Future of Banking in Ireland: Statements

It is my great personal pleasure to welcome to the House one of its distinguished former Members, the Minister for Finance, Deputy Donohoe.

I thank the Leas-Chathaoirleach for the opportunity to discuss the future of banking. I will open this discussion by updating the House on what I see as some of the key issues: the impact of Covid-19 and our response; the changing retail financial sector environment and the challenge for banks to secure an appropriate return; and the continuing effort to improve regulation and rebuild trust in the banking system through measures such as the senior executive accountability regime, SEAR.

The pandemic has posed significant challenges for our society and economy and many households and small businesses have been especially affected. The Government recognises the difficulties the pandemic has caused and has put in place a range of important and necessary supports for households and businesses. However, it was also important that the banking industry acted, and was in a position to act, to provide necessary support to its customers at the outset of the pandemic. In March of last year, I engaged with the Banking and Payments Federation Ireland, BPFI, to ensure that these supports would be put in place. In response, the BPFI announced a co-ordinated approach by members to support customers. The range of supports included payment breaks of three and, later, six months. Since then, payment breaks have been approved on more than 172,000 Irish accounts, meaning that a large number of borrowers have received important cash flow supports during the public health crisis. It was welcome that, as the system-wide payment breaks came to an end, the majority of borrowers were able to resume full loan repayments. Of course, many borrowers are still impacted by the pandemic and they will continue to need, and will be expected to obtain, assistance from their lenders.

It is also important that lenders support new borrowers and continue lending into the economy. While the pandemic had an immediate impact on the scale of new lending and there was a significant decline in mortgage approvals and lending during the middle of last year, the number of approvals and amount of lending has picked up significantly since then.

For the banking system, Covid-19 is the most significant shock it has faced since the financial crisis. It has helped that banks are more focused on the Irish market and have more stable sources of finance. At EU level, the regulatory and supervisory framework for banks has changed significantly since the financial crisis. Banks are now subject to more intrusive supervisory regimes, must hold more and better quality capital, and have enhanced reporting requirements.

Other factors have also significantly helped to maintain stability at this difficult time. While the banking sector has undergone a huge transformation in the years since the crash, unfortunately, during those years we have seen evidence of unacceptable behaviour on the part of banks and people working within them, particularly in the context of the tracker mortgage scandal. It is for this reason that my Department is working on the SEAR legislation, which will place obligations on firms and senior holders within them to set out clearly where responsibility and decision-making lie. There has been lengthy engagement with the Attorney General's office and the Central Bank to ensure that the legislation is effective and constitutionally robust. It is my intention to publish the heads of the Bill before the summer recess, subject to any engagement with the Attorney General on the detail of it.

In order to keep up with developments in the lending market and the new ways in which people are borrowing money, my officials have been working on a Bill to bring the providers of personal contract plans, PCP, hire purchase and consumer hire agreements within the regulatory remit of the Central Bank. I have been in contact with the finance committee which is currently undertaking pre-legislative scrutiny on the heads of the Bill and I hope to be in a position to publish the legislation soon after the committee completes its report.

In regard to the general operating conditions of the banking sector, this spring, we saw a number of announcements which give us cause to reflect on the sector's structure. Last month, KBC Bank Ireland announced that it is has entered a memorandum of understanding with Bank of Ireland which could lead to a transfer of its performing loan book. This announcement came quickly after the decision by NatWest to withdraw Ulster Bank from the Irish market and Bank of Ireland's decision to close branches across the country. These announcements illustrate that the operating environment for banks in Ireland is very difficult. The announcement by Bank of Ireland to close branches is evidence of the impact technology is having on banking and the way the public interacts with banks. Increasingly, banks are competing with new technology-driven firms regarding services that were previously the preserve of traditional banks.

There is considerable public demand for the wider roll-out of broadband such that people can more easily and conveniently transact their business, and banks are only one of the many businesses that are now conducting a greater share of their business online. While there is a demand for banks to develop their online services and there is a cost associated with this development, many people will still need or want to carry out their banking activities in person. 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. The landscape is changing and partnerships like this are important. There are new services, new ways of banking and greater mobility between services. When we look to improve the retail financial sector, it is important that we view the banking system as a means to help households and firms achieve their financial, economic and social needs.

While non-interest income revenue is facing challenges due to technological changes and greater competition from non-banks, low interest rates have also depressed banks' interest revenues. In addition, their cost base is high. Overall, this puts pressure on banks' profits, and, in turn, the attractiveness of the market. However, the same can be said for banks in many other countries. The impact of Covid-19, on top of weak economic growth in Europe and America, has been already seen in European banking, with consolidation and mergers in other European markets. In the European context, there is a view that the banking sector has too many participants and that there is a need for it to consolidate so that it can more efficiently provide services to its customers in a sustainable way and, in particular, there will be a need for banks to further improve the level of investment in technology. This is likely to be a particular challenge for small to medium-sized banks in various national markets as they attempt to manage the cost efficiencies and IT investment that are crucial in the new banking environment.

It is easy to say there is a problem with the banking market but it is more difficult to say where the appropriate balance between competition and consolidation lies in the best long-term interests of the economy. While the Government would like to see a more robust level of competition in the Irish banking market, it must be borne in mind that in the early years of this century, the Irish banking market was a very competitive one but not sustainably so and I think it is also fair to say that, ultimately, it did not serve the best long-term needs of the economy or society. Sustainable and responsible competition in the retail financial sector is vital to ensuring that businesses and consumers have a range of banking options available when using financial services and accessing credit.

Looking to the future, the Government wants to ensure that the banking and financial system is one that will effectively contribute and support economic growth and employment. Ultimately, the banking industry should not be regarded as an end in itself but rather as a system that will serve as the means to help households and firms achieve their financial, economic and social needs. That is our starting point. To that end, the programme for Government sets out a number of banking areas that will be considered for the benefit of consumers and the real economy. This includes measures to help ensure a smooth transition of European Central Bank, ECB, monetary policy, to look at ways to increase the availability of long-term fixed rate finance and to continue to work with the banking industry and non-bank lenders to support customers during and after the Covid crisis. I look forward to hearing the views of Senators on this important topic and the proposals they have to improve the banking market in the overall interests of the economy and our people.

I welcome the Minister to the Chamber and wish all businesses across the country that are re-opening today the very best of luck and profitability. I hope it is a permanent re-opening. We all hope that. Many businesses across our country have had a horrid 14 months because of the pandemic. I acknowledge the range of supports put in place by the Minister and the Department of Finance.

We know that SMEs are highly important to the banking sector and vice versa. There is interdependency between the two. Regarding the goings-on over the past number of months regarding the banking sector and rationalisation and ignoring the real-life rationale for bank branches in different places, which I am sure will be discussed, the loss of a bank branch, which is often an iconic building on a main street, has a serious impact on the town in terms of sustainability, vibrancy and a visual viewpoint. Banks need to understand the loss of footfall and the casual or opportunity buying and browsing that takes place in a town. This is not engaging with the rationale for bank branch closures.

The last Government initiated a report on public banking in December 2018 following programme for Government calls for an examination into the banking models in Germany. That report was published jointly by the Department of Finance and the Department of Rural and Community Development. It stated that there "are few compelling arguments for the State to establish a new bank" and went on to discuss the role of the Strategic Banking Corporation of Ireland, SBCI, An Post; and the credit unions in providing loans to SMEs and consumers. The SBCI was established as a lender in 2015 and has supported thousands of SMEs since then. It is based on a model that addresses market failure while creating competition but not being the competition itself, which is important. There has been much talk about the Sparkassen model, which in reality has a very prudent nature regarding lending whereby a relatively long period of savings by a customer would precede a loan offer.

Therefore, according to that report, there is no expectation an Irish public bank, if one ever came into being, would offer a substantive change to the current mortgage market. Similarly, it argues the new An Post current accounts would provide and have provided additional competition and increased availability of banking facilities throughout rural Ireland, as would the credit unions, which are community based and regional.

The Department of Finance published the Indecon report in December 2019, which states there is no economic case for a State-owned banking network despite some market failure. It goes on to state the analysis indicates that in addition to the community banking role played by credit unions and An Post, the main commercial banks have a large footprint of branches, although matters have changes on that score since 2019. There is also evidence of new entrants to the small and medium enterprise market, including non-traditional providers. The report goes on to state it would have concerns over the ability of such a new State-owned entrant to provide effective competition, and the Exchequer costs and risks involved would not be justified by its analysis of the causes and extent of market failure.

Although those reports are quite recent - the Department of Finance and the Department of Rural and Community Development report was published in 2018 and the Indecon report was published in 2018, the Covid pandemic - bank rationalisation of branches and proposed and planned bank exits or mergers of loan books in the case of KBC raise the question as to whether the Minister is happy the conclusions of both of those reports still stand. They are recent and ordinarily he would probably say he is sure they do, but I would be interested to hear if that rationale still stacks up.

