I propose to take Questions Nos. 231 to 233, inclusive, together.
As the Deputy will be aware, I met with representatives of Ulster Bank on the 21 of October. I outlined that I expected that staff, customers and other stakeholders would be informed promptly about any decisions being made.
News of the review is, of course, unsettling for all stakeholders, especially the staff and customers. I outlined that I expect Ulster Bank to keep all its stakeholders, especially its staff and customers, fully informed about any developments in the review and engage with them in relation to any proposals or decisions that result from the review promptly.
I also emphasised the importance of Ulster Bank to the Irish financial services market, to the wider economy and to the communities it serves.
Ulster Bank confirmed that the strategic review is ongoing and that no decision has yet been taken. Ulster Bank also confirmed that there is no set timetable for this review and that it is fully aware of the strategically important role that Ulster Bank plays in the provision of financial services to the Irish market.
The continued presence of a viable and active Ulster Bank in the Irish market would be the most welcome outcome. Ulster Bank is a significant employer with 2800 employees and has 88 branches across the country. Ulster Bank is also important in terms of providing competition in the Irish retail banking market.
In the absence of direct knowledge about NatWest’s strategic review of Ulster Bank’s operations, I cannot and will not comment or speculate on possible outcomes as there is no basis for such speculation, which would be open to misinterpretation.
While I will have further engagement with the bank as the review process continues, I would like to emphasise that I have no role in the review or any commercial decisions arising from it. My officials will continue to monitor developments.
With regard to competition in the Irish banking sector, as the Deputy may be aware, the Department of Finance published a paper in 2019 by Indecon Consulting on an Evaluation of the Concept of Community Banking in Ireland. This was a follow on to a previous paper on Local Public Banking published by the Department of Finance in 2018. The Indecon report concluded that there is no business case for the State to establish a public banking system in Ireland, supporting the outcome of the previous report on Local Public Banking. While Indecon’s report concluded there are some areas of market failure, it noted that there is extensive provision of and access to banking services through some 1,900 bank branches, credit union offices and An Post branches, as well as a wide range of Exchequer funded existing supports.
Credit unions are increasing the offering of financial products for their members. The Credit Union Act, 1997 (the 1997 Act) and the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 set out the services that credit unions may provide to their members. These include loans and savings under the 1997 Act and a further suite of services under the 2016 Regulations such as third party payments; ATM services; bureau de change and certain insurance services on an agency basis. I understand that a number of credit unions provide some of the services provided for under the 2016 Regulations. Where a credit union wishes to provide other services to its members, an application may be made to the Central Bank for approval to provide such services in accordance with the provisions set out in sections 48-51 of the 1997 Act.
One such additional service includes the Member Personal Current Account Service (MPCAS). In 2016, the Central Bank defined and described a suite of additional services known as MPCAS, under which approved credit unions may offer personal current accounts with debit cards, overdrafts and a wide range of payment services within an appropriate risk framework. To date, 54 credit unions have been approved to provide MPCAS.
An Post offers financial services including a payment account, personal loans, credit cards, a range of insurances, money transmission and foreign exchange services. An Post offers counter services for a number of retail banks, allowing customers to lodge and withdraw cash at An Post branches. There is there is a significant network of post offices in areas where there is no bank branch within five kilometres.
I would welcome the introduction of new lenders to the Irish market. It is, therefore, a welcome development that a new residential mortgage lender has recently entered the market and it will be of benefit to new mortgage borrowers and also to borrowers who may wish to consider switching to a new lender. With regard to the mortgage market, though the general level of lending interest rates in Ireland are higher than is the case in many other European countries, it should also be noted that recent trends indicate that rates have been falling. For example, interest rates on new fixed rate mortgages (excluding renegotiations) have fallen from 4.11% in December 2014 to 2.64% in September of this year.
Interest rate pricing in the mortgage market, and generally, is affected by a wide range of factors including product features, e.g. cash back, the operational costs of the lender, capital requirements, credit risk, the level of non-performing loans (NPLs) and competition. As a result of the previous crash, credit risk levels are still elevated in Ireland as is the level of historical NPLS and these feed into higher capital requirements for Irish banks versus the requirements elsewhere in Europe. A reduction in the level of competition in any market may affect interest rate pricing but any estimation of this, particularly in isolation, would be speculation. Furthermore, as noted above, interest rates in the Irish mortgage market have declined over the last 6 years despite lower levels of competition compared to other jurisdictions.