Professor Philip Lane:

As the Deputy indicated, there has been some movement, which is encouraging. We think the policy swerve has helped a little with that by making switching easier. Information campaigns and so on have assisted in this regard. We see some evidence that people are waking up. Many could save money by moving to cheaper rates, even within their own banks. The wider point is that, as we indicated, while there is no doubt that there are some factors such as NPLs, the history of the crisis, etc., there is also an issue of competition. There are no barriers to entry here and we are not in a different bloc. We have a single banking union and there is no longer a concern about whether a national regulator will do something odd or surprising. People can rely on a single European regulatory framework. The answer is that, as time goes by, the more we have a track record of the economy growing and of credit not going crazy, of mortgages being relatively low risk, of low LTV ratios, of reasonable loan-to-income ratios and so on, the more the fundamentals will appeal.

Internationally, there was a period when everyone was so busy fixing their own problems that there was no appetite to enter new markets. There are many discussions on cross-border banking. We need to have consolidation and to allow the strong, good banks to expand. I am hopeful that there will be new entrants or that even the threat of this will force the incumbents to reduce their rates. There is room on the margins for those to come down but the only way to really deliver in this regard is by not erecting new barriers to entry and not creating unstable conditions here. The reality is that commercial banking relies heavily on private funding. People take a risk in funding these banks and until they are confident they can make a return here, this may persist. It is all going in the right direction. More stability, a lower risk credit environment, etc.,will help to create conditions for new entrants but I cannot tell the Deputy when that will happen.