Dáil Éireann díospóireacht -
Tuesday, 12 Nov 2002

Vol. 557 No. 1

Written Answers. - Banking Sector.

Richard Bruton

Ceist:

109 Mr. R. Bruton asked the Minister for Finance if he has satisfied himself that the moves by the banking system to use cheaper on-line channels for transactions are being introduced in a way that respects consumer choice and passes on the cost savings; his views on whether there is a need for consideration of legal provisions to influence the corporate responsibility of banks to the community; and his further views on whether a forum to discuss these ideas would be useful to inform the debate surrounding the legislation promised in this field. [21341/02]

Minister for Finance (Mr. McCreevy)

I take it that when the Deputy refers to on-line banking channels, he is referring to telephone banking and Internet banking facilities. I do not have information quantifying the savings involved in the move to on-line banking. As operated by Irish banks, on-line banking is generally a complement to, and not a substitute for, a traditional branch network. In this situation, therefore, I am not sure that, overall, taking into account the cost of providing such services, this type of operation is necessarily a great cost saving for Irish banking institutions.

Banks recover their operating costs in a variety of ways. These include charges, fees and the differences in the rates at which they borrow and lend funds. In this mixed cost and revenue regime, it would probably be difficult to say whether specific charges match specific expenses.

In any event, I should mention that while interest-related charges are set by market forces, non-interest related charges are a matter for the Director of Consumer Affairs and I have no statutory function in that matter.

In any event, the most important force for ensuring that businesses pass savings on to consumers is the pressure of competition in the market. I might also mention that the Competition Authority announced on 13 September a preliminary consultation on the terms of reference of a study on the level of competition in the provision of banking services in Ireland.

It is not clear what exactly the Deputy has in mind with regard to additional legal provisions in the area of the corporate responsibility of banks to the community. In common with our EU partners, our legislation on financial supervision is based on a comprehensive, harmonised framework of directives and regulations. This enables banks from Ireland and the other member states to compete with each other on a level playing field across Europe. Both consumers and providers benefit from being part of this wider market. I would be cautious in placing a statutory burden on Irish banks that did not apply to banks supervised and regulated in other member states, but operating in the Irish market.

When the Deputy refers to legislation promised in the area, I take it this is a reference to the Central Bank and Financial Services Authority of Ireland Bill, 2002, which passed Second Stage in this House on 19 June 2002, and to the proposed Central Bank and Financial Services Authority of Ireland (No. 2) Bill. This latter Bill has already been the subject of a recent public consultation. I would again acknowledge the many contributions received, which are currently being studied in my Department.

It is envisaged that this legislation will provide for ongoing structured consultation by the new regulatory authority with two statutory consultative panels, appointed by the Minister for Finance to be representative of industry and consumer interests respectively. The main function of the panels is to provide a discussion forum in relation to the activities of IFSRA and of bodies associated with it. The consultative panels will ensure that the new regulatory authority, or IFSRA, as it has been called, and bodies associated with it are responsive to the needs and concerns of consumers and of financial services providers. A general obligation would be imposed on IFSRA to consult the panels before issuing any general directives or guidelines. The chairpersons will also be obliged to appear before the relevant Oireachtas committee.

In addition to creating these two panels, there is also provision for a joint committee of the panels and for the establishment of consultative panel advisory groups. A consultative panel advisory group might be established by one or both of the consultative panels to provide expert advice.

As I noted earlier, an extensive public consultation has already been carried out on these legislative proposals, eliciting a significant number of submissions. The proposals provide for a high level of consumer and industry consultation to be built in to the new structure. I would not see any need, therefore, for a forum to debate the issues identified by the Deputy.