Michael Moynihan
Question:47. Deputy Michael Moynihan asked the Minister for Finance the measures he proposes to take to strengthen the banking sector following recent announcements of branch closures nationally. [16250/21]
View answerThursday, 25 March 2021
Questions (47, 48)
Michael Moynihan
Question:48. Deputy Michael Moynihan asked the Minister for Finance the role he sees for credit unions in filling the gap left by bank closures in rural areas. [16251/21]
View answerWritten answers
I propose to take Questions Nos. 47 and 48 together.
NatWest's decision to withdraw Ulster Bank from the Irish market and the decision by Bank of Ireland to close 88 branches in the Republic of Ireland are regrettable and they represent unfavourable developments for the Irish banking market.
However, I welcome that NatWest confirmed that it is negotiations with Permanent TSB and other strategic banking partners in relation to certain retail and SME assets, liabilities and operations and that it also announced that it has signed a Memorandum of Understanding with AIB in relation to the sale of a c. €4bn portfolio of performing commercial loans, and that encompasses the transfer of staff wholly or mainly assigned to this loan book.
These announcements signal a potentially important development for the Irish banking sector. However, NatWest highlighted that, at this stage, these discussions have some way to go before final transactions are agreed. NatWest, Permanent TSB and AIB have confirmed that they will provide further updates to the market as negotiations progress in this regard.
As part of its announcement about branch closures, the news that Bank of Ireland has agreed a new partnership with An Post which will allow personal and business customers use their local post office for a range of banking services , including to withdraw cash and make cash and cheque lodgements, at no additional cost, is welcome.
A range of other initiatives are underway that will enhance the sustainability, culture and accountability of the banking sector and improve customer outcomes. These include
1. The Senior Executive Accountability Regime (SEAR)
The Government intends to further enhance the Central Bank’s existing powers through new legislation to be introduced in the Central Bank (Amendment) Bill.
The centrepiece of the new legislation is the Senior Executive Accountability Regime (SEAR), a commitment of the Programme for Government, which seeks to improve the culture of the financial sector and restore public trust in the sector. SEAR is expected to drive positive changes in terms of culture in the financial services industry and enhanced accountability while simplifying the taking of sanctions against individuals who fail in their financial sector roles.
The proposed legislation will seek to address proposals put forward by the Central Bank arising from the recommendations in its Culture Report which was requested by me on foot of the Tracker Mortgage Examination.
The legislation is intended to drive greater accountability in the financial sector, raising the standards of expected behaviour for individuals and firms, in order to achieve better outcomes for consumers and improve the sustainability of the financial system.
2. Banking Union
Development of the European Banking Union began in response to the 2008 financial crisis. The European Commission pursued a number of initiatives to create a safer financial sector for the Single Market, consisting of a set of legislative texts that are applied to all financial institutions and all financial products across the EU which are designed to ensure that Europe has a safer banking sector which can support the financing needs of the economy. Specifically, its rules include capital requirements for banks, rules for managing failing banks and improved deposit guarantee schemes. Departmental Officials attend EU working groups to ensure Irish opinions and the specificities of the Irish Financial Sector are considered in the development of new regulations.
The completion and improvement of the Banking Union is a priority and recently, the Department completed the transposition of the “Risk Reduction Measures” Package of reforms which updated existing rules to keep them in line with standards agreed by the Basel Committee on Banking Supervision. These reforms included new supports for investments in infrastructure and increased supports for lending to SMEs, revised regulations regarding remuneration practices and a new moratorium power to suspend an institution’s payment obligations during a resolution process.
3. Digital Finance Package
The European Commission published the Digital Finance Package in September 2020 containing measures developed to further enable and support the potential of digital finance in terms of innovation and competition while mitigating risks.
The Package contained a number of components – both legislative proposals and Commission Communications – including a proposal for a Regulation and Directive on Digital Operational Resilience (DORA), a proposal for a Regulation on Markets in Crypto-Assets (MiCA) and a Commission Communication on a Retail Payments Strategy.
The suite of measures proposed promotes and enables a more digitalised financial services sector across Europe by regulating emerging technologies such as crypto-assets, evaluating existing legislation such as the Payment Services Directive 2 and the Electronic Money Directive and setting out a framework for a more resilient and stable financial services sector. At the same time, the proposals help to protect consumers in this changing environment.
The Digital Finance Package allows for a more digitalised financial services sector in Europe which could in future be less reliant on physical bank branches and traditional payment methods such as banknotes and coins. However, financial inclusion remains a priority and the Commission’s proposals include measures minimise financial exclusion such as ensuring cash usage and acceptance across Europe.
4. COVID-19 Credit Guarantee Scheme
The extension of the COVID-19 Credit Guarantee Scheme is a welcome development that will ensure ongoing availability of credit throughout the remainder of this year to our vitally important SME sector who are facing the significant challenges of not only COVID-19 but also adjusting to Brexit. It demonstrates the Government’s broader commitment to ensure that SMEs have the right tools and supports to secure their viability.
In particular, I welcome the recent expansion in the on-lenders to beyond the retail banks, including 19 credit unions spread between three groups and non-bank lenders. This extension means that more SMEs will be able to access credit from an increased diversity of sources in both bank and non-bank credit.
With regard to the provision of financial services in rural areas, the Department of Finance published a paper in 2019 by Indecon Consulting on an Evaluation of the Concept of Community Banking in Ireland (https://www.gov.ie/en/press-release/3f7624-minister-donohoe-publishes-independent-external-evaluation-on-local-/). The report highlighted the large number of post offices and credit unions that are spread right across the country in addition to the bank networks. This was a follow on to a previous paper on Local Public Banking published by the Department of Finance in 2018. The Indecon report concluded that there is no business case for the State to establish a public banking system in Ireland, supporting the outcome of the previous report on Local Public Banking.
Credit Unions
The Credit Union Act, 1997 (the 1997 Act) and the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 set out the services that credit unions may provide to their members. These include loans and savings under the 1997 Act and a further suite of services under the 2016 Regulations such as third party payments; ATM services; bureau de change and certain insurance services on an agency basis. I understand that a number of credit unions provide some of the services provided for under the 2016 Regulations. Where a credit union wishes to provide other services to its members, an application may be made to the Central Bank for approval to provide such services in accordance with the provisions set out in sections 48-51 of the 1997 Act.
One such additional service includes the Member Personal Current Account Service (MPCAS). In 2016, the Central Bank defined and described a suite of additional services known as MPCAS, under which approved credit unions may offer personal current accounts with debit cards, overdrafts and a wide range of payment services within an appropriate risk framework.
An Post Services
There is a significant network of post offices in areas where there is no bank branch within five kilometres. In addition, An Post offers financial services including a payment account, personal loans, credit cards, a range of insurances, money transmission and foreign exchange services. An Post offers counter services for AIB, allowing customers to lodge and withdraw cash at An Post branches.
As noted above, Bank of Ireland’s new partnership with An Post to provide a range of banking services means that there will be a post office within, on average, less than 500 metres of the branches that are being closed. The Bank confirmed that the new partnership with An Post will be available to all Bank of Ireland customers before any branch closes.