Also, in the 2018 report it was commented there was no impediment to both the Irish Rural Link and the Savings Bank Foundation for International Co-operation engaging with the Central Bank of Ireland, the credit union sector or An Post and other private entities to progress any proposals for a new banking force. Has there been even a cursory engagement on that or is the Minister aware of any engagement from banks outside the current market to enter it? Competition, as we know, is the lifeblood of banking, notwithstanding the Minister's earlier comments to the effect that in the European context there is a view the banking sector has too many participants, which one would not have taught is true to the Irish market. He spoke about consolidation and the balance between competition and consolidation and the long-term interests of the economy. I accept that.

I am sure it would be no surprise to the Minister to note that the level of trust in Irish banking is rather low, although it is still around 40%. We do not need to go into the history of that as we all know it. This is not unique to Ireland but the level of trust in banking is rather lower in Ireland than in many other countries. One of the most important issues young people face when establishing themselves is securing a mortgage. With the lower the level of competition, the lower level of trust in traditional providers is of concern. What does the Minister, his Department and the Central Bank view as being the future of mortgage lending? Does he believe, realistically, we are looking at longer term fixed mortgage rates that might be more common in other jurisdictions? Does he have concerns about the EU Single Market for financial services? What will that mean for competition? Is that a concern he has?

The Financial Services Union published a report recently on the future of banking across the island of Ireland. It referred to the fact we still own shares in AIB, Bank of Ireland and Permanent TSB in the context of a public service obligation they might have. That comes back to the original point regarding the iconic buildings and the branches with respect to there being a community use for some of those and engagement with the community on that. That may be an issue that could be examined as we have those shares. Have the recent decisions by Ulster Bank and the plans for KBC changed the Minister's views on the offloading of the shares we have in the other banks with regard to the timescale and plans?

I am not saying there is any solution because this is a difficult area but those are some points I have about an important area for our economy.

I am delighted that the Leader has allowed us this opportunity to make statements on the future of banking as it gives me an opportunity to talk about an extremely important area of finance which has not received nearly enough attention in this country. I thank the Department for acting so swiftly to support borrowers since the Covid-19 pandemic started, with payment breaks for businesses and homeowners. I welcome the scrutiny that our banking sector will face with a regulatory and supervisory framework put in place by the EU. My colleagues will no doubt deal with the KBC and Ulster Bank issue, and the lack of competition in the market for citizens.

For my part, I would like to focus on one aspect of banking which is very much in the future. I speak, of course, of cryptocurrency and the possible impact of a decentralised monetary system on traditional banking. Broadly speaking, a bank performs two economic functions. It operates a payment system and it engages in financial intermediation, lending and investing either the money we deposit with them or the credit they themselves create for businesses, enterprises, households and governments. The second function is the business side of banking. Banks are profit-seeking corporations with stockholders which provide the equity capital needed to start and maintain a banking business. As with any business, there is a level of inherent risk. What happens to the banking system and the economy if many borrowers cannot and will not repay their loans? What happens if, in the pursuit of profits, banks do not maintain levels of reserves and capital consistent with their own stability? Those are questions which, in this country, are no mere thought experiment.

The rise of cryptocurrencies will of course impact on that second side of banking, but it is more the first function that I want to discuss, the operation of a payment system. No modern economy can exist without a fit-for-purpose payment system. It is the bedrock for the exchange of all goods and services. The global use of national and international currencies has satisfied this requirement for decades. Fiat currencies are a tried and tested system which have their flaws but work when instituted correctly. All of this changes with cryptocurrency and its associated technologies, blockchain and its cousin, distributed ledger technology, a combination of which could render traditional banking completely obsolete. The reason for this, in simple terms, lies in the fact that cryptocurrencies use blockchain technology to avoid the need for a trusted third party, that is, a bank. In traditional banking, the banks act as that trusted third party. If I wire you money, the bank takes it from my account and puts it into yours. If it took it out of mine and did not put it into yours, it would disappear. If it put it into your account but did not take it out of mine, I could spend it twice. The so-called double spending problem, first identified in 1982, was solved in 2008 with the advent of blockchain. I will not bore the Minister with the details but I point to Satoshi Nakamoto's 2008 white paper, "Bitcoin: A Peer-to-Peer Electronic Cash System". It is essential reading for anyone seeking to understand the cryptographic design of blockchain technology.

The threat that this poses to traditional banking cannot be overstated. Our banks and our Governments can no longer ignore what is happening with cryptocurrencies. We must adopt them and adapt them or we will be left behind. I am sure, as I have been speaking, that some Members may still be thinking that all of this is a fad and that it will collapse, being the Dutch tulips of our century. I can empathise with that viewpoint. History is littered with failed projects which were heralded as the future. The statement that cryptocurrencies are the future was optimistic in 2009. It was understandably positioned in 2015. In 2021, it is simply the truth.

Each generation is presented with a handful of gold rush moments, times where massive change provides incredible opportunity for those ready and willing to take them. Each of those moments has naysayers. I recall the infamous quote from a Nobel laureate: "By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's." The advent of cryptocurrency is the gold rush of our time, the reprise of the dot-com boom in an entirely new way. Are we ready?

Ireland enjoys a reputation as a tech capital of Europe. Thanks to international IT giants such as Google and Apple, as well as the native start-ups that are gathering momentum and that have accelerated economic recovery and growth in recent years, if anyone is going to be ahead of the curve on cryptocurrency it should be us. When I say "ahead of the curve" I do not mean multinationals, tech giants or offshore funds. They have woken up to this. It took them a while but the big players have wisened up to what is going on. They are going to make their money as they always do.

In September 2017, JP Morgan Chase CEO Jamie Dimon said of bitcoin:

It's worse than tulip bulbs [referring to the 17th century Dutch tulip market bubble] it won't end well. Someone is going to get killed.

That was four years ago. The banking giant recently predicted that bitcoin's price could go above $146,000. Its own strategist led by their managing director said that the cryptocurrency will get immensely popular and bitcoin will soon become the alternative to gold. Former Goldman Sachs CEO, Lloyd Blankfein, said:

Something that moves 20% [overnight] does not feel like a currency. It is a vehicle to perpetrate fraud.

Three days ago, an internal memorandum revealed that Goldman Sachs has created a new dedicated cryptocurrency trading team. One by one, every major critic and sceptic is falling and getting on board before it is too late. Where will Ireland be on the timeline? I am asking this of the Irish banks and the Government. What systems are being put in place to account for the changes that will be brought by advances in cryptocurrency? What research and development is being established and funded to ensure that Ireland is not playing catch-up in the late 2020s? Proactivity by the Government on this is essential. Is the Minister talking to the banks on this? What plans does the Government have to embrace digital currency? It does not get a single mention in the programme for Government, which is a baffling omission. The new frontier is the most clear-cut opportunity in a long time for the people of Ireland to increase their lot. It is no exaggeration that Irish debt could be obliterated if the Government plays its card right in the ongoing crypto revolution. We are talking about generational wealth and the necessary replenishing of the Exchequer coffers following the Covid pandemic and lockdowns. I seek reassurance that in ten years we will not say ruefully that we should have acted. If we do not act right now, we should be able to address this urgently.

Before I begin, I apologise that I must leave immediately after speaking as I have a committee meeting to attend at 2 p.m. I also wish the very best of luck to all the businesses that are reopening their doors today as part of a gradual process. It has been a challenging time. We are looking forward to opening ourselves on 2 June as our hotel reopens its doors. This would not have been possible without the Government supports that we have been given over the past very difficult period for businesses. The viability of all businesses is being challenged during the pandemic but the challenge will go beyond Covid as many of these businesses will struggle to survive as the supports are withdrawn.

While we talk about the viability of businesses, the banking industry is a business and it too must be viable. While we might like to look down on the banking sector and run it down at times, without a banking sector we do not have a society. Therefore, we need a working, viable banking sector now and into the future.

The sector has been challenged by Covid and influenced by other factors. In recent months there has been some very disappointing and devastating news for the banking sector. The retail financial sector is going through a major period of change. Over recent months we have seen major announcements that included the withdrawal of Ulster Bank, the potential withdrawal of KBC Bank Ireland, and further closures of a large number of branches of the Bank of Ireland and a smaller number of AIB branches. These developments lead to the core question of the viability of the banking sector into the future. While the decision made by the Bank of Ireland was a commercial one and I know the rhetoric will be that we are stakeholders of that bank, we have no control over its day-to-day operations. We must examine, however, how the financial sector can evolve from this and become viable into the future.

The sector faces long-running challenges such as negative interest rates, technological changes that are reducing the barriers to entry for a whole range of new entrants, and changing customer preferences as they move more to the digital services while still wanting a traditional branch network to be available. Competing with online firms while coping with high-cost structures poses considerable challenges to the traditional full service sector we have all been used to. If anything, Covid has advanced a cashless society by a decade. We would not have foreseen that we would tap our phones on a machine simply to buy a bottle of water and a packet of crisps in a local shop, but that is the way society is going and we must take all these factors into account.

