Mr. Larry Broderick:

I thank the Chairman and the members of the committee for the opportunity to make this presentation. The Financial Services Union, FSU, was formerly the Irish Bank Officials Association and is a key stakeholder in the industry. To the delight of members, I am not going to read my submission into the record. I will instead focus on a couple of main headings in the context of the key issues we want to bring to the attention of the committee.

Our members have paid a significant price for the calamitous management of the banking sector. The latter had a huge impact on staffing, the future of the industry and customers. We believe that the industry is in the process of dynamic change. There are opportunities. It is improving, becoming more viable and profitable.

Based on the presentations the committee has heard to date, we want to identify the key issues of which we believe the Members of the Oireachtas should take hold. First is the need to establish a forum on the future of banking in Ireland. Banking is viable. There are State-owned banks, there foreign banks and there banking institutions that are merging towards profitability. There is a great deal of change in the industry. Our concern is that each institution is considering its own set of circumstances and not factoring in the role of banking in Irish society, the impact on rural Ireland and the impact on staff and customers to the extent that we believe it should. We believe a strategy for banking should be given guidelines through some type of forum to set out for all banking institutions what would be required of an ethical banking industry which must be viable and profitable and at the same time cognisant of its role in the economy. We have set out in our submission the kind of issues that forum should address: what kind of banking sector does the Irish economy need and want; how best to deal with State-owned banks; how to encourage a level playing field, particularly for those institutions that are part of banking now that are not regulated; how to address the best interests of customers, staff and communities in the context of the changing of banking; how to meet the challenge in the industry and how to create first-class employment for our employees. We have no particular view on how this should take place but it should involve stakeholders.

The second plank of our approach is sustaining branches in the community, which this committee is very focused on. There have been 160 branch closures since 2008. All banks have indicated that they are reviewing the essence of banking into the future. We argue very strongly that there is a need for banking institutions in communities. There also needs to be a strategy for banking as part of a rural Ireland strategy. Oireachtas Members have developed a rural Ireland strategy and financial institutions should be part of that.

We have set out an eight-point plan focusing on issues such as one financial institution being required to have a presence in every town. There should be a six-month moratorium before any branch is closed. That should be done by an independent expert or ombudsman who needs to challenge the bank on the rationale, engage with stakeholders to provide alternatives. We need to consider alternatives. Elsewhere in Europe and the rest of the world, there are alternative models - such as mobile units - where there are no branches. What tends to happen is that banks announce closures and only because of responses from us or customers are these issues addressed. The staff agenda should also be addressed. We have agreements with all institutions to the effect that there should be no compulsory redundancies but people will be transferred or relocated. That should be endorsed and be part of any strategy.

The third area we focus on is the culture in banking. In our submission to the banking inquiry we said this was one of the major factors in the malaise in banking in the past. We have identified the kind of changes needed to change the culture, starting with the composition of boards which do not have employee or customer representatives, the regulator is not a member of the boards. A more diverse board structure will help the governance of banks to achieve some of their objectives. The measurement of banks' success needs to focus not just on short-termism, maximising shareholder value or profitability but on long-term sustainability and customer service. We recognise that banks need to be viable and profitable but these are not incongruous ideas. Third, we need a pay strategy. We are not convinced that lifting caps on senior executives' pay or incentive schemes will do anything to improve the direction of the industry. Linking senior executives' pay to incentives caused the calamitous problems we experienced. Pay should be based on customer service, education and the performance of the organisation in terms of the service it provides to the community. We need to address the problems that front-line staff have because of inadequate staffing and stress in the industry.

Finally, there is a significant breakdown in trust in our industry between senior management and staff and in particular because of the fear permeating the industry which makes change very difficult. Staff are afraid to address and highlight difficulties. These are some of the areas we identified.

We have been involved in securing modest pay increases over the past few years but there is a huge gap between the pay levels at the top of the organisation and those at the bottom. A senior executive earns a minimum of 65 times more than a junior staff member who earns €23,000 a year. It is an enormous gap. There is still a focus on performance-related pay.

