Jim O'Callaghan
Question:54. Deputy Jim O'Callaghan asked the Minister for Finance the action he can take to increase competition in the banking sector; and if he will make a statement on the matter. [9448/22]
View answerTuesday, 22 February 2022
Questions (54)
Written answers
While competition issues generally are primarily a matter for the Competition and Consumer Protection Commission, competitive pressures in the banking sector can clearly have an effect on the functioning of the financial system and the on the quality and price of credit and other banking services provided to customers.
The Irish retail banking system is relatively concentrated by international standards and the recent decisions by some banks to leave the Irish market will further impact on this. However, against this it should also be noted that some new lenders have entered the market and are playing a greater role in the provision of new services. More generally, it is likely that increased competition in the provision of financial services globally will take place and that this will have an influence in Ireland with potential new entrants to the deposit-taking, credit and payments markets for households and businesses.
The European Union’s initiatives in the context of the Capital Markets Union, which aim to improve the provision of financial services across borders within the Union, also have the potential to further improve levels of choice regarding savings and investments for consumers, and to improve access to finance for businesses in the Irish economy. Further, the scope for provision of services within the Union will be enhanced by the adoption of digital financial technologies already underway.
Even in a concentrated banking system such as that in place in recent years, price competition is possible, particularly in a growing economy. Trends show that interest rates in Ireland have been falling in recent years, providing benefit to consumers. Interest rates on new mortgages (excluding renegotiations) have fallen from 4.05% in December 2014 to 2.69% in December 2021. SME and consumer loans interest rates have also declined over the same period.
However, I fully appreciate that enhanced sustainable competition in the credit and banking market more generally will be of benefit to consumers and other borrowers. Accordingly, the review of the retail banking market which is now underway in my Department will assess various aspects of the banking market and will consider options to encourage greater competition in the credit and banking market, including possible options to develop the mortgage market.