From my own point of view and that of business, I have seen a local bank and post office close so I know the practical implications for businesses, such as what we do with our cash. All of a sudden cash had to be transported 30 km instead of 10 km, which led to us entering into an agreement with a security firm to collect the cash. These are all things that are changing but that cash element within business is being diluted year on year and is becoming less of a factor.

We all still love to see a bank on main street. One of the greatest losses in the financial sector is the personal touch. Whether you were an individual or a business, you had a connection with the bank manager. Not everything is always black and white. There are some things a bank manager understands about certain locations, businesses and personalities that can make for a more balanced decision on the ability to service a loan.

While I can offer the Minister solutions for the hotel industry, I probably cannot offer him solutions today for the financial services. The post office and the credit union networks give us options. The entrance by credit unions into the commercial and SME markets must be welcomed as part of the Covid response because, as a user of the banks, I know we need competition in the sector and, regrettably, that competition is lacking at the moment. Between the post offices and credit unions, and what is left of the banking sector within towns, we must evolve a model that can keep a presence on our main street. It is vital, even though we are moving away from personal contact, that we keep a presence on main street.

I thank the Minister for spending time here today and for the supports that he has provided for businesses.

During that time, accessing credit from financial institutions has been extremely difficult for those in the SME sector. The sector has not been treated well by the banks. We need to look into this area to see how it can be made easier to access credit and how the process can be made less onerous and strenuous for businesses and individuals.

I apologise that I have to leave for another meeting but I thank the Minister for his time today. The way he is facing challenges in trying to provide us all with a viable banking sector will be critical for Ireland both from a personal point of view and a commercial one. It is vital that both sectors can work and function into the future.

I thank the Senator and offer him my sincere apologies; I was distracted at the beginning.

That is all right. We will forgive the Leas-Chathaoirleach this time.

Is é sin mo chéad seans labhairt leis an Aire go hoifigiúil sa Teach seo. Is deas é a fheiceáil agus gabhaim buíochas leis. I thank the Minister for his time. I can only imagine what his job is like. I will keep it brief. This year has marked a dramatic change in the banking landscape in Ireland. With the exit of Ulster Bank and KBC Bank from Ireland, as well as the decision of Bank of Ireland to close 88 branches, which has serious affected my county and, I am sure, many others, the need for a new force in banking has never been more keenly felt.

When looking at future policy on banking, it is important to look at who has been most negatively impacted by this structural failure. With regard to SME financing, as spokesperson on enterprise, trade and employment, I am very aware of this sector. A lack of credit has continually been a barrier to growth for many micro, small and medium enterprises. According to the 2019 Indecon report on public banking in Ireland:

Despite the overall levels of new lending there has been a decline in the application rates for bank finance by the SME sector. Application rates for bank finance were 35% in March 2014 and declined to 20% by September 2018.

With regard to financial inclusion, Internet banking is not a viable alternative for some people who cannot access broadband and for some customers with disabilities who may need person-to-person assistance. I spent nearly an hour on Saturday evening trying to help a 77-year-old find out how much money he had in his account. The large banks do not send out statements any more. His bank refused to send him a printed statement and he was told he would have to bank online. I had to set up an online banking account for him but he could not remember the password. Having to deal with things online is very stressful for older people. What annoys me most is that they are probably the most loyal customers the banks have had because the older people are, the longer they have been using their bank account and the more fees they have paid. The thanks they are getting is that there are no human tellers and they are told to do everything online. In many cases, they cannot access the Internet. They have no clue. I could not figure it out for this 77-year-old and I have a degree in computer science. There is something radically wrong there. We are not serving the oldest, who have paid the most to the banks in fees.

With regard to regional access, the removal of banking facilities from communities has an immediate impact on financial inclusion. If everything is being moved online, we have to admit that is what is happening and ask what we are going to do to help deal with it. In some ways, it is great to do everything online because we have to travel less and everything is at our fingertips. I do not find it to be a problem but not everybody in rural areas can do these things online and not everybody can get to their local bank branch because there are now fewer of them. Personally, just a few weeks ago, I discovered that I can get my wages paid into my post office account. At that stage, I decided to try to do as little as possible with the bigger banks and to work with my local post office. I can do that now. I can get my wages into my post office account. An Post will give me a debit card and that is all I need. That was interesting for me. I had not really thought about it before. I presumed one could not do that. Perhaps we need to look at that. Perhaps we have not looked at alternatives that might be better for us and our communities.

Mario Draghi, the then President of the European Central Bank, ECB, pointed to the structure of Ireland's banking system as the main reason for the continuing high cost of mortgages in Ireland at a recent appearance before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. With some of the most expensive mortgage rates in the European Union, and now only two large lenders, the market has failed to provide adequate competition for Irish customers. A principle of regional banking would see money saved in the region of the bank lent out in the same region. This is something the Green Party has been on about for years.

I remember when I joined first, maybe 20 years ago, there was talk about localised banking services and we have recently launched a policy on that. I commend my Green Party colleague in Louth, Mark Dearey, for his work on this over many years. I thank him for being ahead of the game.

This model has four differences from that relating to traditional banking. First, it has a business model that is profit-making but not profit-maximising. A public bank must have profits in order to survive and grow but the core goal of the public bank is to create value and sustainability for communities. We now have an opportunity, due to these banks leaving, to be creative and to find a new model that has worked in other countries. Second, it has a defined regional basis. A public bank has a clear geographical area within which it operates, which allows it to gain in-depth knowledge of the area and build lasting relationships within communities. We see this happening less and less, apart from the odd token sponsored event by a bigger bank, and the bigger banks are definitely more disconnected from communities than they used to be. Third, it has a decentralised, network structure. Each bank would be independent, with decisions taken locally, and the network would jointly own a service provider that would allow efficiencies and uniformity of products, costs and controls. Fourth, it involves a stakeholder model. The public ownership model allows banks to avoid focusing on shareholder value and speculation and, instead, to focus on the real economy.

I want to mention several points the three parties agreed in the programme for Government. We said we would introduce SEAR in order to deliver heightened accountability within the banking system. We have a financial regulator, but we need to get this right. We are all scarred from the history of the past in banking but the present Government cannot be blamed for that. It is up to us to try to make things better and maybe give people more confidence in the whole banking sector. As a Government, we have committed to prioritising green finance strategic actions that are developed in line with climate justice targets and sustainable development goals. We have committed to enabling and supporting the credit union movement to grow, and to supporting credit unions in the expansion of services to encourage community development. In many smaller towns and villages, we have good credit unions where we no longer have banks.

We could talk at length about An Post. We all know the story of the closure of post offices but the more services they can provide, including banking services, the more chance there is of them surviving.

I spent an hour and a quarter on the helpline just before I came to the House, trying to see what it would be like for an older person doing this online. I spent an hour and a quarter and pressed lots of buttons, but nobody answered the phone. We have to do better, especially for older people.

I welcome the Minister. It is good to have this opportunity. It is timely to debate the state of banking in this State and it is certainly overdue.

I welcome that the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach has taken up a number of Deputy Pearse Doherty’s suggestions, including this issue of the level of capital that our banks have to hold, and is asking the Central Bank to carry out a further assessment on the appropriateness of the current situation.

As others have mentioned, we have had quite a devastating last 12 months, in particular in retail banking. The announcements by Ulster Bank and KBC have been hammer blows, not just to staff and customers, but to the banking sector as a whole and, in particular, rural Ireland. It is going to reduce competition and increase interest rates for consumers, or that is the likely direction of travel. The State plays a major role in banking due to its shareholding. In reality, we are regrettably seeing and feeling the aftershocks of the financial crash of 2008. The reason Ulster Bank is withdrawing from the market is to free up capital trapped as a result of that crash. However, in dealing with the aftermath of Ulster Bank's decision, there is an opportunity to create a third force in banking to challenge the duopoly of AIB and Bank of Ireland. Permanent TSB is clearly the bank to take up that mantle. Does the Minister agree that we need a third force in banking, a point that has been echoed by others across the Chamber? If so, what steps is he going to take to enable that to happen?

One thing I want to emphasise to the Minister is the consistent call Sinn Féin has made in regard to establishing a forum on the future of banking. As the Minister knows, we have been calling for this for some time. It would bring together all of the stakeholders and external experts to assess the state of our banking sector and the problems it faces, and to chart a path for its future.

If I am honest, I had hoped the Minister's speech would include a commitment to do that.

We cannot simply keep reacting. There has been a great deal to react to in the past 12 months. I would have thought it was an eminently sensible suggestion to pull together a forum on the future of banking. Every speaker has expressed concerns about the future of banking and how the sector should serve regional and rural communities in particular. Surely it is past time that the Minister committed to such a forum. I would be greatly disappointed if he does not give us a positive response. Either way, I appeal to him to clarify his position in that regard.