We believe that looking at staff performance based on sales targets is not conducive to a good environment to work in. If the industry is going to be successful, we need to invest in staff development and training and building on their skills and having them involved in local community bankers. Our members are prepared to participate in this but the focus in the industry is still on performance-related pay. We need to address, in a structured way, how somebody progresses from the bottom to the top of the scale. In some banks, if the bank gets its way, it takes 35 years for somebody to progress from a junior point of the scale to the top of the scale. It is ridiculous. Prior to the crisis, 12 or 14 years was a reasonable time for progression. These are things that need to be addressed.

We then focus on outsourcing. Our view in the past has been that outsourcing has been a recipe for disaster for the industry. There is evidence of that. I refer the committee to the RBS outsourcing of Ulster Bank's information technology function. Had there not been a branch network, the impact on the Irish economy for Ulster Bank customers would have been disastrous. AIB and some of the other banks have outsourced recently. While we are not convinced it is the route to go, as part of that outsourcing there was a commitment that this work would be retained in Ireland. We are genuinely concerned because there is a second phase going on now in which these new companies that are coming in with outsourced work are talking about offshoring that work outside of Ireland. That is not in the interest of our members, the community or the taxpayers and has implications for the economy as a whole. The Central Bank has a role in this but it has to be more vigorous in ensuring and looking at propositions. We are totally opposed to offshoring. We are particularly conscious of the implication for our members in terms of employment.

We are as alarmed as is everybody else about the development that has taken place in the tracker mortgage debacle. It is our view that the Central Bank investigation should have happened a lot earlier. No guidelines were set out for institutions when the challenge in respect of tracker mortgages was brought in. There must be a very clear guideline from the Central Bank on what should happen when people move within variable rates and fixed rates. In the absence of that, particular banks and institutions take particular decisions. It is complex because of legal contracts that emerge. We are certainly all for a system that talks about redress but we are not convinced that everybody has signed up to that redress. If they have, they should be communicated with and supported. The work the committee has done on this has been significant. We also believe there should be internal mechanisms of appeal because there is still a challenge going on there. Is what is being provided under the redress scheme fair and reasonable to the customer? What is the notion of a prevailing rate that will apply in the context of a solution to the problem? Nobody seems to be in a position to answer that.

We are concerned about the role of vulture funds in the industry. They have come in in number of areas in terms of lending and taking over non-performing loans, NPLs, which are difficult loans. Our concern is that much of the time they are not regulated. We have all seen the implications they have for the industry in terms of how they deal with customers. There are non-profit organisations that can manage non-performing loans for the banks in a cost-effective fashion. It may take a bit more time to address. The banks are dealing with pressure from Frankfurt to get such loans off their books in the interest of improving capital but there needs to be a balance here. The Oireachtas could play a role in challenging and looking at alternatives rather than the willy-nilly approach of each bank moving to a quick exodus in terms of the non-performing loans.

On the sale of AIB, as we stated previously, the Oireachtas and politicians need to question what will be done and what is the best value for the taxpayer of State-owned banks. If the decision is to sell, it should be transparent. From our perspective, if that is the decision, the terms and conditions of our members and pensioners should be protected, as well as their pensions and pension funds, as happened when that took place in Bank of Ireland. We are concerned in that context that these issues are not on the agenda and need to be addressed into the future.

Finally, the impact of Brexit will be the biggest challenge this country will face both in the Republic of Ireland and by our colleagues in Northern Ireland as well. We are unique as a union that has representation in Great Britain, Northern Ireland and the Republic of Ireland. We submitted a similar paper to our colleagues and all the politicians in Northern Ireland about the future of their industry. If there is going to be an opportunity to bring jobs here it should not be at the expense of jobs in London, Belfast or Northern Ireland. We need to be conscious of that. If jobs are to brought in, it should be done on the basis of value jobs and not on the basis of looking at cheap opportunities to maximise opportunities on a low-cost model. We are working with the banks and the committee to ensure that what emerges from that is very close.

The banks have appeared before the committee to talk about various strategies and we believe the committee has a unique opportunity as this industry is changing and the taxpayers helped out all of the banks. There is an opportunity with the announcement that KBC will remain in Ireland. The commitment of AIB to get back into profitability is very clear. Bank of Ireland will undoubtedly reach profit again and in the next number of days will announce a profit. Ulster Bank is back in profitability. There is a great opportunity to influence the banking institutions if members take it. They will listen to central direction. In the past, by being local and by focusing on local issues, we have all been bypassed. If some of these thoughts are taken on board and delivered, there will be opportunities to maximise influence in the industry into the future.