in the sector is vital to ensure that businesses and consumers have a range of banking options available when using financial services and accessing credit.
The withdrawal of Ulster Bank is regrettable for its customers and staff and is an unfavourable development for competition in the banking market. It is also a reflection of the wider challenges banking is facing, not only in Ireland but also abroad. The impact of Covid-19, coming on top of weak enough economic growth in Europe and America, has already been seen in European banking with consolidation and mergers in other European markets.
In Ireland, our banks were amongst the worst hit by the previous crisis. Since then, overall conditions for banks have been difficult despite Ireland’s strong recovery from the previous crisis. These conditions include the long period of low, now negative, interest rates that have severely depressed margins, having to continue to deal with the bad debt legacy of the last crisis, low credit demand, both in mortgages and SME lending and the relatively small size of the Irish market.
In addition, there are major changes driving the consolidation elsewhere. The innovations introduced by fintechs and their increasing market penetration are reducing traffic into the branch networks run by traditional banks. Competing with lean and nimble online firms while coping with high cost structures is posing a considerable challenge for the traditional full service sector and we are seeing cutbacks in these entities in terms of staff, branches and initiatives to move their customers online.
The announcement by Bank of Ireland last week that it is to close 103 branches in Ireland – 15 of which are in the north - is further evidence of the impact technology is having on banking and the way the public interacts with banks. However, it is accepted that many people will still need or want to carry out their banking activities in person and it is a welcome development that Bank of Ireland is now entering into a new partnership with An Post that will allow personal and business customers to use their local post office for a range of banking services, including cash withdrawal and lodgements.
NatWest is in early stage discussions with PTSB and other strategic banking counterparties about their potential interest in certain retail and SME assets, liabilities and operations. A Memorandum of Understanding which has been signed with AIB regarding certain corporate and commercial loans, signals a potentially important development for the Irish banking sector. While these are primarily commercial negotiations, the Government is supportive of trying to bring about an outcome that is good for both AIB and PTSB, but more importantly for Ulster Bank’s customers, staff and the Irish economy generally.