I call on the Minister to make a clear call on KBC Bank in particular to engage with the Financial Services Union - the union representing KBC Bank staff - on the difficult circumstances staff now face. There should be no difficulty with the Minister making that call and it is important we hear it.

It is worth listing the lenders that have left the Irish market since 2008. They include Bank of Scotland Ireland, Anglo-Irish Bank, which was no loss, Irish Nationwide Building Society and Ulster Bank. We have also seen devastating Bank of Ireland closures this year. The situation continues to shift rapidly. The Minister is clearly trying to manage the situation but it seems as if he is reacting constantly, and I mean that respectfully. A forum on the future of banking is a means for all of us to take stock and plan a more effective future for our banking in these challenging circumstances.

I raise the Bank of Ireland closures in particular. In the teeth of the pandemic the closure of 103 branches throughout the country was truly shocking. The bank intends to close 88 branches in the South and 15 in the North, which is more than one third of branches nationwide. There were seven closures throughout the county and city of Limerick at Abbeyfeale, Askeaton, Bruff, Caherdavin, Rathkeale and Roxborough as well as at the University of Limerick campus in September.

This has been devastating for Limerick and the mid-west. I had a long engagement with folk from Abbeyfeale. They spoke of how the town has a host of empty retail spaces. It was devastating to hear the news that one of the key anchors of the town will now leave. Again, that is why we need to see a co-ordinated response from the Minister, one that includes communities and vital stakeholders. That would ensure we can rebuild confidence in those areas.

Bank of Ireland made the wrong decision at the worst possible time. It has told us that services will be available through An Post branches. As the Minister knows, many of these branches offered a full suite of banking services and it is simply not possible to offer the full suite within the post office network.

Services continue to be taken from parts of regional Ireland when we need regional development. Without infrastructure and services like banking, it is difficult for jobs and opportunities to stay local. Economically, we are being dominated by the east coast and Dublin at the expense of parts of the west, including Limerick.

It is interesting to note that in Britain the regulator called for banks to pause all branch closures during the pandemic on the grounds that closures would hurt vulnerable customers who would be unable to prepare effectively for the transition to online banking, especially given that they cannot visit their branch during public health restrictions. Clearly, Bank of Ireland did not share those concerns.

I acknowledge, as did Senator Casey, that the Minister cannot direct or control the bank. As the largest shareholder in Bank of Ireland, I appeal to the Minister to call on the bank to reverse its decision. It was made in the middle of the pandemic and should be halted until there is proper consultation. I appeal to the Minister to make that call today.

My final point relates to public banking. It is noticeable that several Senators from different parties raised this matter. Sinn Féin previously published a document looking at how public banking could work in Ireland. The issue of public banking has been on the agenda for several years. The withdrawal of Ulster Bank from the Irish market and the closure of Bank of Ireland branches throughout the country highlight the urgency of examining the possibility of a new public banking model. I acknowledge that public banking was dismissed by the then Government following the Indecon report of 2019. The report found there was not a compelling case for the establishment of a State-owned public banking network because commercial banks were fulfilling the role. That is no longer the case; this is the point. There has been a fundamental change in the marketplace with the withdrawal of Ulster Bank and KBC Bank as well as the vast reduction in Bank of Ireland branches.

Senator Kyne raised a question earlier about the Indecon report. It is now out of date because the situation has changed drastically. I hope the Minister will recognise that and respond positively to the new situation.

The credit unions and post offices have an important role to play. The failure to expand sufficiently the financial services provided by them has minimised their growth and profits. One cannot help but look at the credit unions and see the vast untapped potential that is still there. How can we get the money sitting in credit union accounts actively working for our communities? More can be done. This brings me back again to the future of banking forum for which we are calling. This is the opportunity the Minister should embrace to work out a more consolidated, sensible and inclusive pathway for banking in the future of this State.

The Government must engage with credit unions and post offices to explore the possibility of utilising their existing infrastructure for a new public banking system. The Kiwibank model, whereby banks and post offices share the same buildings, is an example of how existing infrastructure can be used for banking purposes. I am just out of time. I look forward to the Minister's response.

Thank you, Senator Gavan. Your contribution was a model of timing. It came in at eight minutes. Our next speaker is the Seanad Deputy Leader, Senator Chambers.

Banking in Ireland is changing at a rapid rate. The pandemic has accelerated that pace of change. People of all ages, from the personal user to the large commercial customer, are banking online. The banks are responding to this change, understandably, but the impact on customers is already evident. A reduction in face-to-face service and less competition for products like business loans and mortgages are really concerning customers because they wonder about the future of the banking sector in their country. The State must act and not just react. We need to try to get ahead of these changes and assess the impact on citizens so we can protect people while ensuring a functioning banking sector for our country. This is vital for our economy to grow and for people to be able to access the financial products and services they need.

The retail financial services sector is undergoing major change at this time. In the past two months we have seen several major announcements, including the withdrawal of Ulster Bank, the potential withdrawal of KBC Bank Ireland and the forthcoming closure of a large number of branches by Bank of Ireland and a smaller number by AIB. Branch closures are a real concern for many communities, which are finding the pace of change unnerving and unsettling. People are worried for the future of their communities and what this means in the bigger picture for small towns across Ireland. Without basic services in towns, footfall decreases and other businesses are impacted, so the public are looking for leadership in this space and a clear plan for reimagining community banking across the country.

The announcement of Bank of Ireland's partnership with An Post is welcome. The fact that Bank of Ireland customers will be able to access services while the post office network is maintained is a really positive step forward. It shows us that the debate we have been having recently on protecting the post office network is a vital one to have because that network, which has been in place for many years, could now provide us with one of the solutions we need to deal with the crisis in our banking sector. We need a sector that offers customers choice and we need competition to make sure that people get the products and services they need but at a fair and reasonable price. We must therefore manage the fallout from these decisions and build a sector that delivers for our people, is diverse, modern and progressive, moves with the times and deals with the technological changes but at the same time provides to people a customer service that is not all about machines with no personal interaction any more.

As to what is concerning people, I do not think it is just about the loss of the physical premises in their towns or the fact that they will have to travel that little bit further. Change makes people unsettled and upsets them, particularly when they do not know what is replacing what. What we have to do for our citizens is provide reassurance that we know that change is happening and that the pace is much faster than we had anticipated but that as a Government we will put a plan in place to make sure that people are protected, that they will still have access to financial services into the future and that we will protect the existing financial networks in order that people will have access to services as close to home as is possible, taking into account that many people - not everybody - are moving online and that some people will do most of their banking online but still want the option to meet a bank manager or bank worker if they need to talk to somebody face to face. It is about providing that balance and understanding that people are not against change as such or against embracing technology. It is fear of the unknown that is upsetting people. So much change in such a short time is making people really nervous. People are also worried about the bigger picture: the impact on their towns, villages and the areas in which they live and what this means for local services.

This is just one of many changes that people, especially those in rural Ireland, are grappling with. Again, it is the concern around whether our towns will still be the way they are now in ten and 20 years or if sons and daughters will want to live there or if they will have to go elsewhere. Will we be able to attract new people into our towns and villages if we are not providing basic services? These bigger-picture issues are really on people's minds when they see these announcements, and so many of them in such a short space of time.

People are also worried about the cost of financial products. People are very worried about business lending. Effectively, Ireland is down almost to a duopoly for business lending and people are asking what this means for small and medium enterprises. This is where the credit unions and post offices can really step in to provide that much needed competition. Citizens are worried about the cost of mortgages. For quite some time we have been discussing the need to have increased competition to bring down those interest rates, yet we see banks pulling out.

When considering the housing crisis, first-time buyers who are saving right now are concerned about whether they will get a mortgage in five years' time. People fear that the cost of borrowing for personal loans will increase also. We fear that our banking sector is not operating at the level it needs to be operating at in terms of efficiency, customer service and providing value for money people want. It is about bigger picture stuff and what it means for people day to day.

My colleague Senator Casey referred to the face-to-face interaction. We do not want to get to a situation where all of the time we are dealing just with machines. If we need to discuss the grey areas in finance that are not always black and white we still want to have the person to talk with face to face, which is a flexibility and discretion that is really valued.

I welcome the Minister. I wish the Minister well in his chairmanship of the board of governors at the European Bank for Reconstruction and Development.

Over the past 20 years we have never seen such changes in banking circles and in banking products. It is a huge change for everybody. Quite a number of years ago, I told the Houses that a new, additional banking facility had opened in Castlebar. It brought to 14 or 15 the number of banking outlets in Castlebar, which at the time was a small town of some 16,000 people. This was 15 areas where a person could get funding or loans. Now we are seeing the opposite and the number of outlets where one can get finance is dwindling by the day, with closures of Ulster Bank and KBC and with a reduced number of Bank of Ireland branches. We have also seen huge changes in products and we have gone through the whole area of the tracker mortgage scandal.

