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Banking Sector

Dáil Éireann Debate, Wednesday - 31 March 2021

Wednesday, 31 March 2021

Questions (121, 130)

Pádraig O'Sullivan

Question:

121. Deputy Pádraig O'Sullivan asked the Minister for Finance the measures he proposes to take to strengthen the banking sector following recent announcements of branch closures nationally; and if he will make a statement on the matter. [17072/21]

View answer

Brian Stanley

Question:

130. Deputy Brian Stanley asked the Minister for Finance if consultations are taking place on strengthening existing financial institutions following recent announcements of closures by banks (details supplied). [16748/21]

View answer

Written answers

I propose to take Questions Nos. 121 and 130 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.

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 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. NatWest, PTSB and AIB have confirmed that they will provide further updates to the market as negotiations progress in this regard. Both sets of negotiations potentially signal significant developments for the Irish banking system.

Ireland continues to have an extensive network for banking services, including post offices and credit unions that are spread right across the country in addition to the bank networks.

Credit unions are offer a wide range of services. They are also authorised by the Central Bank of Ireland to provide a Member Personal Current Account Service (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. 51 credit unions, representing circa 50% of sector assets, currently have approval to provide current accounts and debit cards.

An Post also offers a range of financial services and products, including counter services for AIB, allowing customers to lodge and withdraw cash at An Post branches. As part of its announcement about branch closures, Bank of Ireland has also 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.

A range of other initiatives are underway that will strengthen the sector and 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.

The completion and improvement of the Banking Union is a priority. Recently, my 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.

4. COVID-19 Credit Guarantee Scheme The COVID-19 Credit Guarantee Scheme 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. 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.

Question No. 122 answered with Question No. 114.
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