Mr. Mark Fielding:

I thank the Chairman for inviting the Irish Small and Medium Enterprises association to appear before the committee. ISME has just under 9,000 members across the country, all of whom are owner-managers of small and medium businesses.

I am not going to dwell on statistics or comparisons as I am quite sure the Central Bank is more than capable of covering those areas, but will mention the low-lights of the history of the banks in the Irish economy. Let me start with the collapse of the Insurance Corporation of Ireland, which probably cost us around €200 million. Then there was the DIRT debacle, in which the banks made the largest settlement of €90 million. In July 2004, the Irish Financial Services Regulatory Authority, IFSRA, issued a report on the overcharging of 80,000 customers on foreign exchange transactions, which is related to today's discussion on bank charges. At the time the bank said the cost of refunds would be somewhere in the region of €14 million, but it ended up at €50 million. In October 2004, a report found that Irish banks were making nearly three times as much profit per customer as their European counterparts and in the process they were ripping off SMEs. The study found that AIB and Bank of Ireland were each earning in the region of €341 per year per customer, as against €123 per year per customer across Europe. A study published by the Competition Authority in September 2005 found that SMEs were suffering disproportionately in comparison to big business. That has always been the case in the context of lending rates and charges in Ireland. In 2008 there was a major problem, with the banks giving blatant untruths with regard to recapitalisation and the blanket guarantee. In 2010, we had more untruths, mentioned by the chairman of NAMA when it was taking over what were supposedly performing loans, which proved to be completely overestimated by the banks.

I will not dwell on these, but I want to mention the charge by the UK Competition Commission, back in 2001, of cartel-like practices by certain Irish banks and their subsidiaries. The commission concluded that a complex monopoly situation existed and identified Allied Irish Banks and Bank of Ireland as participants in the restriction and distortion of price competition for small and medium businesses. That study identified that small and medium businesses were suffering disproportionately in comparison to big business. That is no major surprise to us. It was further confirmed in 2003 by the chief executive officer of a bank in Ireland who went on record stating that a cartel was in operation in Ireland and that Irish banks were overcharging their customers.

My role today is to warn members about the banks - as if they need warning, when the Minister for Finance has said that one cannot believe what bankers say. I will warn members about the actions of banks and inform them of the dire straits in which the owners of small and medium businesses find themselves due to the economic downturn, brought about partly by the same banks. I will plead on behalf of members that small and medium businesses be guaranteed fair play in bank charges as we struggle to get the economy back on its feet. In the current climate, do members think that increases in bank charges of up to 250% can be justified? The banking market is highly concentrated. Back in 2003 it was mentioned that it was one of the most concentrated banking systems in the world, and since then we have lost a number of banks. The two main banks account for 80% of SME lending, and when Ulster Bank is added, those three banks account for 96% of total lending to the SME market. Basic economics indicate that where there is more competition in banking, margins and profits tend to be lower, so obviously the opposite happens in Ireland, as we know. Where the market is highly concentrated it is also recognised that banks will find it is not in their interest to compete vigorously.

Banks make their money in two ways: through interest margins and service charges. To counteract the effect on margins of the general drop in interest rates, albeit not for small businesses, banks have introduced a range of charges for other services that were previously cross-subsidised by lending margins. The rescued banks are scurrying around at the moment looking to see where they can increase income. Anyone going into a bank to renegotiate loans or have an overdraft reviewed is likely to have the interest rate increased, be subject to higher charges on his or her account, or probably both. Loan arrangement fees are also going to be reintroduced. With the recent branch closures in AIB and National Irish Bank, we have reached a point at which there are cost penalties when one puts a foot inside the door of the bank. One of ISME members said in passing that in his local branch of AIB in Carrick-on-Shannon they have replaced a cashier with a bunch of flowers and a third clerk with a machine that takes cash and cheques but not coins, with the result that the waiting time is now an hour. They have one clerk behind the counter, one or two clerks on the floor circulating and chatting to customers in the queue, and another clerk sitting behind what is loosely called a customer service desk. He would love to have a queue in his business but he would not have them waiting an hour for service. When he raised the matter with the staff, their response is that this is new bank policy. That is what we can come to expect from the banks.

As Mr. Sheridan has mentioned, bank charges in Ireland are regulated in accordance with the Consumer Credit Act 1995. The current raft of bank charges are now astronomical. We had to listen to a spokesperson from the Irish Banking Federation recently saying that the banks are returning to more realistic pricing. It is a pity they were not more realistic when they were lending in the past 15 years. Such pricing reflects the underlying costs and risks of the products and services they provide, according to the IBF, and meets the requirement to return to profitability. He then continued, quite smarmily, to tell us that a consideration-----