In his speech the Minister referred to bringing in legislation to regulate the banks under the senior executive accountability regime programme, SEAR, which will be provided for in the Bill. This will bring accountability to staff and board members of banking institutions. Heretofore it seems to have been the four walls of a bank that was making decisions and not the personnel at all who were working in the bank. In the context of the Minister's speech, does he believe the Central Bank has failed in regulation over the last years? When I was a member of the finance committee we had to go fairly hard on the Central Bank to get it to interact with all the banks on the tracker mortgage scandal. It was a scandal that created an awful lot of hardship for many thousands of people. It put some people out of their homes. This is why I raise the question with the Minister.

On mortgages, I believe we should have 50-year mortgages. I do not see why any one family should have to pay back the mortgage in its time in a house over a period of 20 or 30 years. This could be extended to 50 years. The second family coming along or the next person to take over the house could continue on paying the mortgage.

In light of the housing crisis and in view of the changing banking products that are available, a 50-year mortgage product should be possible. This is particularly the case now that banks and governments can borrow very cheaply, and for the long-term at that. There is no reason such products could not be designed, particularly for people who want to buy a home and possibly not pay the loan off over one generation but over a number of generations. I remember taking out a 20-year mortgage, as did everybody around my time. Before that, local authorities offered a 12-year mortgage or loan. There was no problem repaying the loan over that number of years but it is now an impossibility for young people starting off to repay a loan, even one taken out over 25 or 30 years. These are products that the Government and banks will have to look at.

I ask the Minister how the personal contract plan, PCP, financial product is working out so far? He is also bringing in legislation on that aspect of banking. In my view, PCPs create an expectation and place huge pressure on families to buy products and cars they may not be able to afford. I welcome that the Minister is looking into this area and will bring in legislation regarding it. There are many other banking issues I would like to speak on, particularly competition and how we sometimes have too little and at other times too much. We have too little competition at the moment and that will be a problem in future.

I welcome the Minister to the House. It is the first time I have addressed him since this Government was formed. I welcome the reopening of the country as it is happening in a clear, managed way. The calm manner in which the Minister has dealt with questions on live media over the past 12 months about the state of the economy and the damage Covid is doing to it has been remarkable. It encourages a certain amount of confidence in people and helps them to relax. I congratulate the Minister on that.

We are talking about banks today. When I was growing up, the only time I ever saw my father wear a suit was when he was going to a funeral or to the bank. I remember my first encounter with the bank as a young corporal buying my first house in Galway. I remember how the bank manager bent over backwards to do everything to help me. Ten years later, when I had run a business into the ground and lost everything I owned, that same bank manager held my hand as we walked through a liquidation process. In the end, his bank took my house but at least I was able to talk to him. I remember the day I told him I was broke. He sat me down, ordered coffee and biscuits and asked how we were going to solve the problem.

I heard previous speakers talk about banks being about the community. They are not; they are about shareholders now. The community no longer has a place. The banks will do what their shareholders need them to do. I pity people like the Minister who has to deal with these people. We saw in 2008 how they lied through their teeth about the state of the economy and their own balance sheets. They lied through their teeth and made the citizens of this country pay for the banks' recklessness. We talk about competition but I do not want to see the competition we had in the crazy mid-1990s right up to the mid-2000s again. I do not want to see banks coming into this country to suck the life and soul out of taxpayers and the hard-working people of this country. I want the Minister to control the system as best he can.

While it is bad that we are now down to three banks in this country and competition will be limited, what is even worse are the limitations we are putting on credit unions. I was recently told that the maximum amount that can be held in credit union savings now stands at €30,000. People living in rural Ireland who do not have access to a local bank branch may have access to a credit union.

We need to give the credit unions more space. I heard my colleague, Senator Kyne, speaking about the Sparkasse system. We need to look at that a little more carefully to see where we are going in respect of community banking. I have been to Germany and have looked at some of the community banking systems there and how they have been involved in the development of infrastructure in the cities, not just in the provision of personal loans and mortgages. They have provided infrastructure and seed capital for factories and have been involved in every aspect of community. That is what we need in this country.

I am at an age when I have been using and teaching technology for all of 25 years before I came in here. It still amuses me when I ring my bank and I am asked to press "1" for this and "2" for that, and to key in then my membership, account number or personal access PIN. You go through all of these steps eventually to get a machine that will say it will provide a new password for your Internet banking account. You never get to talk to a human being any more. Where are the bank managers who used to have human empathy and are going to help the small businesses of this country get back on their feet and who have been crucified over the past 12 months, albeit the Government has supported them well? They now need their banks to step up to the plate to support them for the rest of the time. We need a change of view and, as my colleague, Senator Burke, said, we need the Central Bank to be a little bit less academic and a little more human in its approach.

Senator Burke also mentioned personal contract plans, PCPs. I wonder is that the next bubble we are waiting to burst, and if it does, where will that land our economy?

I congratulate the Minister on what he is doing and I look forward to seeing him work us out of this Covid-19 disaster.

Cuirim fáilte roimh an Aire. Ba mhaith liom an easpa seirbhísí baincéireachta do lucht labhartha na Gaeilge a phlé inniu leis an Aire Airgeadais. Faoi láthair ní féidir le daoine a gcuid baincéireachta a dhéanamh trí Ghaeilge más mian leo. Tá sé scanrúil i ndáiríre nuair a smaoinímid ar an ról lárnach atá ag an Stát sna bainc seo atá timpeall na tíre. Níl na suíomhanna Idirlín nó na haipeanna ar fáil trí Ghaeilge. Tá súil agam go dtabharfaidh an tAire aitheantas don easnamh seo. An bhfuil aon phlean ag an Rialtas chun dul i ngleic leis an bhfadhb sin? Ba cheart go mbeadh na príomhbhainc ar a laghad in ann seirbhísí ar líne a chur ar fáil trí Ghaeilge. B'fhéidir gurb é an rud ba chóir tarlú anois ná banc pobail a bhunú chun freastal ar lucht labhartha na Gaeilge. Rinne na Seanadóirí Chambers, Garvey, Gavan agus Craughwell tagairt do ghluaiseacht an bhainc pobail freisin agus táim ag tnúth leis an bhfreagra ón Aire. Tá sé an-tábhachtach dúinn go bhfuil seirbhís ann do lucht labhartha na Gaeilge.

I welcome the Minister to the Chamber and thank him for all he has done in the past year during this crisis. Senator Craughwell was speaking about someone who shows a presence of calm during a crisis and I do not think that there is anyone who has done that better than the Minister over the past year. It has been of great importance that when we have gone through a crisis that no one has experienced before, leadership has shown a calmness and reassurance that we are going to come out of it.

I wish well all the businesses that have opened up today, especially in my own county of Tipperary. It has been an incredibly difficult number of months. While these businesses very much appreciate the support that has been given to them by Government and by the Minister's Department, in particular, with the employment wage subsidy scheme, EWSS, and the Covid restrictions support scheme, CRSS, they want to make their own money, to be able to work, and to have their business. Most people who work in businesses like that, be they retail, restaurants or pubs, treat their business like a family member.

They have real passion for what they do. When we emerge from this crisis over the next number of months, the challenge will be moving from the State supporting the businesses to them being able to support themselves, with the backing of banks.

It is on that point I have a particular question with regard to the credit guarantee scheme set up by the Government. Under the scheme, the Government supports businesses that are struggling through the Covid-19 pandemic with a loss of income of 15% or higher by supporting loans up to 80%. There has been low take-up of the scheme. I welcome the fact that the Minister has extended it to the end of the year. However, perhaps he could expand on what options there are to encourage more businesses to take it up. Is it an awareness issue whereby we must promote it more or does the Minister believe that with businesses reopening now and supports altering or finishing, this might provide an opportunity for businesses to take up the scheme? It is a good scheme and it would support many businesses if they chose to take it up.

My native county of Tipperary had the disappointing news from Bank of Ireland that three branches are due to close in Cahir, Cashel and Templemore. All three branches are in the heart of the towns and have provided great service over a long period. Times are changing and people understand that, but the issue is what we can do in the future with buildings such as those that are in the centre of towns. I have written to the chief executive of Tipperary County Council, Mr. Joe McGrath, asking him to consider alternatives such as having remote working hubs in those buildings. Obviously, it is quite difficult for county councils because they have had challenges with regard to funding over the past year or two, but is there an opportunity for the Government to engage with Bank of Ireland about such buildings as options for the Government to purchase in the future and to consider them for remote working hubs? In addition, such closures create more possibilities for either credit unions, and there are some fantastic credit unions in Tipperary, especially in Clonmel, or post offices. Does the Minister envisage opportunities for post offices and credit unions to take over some part of what is left after Bank of Ireland and KBC Bank Ireland leave areas? I believe there are. A large number of people like having that service in their community, and certainly so in Tipperary.

