Wednesday, 13 November 2019

Ceisteanna (37)

Thomas P. Broughan


37. Deputy Thomas P. Broughan asked the Minister for Finance his views on the continuing job losses in the pillar and other banks and the perception among the public that banking services, including online services, are deteriorating for households and businesses. [45809/19]

Amharc ar fhreagra

Freagraí ó Béal (7 píosaí cainte) (Ceist ar Finance)

Of course, I will observe the time limits. Since the economic crash, the size of the workforce, particularly in the five pillar banks, has fallen by 45%. The Financial Services Union has, rightly, complained that there has been a dripfeed of information, with AIB losing 1,000 workers, Bank of Ireland losing 1,000 workers and losses in Permanent TSB and so on. The workforce has contracted as a result of Fintech and the revised payments services directive, PSD2. Obviously, it is a major problem, in particular for the banks we own.

I am aware of reports of ongoing and potential rationalisation within the banking sector, both in Ireland and on a wider European level. Reductions in staffing levels are always a matter of regret, as are branch closures. As Minister, I hope they can be kept to the minimum necessary to ensure the banks can meet their obligations to their customers and the need for them over time to be able to contribute to the economy.

The Deputy will be aware that the banking sector is experiencing a challenging operating environment, with an ongoing period of low European Central Bank interest rates, slower than expected loan book growth and general uncertainty surrounding Brexit. In addition, the traditional banking model has been under pressure for some years to adapt and deal with legacy issues. In such circumstances, cost management is likely to remain a high priority for banks as it is an area under their control. However, these are decisions to be made by the boards and management of individual banks which need to be run on an independent and commercial basis. The independence of the banks is protected by relationship frameworks which are legally binding documents that cannot be changed unilaterally. They are publicly available and were insisted on by the European Commission to protect competition in the Irish market. Notwithstanding this, officials from my Department have contacted the various banks mentioned by the Deputy which have all stated they are investing across all channels to improve customer experience and continue to invest significantly in their IT systems and online services.

It is hard to believe the pillar banks regarding net interest margins because we are still paying among the highest interest rates in the European Union. Therefore, the Irish banking market should be very profitable. Obviously, major developments include FinTech and new structures from the European Union. With regard to Brexit, the financial services sector currently employs 40,000 to 45,000 people and we were told a lot of companies would come to Dublin, Cork and our other cities and build on the overall financial services sector. I understand we are the eighth largest provider of financial services in the European Union. It is depressing to read constant reports of people in the pillar banks being let go. We do not seem to have new structures to take advantage of the new directives from Europe.

The Deputy is correct that a lot of work went on to ensure that if changes took place in the UK as a result of Brexit, Ireland would be well placed to attract additional investment and jobs. That is what we have done. Bank of America and JP Morgan have made decisions that are a result of Ireland being a competitive and stable place in which to grow financial services. I do not think that detracts any way from the Deputy's main point. Of course I acknowledge the concerns of staff working in some of the banks that are now being associated with this kind of commentary. I know that the banks take very seriously the communication they have with their employees and they need to manage this in a careful way. I need to reiterate to the Dáil that this is a matter in which I do not play a role. It is a matter for the boards of these banks and their individual managers. I expect they will do all that can be done to keep this kind of difficult change to a minimum.

There is a perception that, along with declining work forces, there is also a lack of services as we have branches which have no managers, one manager managing four or five branches and so on. We signed up to the payment services directive and are seeing the impact of that in our current accounts when we get responses on our phones if we carry out transactions on the web. There is also the new system of open banking, which allows third parties to access our accounts. It is a profound change. Is it the case that the pillar banks have not committed enough to those services?

The Minister set up the culture board recently, which is very important for the banks. How will the Central Bank regulate a plethora of new financial providers based in Germany, Spain and so on, not to mention companies such as Google and Facebook? I was in Sweden during the summer and noticed that the country has become almost cashless, which seems to be the way things are going.

I refer to mortgage rates. In light of the comments of the deputy governor of the Central Bank, Ed Sibley, at the Banking and Payments Federation of Ireland conference and those of the Minister on "Morning Ireland" today, I wish to raise two key issues. The first is the massive differential between Irish rates and European norms and the second is the unfavourable treatment of existing customers compared to new customers. These are issues we have raised for some time. We have made some proposals of which the Minister not been supportive. In light of the comments of the deputy governor and the Minister's own views, does he intend to raise this issue with the Central Bank and find a way forward to improve the situation?

The Central Bank and Mr. Sibley have reiterated a number of important points that I and the Central Bank have made. While recognising that these are commercial decisions in which we do not play a role, I want the rate of interest offered to existing mortgage holders in Ireland to become more competitive. In order for that to happen, other changes need to be made, particularly the level of non-performing loans in our country.

On the issue raised by Deputy Broughan regarding financial service providers in Ireland, as he will be aware, to provide a service in Ireland they need to be registered in Ireland. Any entity which is providing a service must be regulated by the Central Bank to ensure it is properly regulated. As to whether I believe our existing banks have the measure of this, yes, I believe so. Some important changes are happening in some banks in regard to the digital dimension of how they provide services. This is likely to require significant and further investment in the future from banks to make sure they have the IT systems that are capable of providing these kinds of services. Some of the companies to which Deputy Broughan referred have very low levels of staff.