There is a final point I wish to mention. We seem to be in a strange situation at present in terms of mortgages. There are more people applying, and being approved for, mortgages than ever. That is welcome. However, there is the problem that small developers or builders - I am not referring to big developers by any stretch of the imagination - who are building three, four or five houses at a time are struggling to get loans from banks. What does the Minister envisage in the future? Banks are clearly supporting the opportunity for somebody to buy a house, but they are not supporting the opportunity for the builder to build the house. How can we square that circle? There are many complexities in the housing sector and many suggestions have been fired out all week on how simply it can be solved. If that was the case, it would have been solved a long time ago. Certainly, however, banks have a responsibility to support the sector and small builders to start building, especially in areas outside Dublin. I would like to hear the Minister's views on that.

I thank the Minister for coming to the House for this discussion. The theme of the statements is the future of banking but, with the exception of Senator Keogan's comments, much of the discussion has been about the banking model that has existed during the 19th and 20th centuries. If the pillar banks of Bank of Ireland, AIB and Permanent TSB continue to operate as they do now, I predict that they will not exist in the 2030s. Those banks will be finished; they will be the Kodak of the financial sector.

The challenge for those banks is to reimagine the digital services they will provide. I am not particularly optimistic, given the performance of the banks to date. In the area of an instant payment system, all the other banking operators in Europe are trying to develop a Europe-wide system, while in Ireland we have seen the banks clubbing together for an Irish-owned system, which will not be of benefit to consumers. I agree with Senator Craughwell that banks are not about serving communities; they are about serving their shareholders. In their approach to digital, the Irish banks have been particularly poor. In relation to where they are going, Ian Guider had a good piece in yesterday's Business Post where he noted that for any of us who have current accounts there is a flat monthly rate of €6 and that will be a floor. The banks will continue to look at increasing those charges. Ultimately, it is the consumer that will make the decision as to where he or she wants to go. Consumers are leaving the traditional banks in droves. They are moving to Revolut, which has more than 1 million customers, and N26, which now has about 200,000. We are moving towards an era of decentralised finance.

I agree with Senator Keogan about cryptocurrencies. The cryptomarket cap crossed over the $2 trillion mark on 21 April. Regarding decentralised finance, we are now looking at a global market of US$42 billion. This is where finance is going. In terms of offering peer-to-peer loans, savings bonds and all the traditional products people are looking for, consumers are making the choice to shift in a different direction. Colleagues talk about the impact on main streets of branches closing and I have seen it in my home town and others. The best illustration that there is no future for retail banks is not the small town branches but the third level campuses. AIB has just closed its branch in University College Dublin, UCD. When I was a student, the banks would kill each other to win the franchises there. The traditional retail model is gone.

As for trying to help the other retailers on the main street, I will outline what will happen in a few years' time. If the Minister or I want to buy a new shirt, we will go for the retail experience in our local menswear store and stand in front of a machine that will measure us. We will use our phone and pay through a digital currency from our digital wallet. That is how the payments and everything will happen. The best thing to be done for those businesses is to abolish commercial rates, which is a completely unfair tax that penalises main street and high street stores working against online competitors.

A number of crucial issues around the future of finance and banking need to be addressed, particularly around regulation and control. When Facebook proposed introducing the Libra currency, there were serious questions. The tech giants already have a hell of a lot of power. If they start to move into the digital currency environment, there are serious questions for the Government and others to address.

Nationally, we need to look at some of the issues around the Central Bank. All the Central Bank's website gives is warnings about cryptocurrency and blockchain. There does not seem to be a strategy. We need clear regulatory and legislative rules that will allow for innovation in the blockchain space. We need a regulatory sandbox to allow new companies to emerge. The Minister should amend the functions of the Central Bank in order that one function is about encouraging competition in the banking market. Unlike other central banks, it does not have that function. China has already talked about introducing a digital yuan and as the Minister is aware, there is a decision to be made at European level. I support the introduction of a digital euro but it is important that we start to have this conversation.

If the forum on the future of banking becomes a forum purely for the preservation and protection of the existing banks, it will fail. We need to put consumers at the heart of what we are doing. Arguably, the biggest piece of financial services innovation we have seen coming from this country has been Stripe from the Collison brothers. I would rather have people like the Collisons in charge of the forum on the future of banking. I want young people involved but the Minister has to be imaginative. This is about the future of banking, not the protection of the existing banks.

I will share two and a half minutes with Senator Ward.

I welcome the Minister. It is great to have him in the Chamber to update us on the future of banking. Today's world is different compared to the world of one or two years ago when we had an economy with close to full employment and everything had been done to bring it back to financial stability.

The Minister spoke about how he had acted to support businesses and people in terms of banking over the past year. The payment breaks were welcome and had an impact. The Minister also spoke about senior executive accountability under the SEAR and how we needed to rebuild trust. Consolidation of competition points to heavy regulation of the banking sector but also raises concerns about competition. How does he propose increasing competition in banking over the next one to two years?

Speaking as someone from Roscommon and Galway, this is about credit unions and post offices. There have been local closures and banking is changing. Technology is important and it is great to see National Broadband Ireland's plan being rolled out. Would the Minister believe that half of all premises in Roscommon are in the intervention area? Some 3,000 of those have now been surveyed. Broadband is crucial and we need to see the roll-out happening over the next one to two years.

That we have a high level of household savings has been mentioned. This morning on Radio 1, the Irish culture of investing in property was discussed. How can we encourage investment in equity as well? I worked in innovation and with start-ups previously. How do we support Irish businesses, including start-ups and entrepreneurs, and encourage people to consider that type of saving? Innovation is how we will develop.

There was a jobs announcement for Roscommon and east Galway today. Just as the economy is slowly opening up and bringing back hope, we saw an announcement of 50 jobs for Roscommon and 20 for Galway. There is hope. Businesses are doing their best and are pulling ahead. We need to support them and ensure that they are competitive and innovative.

Cuirim fáilte roimh an Aire. Aontaím go hiomlán leis na Seanadóirí a dúirt gur ceart go mbeadh daoine agus custaiméirí in ann a gcuid gnó a dhéanamh leis na mbainc trí Ghaeilge, más féidir. Tá sé an-éasca do na bainc rudaí a chur ar bun do dhaoine mar sin. Tá sé sin an-tábhachtach ar fad.

At one level or another, our banking system is dysfunctional. The Minister and I have had this discussion a number of times. Part of the dysfunction is that we also protect people in their homes. That is tremendously important, but we must find a balance somewhere between the fact that the banks occupy a very privileged position in our economy and the fact that they are not providing a service that they should to the citizens and residents of this country. There is too much of a gap.

When the Tánaiste appeared before us the week before last, he mentioned that we should be considering using credit unions as a route to a community banking model. Mention has been made of Germany's Sparkassen model. Regrettably, I do not believe it would fit in the short term. It would require a significant amount of investment and time before it would be ready to go on stream. Local authorities in this jurisdiction do not have the requisite powers to operate in the way they do in Germany's decentralised federal system. We cannot simply transfer the model. However, we have a network of credit unions throughout the country. They do good work, meet the gaps left by the pillar banks and provide credit and services to people in communities. There is room to expand the remit of credit unions and give them the space to provide more services, including mortgages. Although they can provide mortgages in certain instances, it is only up to a certain threshold that in, for example, the Dún Laoghaire area is far short of what houses cost.

I would love to hear the Minister say that we can consider a much broader banking model.

The Central Bank needs to be as much a consumer advocate as it is a regulator. At the moment, it is, in my respectful opinion, doing neither as well as it could. We need to agitate for the people who need banking services in this country and we need to create banks that serve the community and deliver services that people need as local businesses, but also as individuals who want to buy houses and have homes.

I thank the Minister for coming to the Chamber to address us on the future of banking in Ireland. We all know there has been a flurry of activity in the Irish banking market and in the world banking market in regard to the development of cryptocurrency. As legislators, we have to ensure that we put consumers first and that we have the consumer's back, not the bank's back. It is our job to do all we can to make sure consumers get the best possible deal.

Like other speakers, I want to speak about the two high-level banks that are leaving the Irish market, KBC Bank Ireland and Ulster Bank. As we all know, both banks have, or will, sign memorandums of agreement. Those deals are subject to approval by the competition regulator, but it is important that we, as legislators, and the Minister for Finance ensure that the Central Bank keeps an eye on these transactions and that the banks put the consumer to the fore.

In his opening statement the Minister said that in the European context, there is a view that the banking sector has too many participants and there is a need for them to consolidate. That is not the case in Ireland. As we know, there are too few banks in Ireland. The rating agency Fitch predicted that both lenders could strengthen their pricing power and leading positions in certain domestic lending institutions on the back of these deals. It is worrying that there will be an abuse of a dominant position in a market. The financial regulator and the Competition and Consumer Protection Commission need to be acutely aware of this.

As stated by many of my colleagues, we do not have the luxury of being able to attract European banks to Ireland. In terms of interest rates across Europe, Ireland is the second highest at 2.7%, the average being 1.2%. In Finland, interest rates are as low as 0.7%. What are we doing wrong? Is it the case that household arrears and the court processes around that are keeping interest rates here high? I do not think that is correct. I would welcome the Minister's thought on the matter. People deserve due process and the organisations supporting consumers who are in arrears deserve to be appropriately funded in order that cases can be heard in a timely and efficient manner. We are hearing a great deal about backlogs. Again, is this the only reason other banks are not coming to Ireland? I do not buy that.

There are other banks in the Irish market. For example, Avant, in the case of a loan to value of 60% one can get a 1.9% interest rate. Dilosk is also servicing mortgages, but for the buy-to-let sector. These mortgages are financing those who are wealthy and have a lot of equity in their homes. We need a State banking service that all people can access, and which lends, not at high levels, but at moderate European-average interest levels.

My second point is in regard to the two pillar banks, AIB and Bank of Ireland, and negative interest rates. We know that negative interest rates have been applied by the European Central Bank and that these are being passed on to Irish consumers. Both AIB and Bank of Ireland previously applied negative interest rates on current accounts over €3 million but that is changing. AIB and Bank of Ireland are now moving to apply negative interest rates on accounts over €1 million. This will affect many small and medium-sized businesses around the country who, while they have money in their current accounts, have been hit massively by Covid and will need some insulation as, as always, we do not know what is around the corner. It is wrong that the banks are applying these charges on small companies. Solicitors' accounts, in which money is being held for clients, will also be affected in terms of the application of these negative interest rates on client accounts over €1 million. The sum of €1 million sounds like a lot of money, but for a small solicitor's practice all of these charges add up.

The third issue I want to raise is mortgage switching, which is something we can do in the short term. We should encourage consumers to switch mortgage lenders, in particular those who have had mortgages for a lengthy period because they will have a lot of equity in their homes. They can switch to other providers like Avant and Dilosk and get a better rate.

I do not think people know that this opportunity is available to them. It might be up to the Central Bank to let people know that mortgage switching is available and will reduce their monthly costs. A significant factor that holds us back from switching mortgages is the fact that it is so difficult, there is so much paperwork involved and there is no legislation in place to do e-conveyancing. The Minister needs to look at that in conjunction with the Minister for Justice to ensure that e-conveyancing is put to the fore. E-conveyancing is about ensuring consumers do not face massive legal fees and that the process of remortgaging is easy and swift and that it is not slowed down.

I have covered the issue of the state bank. What is the Minister's view on the repossession question? Does he believe European banks are not coming to Ireland because of the repossession issue and the difficulty in repossessing homes? Is that the problem? I know we all think it is but I would love to hear the Minister's detailed view on that?

There are many people in this House who have much more experience in the area of banks, credits loans and loans. I turned 30 a couple of months ago. My friends are either engaged, having children or looking to get mortgages so that is the stage of life I am in. None of those things is happening with me yet but I am getting to that stage.

The Senator got his hair cut though.

I did get my hair cut. I thank the Minister for noticing. That is very kind of him. I am in flying form today as a result of it. My point is that many of my friends are looking at trying to get a mortgage. It is the biggest issue for my generation. We are talking about people who are well educated, work really hard, have good salaries, pay more in rent than they would if they had a mortgage and are more than capable of paying back a mortgage but cannot get any sort of mortgage from a bank in the first place because for whatever reason, the bank does not have the appetite for it. When we look at how much the pendulum has swung from ten or 12 years ago when people of my generation were in their late teens or early 20s and people could get a mortgage without a problem, we can see the pendulum has swung the other way and it is very difficult to get a mortgage. What people of my generation are asking for is the opportunity to get a mortgage. It is a fair message to send to people that if they work hard and have a good job, they should be able to get a mortgage, particularly if they are already paying through the nose in rent.

Others have mentioned it in terms of credit unions or more competitiveness. The problem we really face is that there is no competition in the market and the few banks that are still here can charge what they want and do what they want. We could look at credit unions and I go back to people who are more experienced in this matter. I went to a bank recently for something but there was zero appetite on its part. Some of that was because of my precarious state of employment. Being in politics was one reason. I then went to a credit union to get a commercial loan instead and found there was huge appetite for that. The credit union was more than happy to do it and I got a really good rate. Credit unions are just dying to lend money to people. They want to be able to do it and if the Government could try to make it as easy as possible for that to happen, it might be a good idea to at least look at.

We talk about the future of banking but it would be good to have a conversation about the future of lending. How do we introduce competitiveness into our market? How do we make it competitive for the consumer and allow him or her to shop around and get a good mortgage in the first instance? How do we reintroduce that competition in the market for first-time buyers? If the Government can do that over the next three or four years and say we want to make this market more competitive and easier for first-time buyers, we will doing the people of my generation a huge service. I would be interested in hearing the Minister's views on that.

I am glad to see the Minister in the House. When I was in the Dáil and I chaired some sessions, we used to meet far more regularly but I have to say that his courtesy to me when I was in the Chair always stood out and I always appreciated that.

The Minister concluded his contribution as follows:

Looking to the future, the Government wants to ensure that the banking and financial system is one that will effectively contribute and support economic growth and employment. Ultimately, the banking industry should not be regarded as an end in itself but rather as a system that will serve as the means to help households and firms achieve their financial, economic and social needs.

I agree with him. That is a strong statement but, as matters stand, Irish banks are not doing this. I have often heard older people comment that it was their small savings that built up the Bank of Ireland. In that respect, I am mindful of my parents and grandparents who are now deceased.

We all accept banking is changing. It is moving on, with modernisation and broadband access. In one fell swoop, 10,000 people have been left without a banking service in north-east Roscommon. After all the promises and commitments Bank of Ireland made to the local community not to close its branches, it decided to close its branches in Elphin and Strokestown. By doing that, in excess of 10,000 people in an area stretching from Tarmonbarry to Rooskey right up to Lanesborough, Ballyleague, Strokestown and Elphin have been left without a banking service where they can walk in and do their business.

I very much agree with Senator Ward and others that we can solve this issue through the credit unions, of which I am a great supporter. They have the network and staff. I understand the Central Bank has a say in this and it is not all down to the Minister. We have to work on the Central Bank guidelines. While the guidelines may allow credit unions to do a little more with respect to borrowing, they are still not allowed to become banks. We need community banks and we have that solution. It is not acceptable in rural communities that people can be left without a walk-in bank service, despite technology and other changes.

I met a young couple at the weekend who have a small business in my region. They have been doing well despite Covid. They had innovative ideas and changed the way they operated. We have all had to adapt to change. They expressed concern that they would no longer have a walk-in bank service which would allow them to indicate to an official that, for example, they would make an extra drawdown on their current account in the following two weeks. They were able to engage with a bank official in the past and advise, for example, that X amount of money would leave their account the following week and they might need cover for two weeks until money came into their account. They fear the more they go into the system of technology, the more they will be outside the box and a black tick will be put against their credit rating. That is a worry for many people.

I compliment the Minister and the Government on all the payments they put in place and I compliment the banks on co-operating to help people out. Even with Covid, many young innovative people in rural Ireland are thinking of starting new businesses, which is great. With the way the banking system is going, however, they are having doubts about it. We need to address what has happened with the banks. We accept that banks will change and will not wait for people to catch up. It is their job to make profits. That is what they will tell us. However, they owe something to society and they should not just walk away. The Government and we, as politicians, must put something in place.

We had the ICC Bank, which was established in 1933, and the ACC Bank, which was established in 1927. The former provided for the small business sector and the latter for agriculture. I do not know what happened to ICC Bank but it was probably absorbed by another bank. ACC Bank became part of Rabobank, which no longer operates here. There have been many changes. Accepting that technology will change and we will have to move on, I am anxious to ensure certain cohorts of people are not left behind. That is important in the context of rural Ireland. I thank the Minister for giving his time today.

I welcome the Minister. I concur with Senator Ahearn and thank the Minister for his leadership in his Department over the past 12 months. I believe that we urgently need to convene a forum and an open, transparent, public debate on the future of banking and financial services in Ireland.

We spoke about a number of significant announcements by banks in recent months to close branches and leave some communities without banking services. Ulster Bank is to gradually withdraw from the market here in the coming years. Bank of Ireland's intention is to close 88 branches from September, including Granard, County Longford, as well as four branches in Westmeath, including Athlone Institute of Technology, Castlepollard, Kinnegad and Moate. Permanent TSB has also announced the withdrawal of cash desk services at 44 of its branches as they will be fully automated. This decision is a hammer blow to staff, customers and communities. At this stage, we do not know what long-term effect these closures will have on households, farmers or even SMEs.

I concur with Senator McGahon's comments. I know of people who were approved recently for loans under the SBCI's scheme but their banks would not entertain it. One of the large commercial banks is not entertaining any commercial loans at all. That needs to be addressed. These announcements strengthen the argument for an urgent debate that needs to happen. It has to include everybody, from stakeholders, including the banks, customers, staff, management, trade unions, business and employers' groups, and community interests. It should not be left up to the banks and financial institutions alone to decide this. I have spoken before about how these closures affect footfall in our smaller towns and communities. We need to ensure that we keep people on the high streets of our towns and villages for their continued survival.

I have also said before how we need to look at An Post or the credit unions as a viable alternative. They have untapped potential to do more and to make a further significant contribution across many areas of public, business and community life in Ireland. I believe that An Post can emerge as a central hub for a wide variety of valuable community services but to fulfil that vision, we must not only put the services in place but must financially support the network. The launch of the An Post Money brand has brought all its financial services under one brand, better allowing it to compete strongly in the financial services field. The biggest opportunity for An Post in future is in the provision of an extended suite of banking services. I believe we need to realise the importance of our communities and to put people at the centre of that. We did it before with ACC and ICC but it was never more needed than it is today. The opportunity is there to establish a people's bank through An Post and the credit union movement, and to put people back at the centre of our financial policy.

I wish highlight the locations of many banks that are closing. Many are located in strategic locations throughout the country. There is an opportunity to develop them into community facilities that would benefit the towns, whether for remote working, relocating the post offices or community scheme offices. A fine example is Edgeworthstown, County Longford, where, after the closure of the bank a number of years ago, the local development organisation met Councillor Paul Ross and me to discuss the possibility of its purchase by the local authority. We were successful in that regard and work has recently started on the developing of the co:worx hub, with spaces already booked out. The cash machine is back in its original hole in the wall to service the town and an extension is being built to provide courses in conjunction with the new technological university in the midlands, based in Athlone IT, all overseen by an excellent voluntary committee in conjunction with the local authority.

There are positives to be gained from the closure of the banks, which is a negative. I thank the Minister for his time. I concur with Senator Ahearn and thank the Minister for his leadership over the last 12 months, which have been difficult for our economy.

There are two images that stick with me across a varied and interesting sharing of views in the Seanad this afternoon. The first was hearing Senator Burke talk about the changes in competition in Castlebar over many years, going from an environment in which there were many banks competing for the business of local residents to where it is now, where there are very few. The second image was hearing Senator Malcolm Byrne paint a picture of how, when he goes in to buy a shirt in his local shop at some point in the future, it will be done via robot and he will pay for it with a digital currency. One is an image of where we have come from and the other is an image of what the future could look like, although I am not sure that the prospect of robots serving any of us shirts or indeed blouses is imminent.

Nonetheless, there were really valuable contributions reminding us of what banking was like. It is a very good image for reminding us of the pressure that banking is under due to changes in technology and the regulatory requirements they are required to meet, on the one hand, and, on the other, the demands on banks coming from consumers who see the world changing around them and are using technology in ways which only a few years ago would have been very unlikely.

I have notes on the points which all Senators made and will respond back to the themes raised rather than responding to each Senator in detail as time does not allow me. The first common theme was the need for a public bank in Ireland. I remind Members that, as it stands, of the three large retail banks present in Ireland, the State has majority shareholdings in two and a minority shareholding in the third. To say the banking sector is ill served due to the underparticipation of the State within it does not sit with the fact we have strong State shareholdings in two of three banks. What is more, a decade ago we learned a very painful lesson of what happens when the balance sheet of the State and that of our banking sector become intimately involved with each other.

For that reason, those who were pressing the case for a public bank should be aware, first, that it is very easy for the risk in any public bank to travel back over to the risk of the taxpayer. Second, any such bank would have to be regulated in the way existing banks are. Third, any lending decisions from that bank would be subject to the same kind of scrutiny and regulatory power as our existing banks are. How the set-up of a public bank would coexist with our credit unions and with An Post is something those who are advocating the setting up of a public bank would need to explain. Finally, there would remain the very thorny matter of how a public bank would get its capital, who would pay for it and how that would sit with the lessons of a decade ago.

That leads to the question of the future of the banking sector in Ireland. The variety of views from Senators reflect how our economy is changing and the impact technology is having on it. I wish to address in particular the point made by Senator Keogan on the impact of technology on currency and what that means for banking. She and some others raised the development of cryptocurrencies, bitcoin, and what that can mean for the future of traditional and retail banks. This is an area in which Ireland and the Department of Finance is already active. We have a blockchain day coming up. We have a blockchain unity in the Department of Finance that looks at the future of decentralised finance and what that could mean for the Irish economy.

There are two very important caveats. First, how people decide to determine their store of value is their right in a market economy. However, the development of a store of value has to be reconciled with the needs we all have for financial stability. Second, the development of that store of value should not be at the expense of the other ways in which we look to store value, such as through the use of a currency and how we store and bank that currency in retail banks. These are the kinds of issues that are being considered by the European Central Bank which will make decisions before the summer on the future of further exploratory work on an e-euro.

I strongly believe that the maintenance of monetary sovereignty is a really important aspect of national economies but in our case, in this part of the world, it is the eurozone and its interests and that is why the work of the ECB in this area is really important. The development of something like that, as demonstrated in this week's edition of The Economist, is something that has really fundamental issues for retail banking, which is why advancing this cautiously I believe is appropriate.

That leads on to the next point that was made regarding why banks will not come to Ireland and why is it we are in a situation where we are seeing additional banks leaving. Of course, we need to reconsider what we mean by banks. Many Senators made the point regarding why banks are leaving and why more banks will not come here but at the same time acknowledge that new ways are being found to provide financial services to consumers and to those we represent. It is not for me to name the ways in which that is being done. It is up to others to make the case for that. It is the case for all of us, and we know this, that financial services are now being provided in ways that are about clicks rather than bricks, and it is done through our phone rather than through our purse. This is all happening and the question is what is the policy environment and the regulatory environment, which is what central banks and regulators all over the world are working on, that enables this development in technology. It still meets the financial stability needs that we all have as governments and as parliaments and also can meet the wider array of needs that we have as societies - the ability to get a loan to buy a home and the ability for an SME to get a loan to help it develop its business. If one looks at what it means for a small open economy like Ireland, there are challenges with regard to this but there are also opportunities.

That leads on to the next theme, the question that was put to me, including by Senator Ardagh, regarding the issues that banks consider when they are deciding, as happened recently, to leave Ireland or if banks are evaluating whether they want to come to other economies. There are a number of factors and the key ones are the size of the economy they are in or moving to; their ability to acquire the asset that is underpinning the loan; and technically -we all know what it refers to - if a mortgage, for example, or a loan cannot be paid the ability of the bank to respond to that. We have made a choice as a society to afford a high level of protection to those who find themselves in financial difficulty and I believe that is the right decision to make. I believe that is right given the pressures that many are under, particularly at a time of a pandemic. It does affect, in turn, the decisions that banks make regarding the rate of interest at which loans are made available in those circumstances, and it is a factor.

That leads on to the biggest factor that is affecting many of us. We are a country that had a financial crisis and from a regulatory point of view our regulator, and the European regulator behind it, then requires our banks to hold a level of capital in recognition of what happened in the banking sector in our past and to make sure that if such a challenge faces us again that we can respond to it. That is a really important point. While we may raise issues regarding the level of capital that our banks are required to hold, it is also the case that the very level of capital our banks are required to hold at the moment is vital in allowing our country to deal with the consequences of a pandemic. It allowed our banks to respond in the way that Senators Eugene Murphy and Kyne raised. It allowed our banks to, for example, deploy payment breaks to deal with issues SMEs were facing without the kind of additional problems arising that we all faced a decade ago.

A variety of different issues were raised with me and I have tried to touch on each of them in turn.

I will conclude by addressing the request made by the Financial Services Union, with the support of some parties represented in the House this afternoon, to set up a banking forum. Our interests would not be served well by a process designed to preserve banking as it is. We have to recognise that a lot of change is under way. We have had a difficult few months here in Ireland with regard to that change. If we want a process that will deliver competition, recognise that people are seeking banking services through their phones as much as through cards and that while there are a variety of needs we want to meet, we may have to meet them in a different way in the future, we need an open process that invites genuine debate rather than one that seeks to preserve the present situation in its entirety. If there is one thing of which I wish to assure the Seanad this afternoon, it is that change is relentless. If we do not have an honest view of the needs of our economy and our society in the future, we will not be well served by such a process with regard to banking. I am giving consideration to an alternative. I look forward to updating the Seanad on that in the future.

Sitting suspended at 3.31 p.m. and resumed at 3.45 p.m.