Mairead Farrell (Galway West, Sinn Fein) | Oireachtas source

Cuirim fáilte roimh an díospóireacht seo agus roimh an deis labhairt ar thodhchaí na mbanc, earnáil atá ag éirí amach as an ngéarchéim agus atá ag dul trí athruithe móra. Sa bhealach agus go bhfuilimid ábalta dul i ngleic leis seo, tá páirtithe leasmhara ar nós the Financial Services Union agus mo pháirtí féin, Sinn Féin, ag iarraidh go mbeidh fóram ann ar thodhchaí na baincéireachta. Thabharfadh sé seo na páirtithe leasmhara le chéile le plé a dhéanamh ar an earnáil, na dúshláin atá roimpi agus an bealach chun tosaigh le tús áite a thabhairt do chustaiméirí, oibrithe agus seasmhacht an gheilleagair. Ba chóir go mbeadh téarmaí tagartha leathana ag an bhfóram, agus scóip atá soiléir. Cé go mbeadh an fóram ag déileáil le ceisteanna ar nós cúrsaí digiteacha agus iasachtaí do ghnóthaí beaga agus measartha, ba chóir freisin aird a thabhairt ar an easpa muiníne atá ag an gnáthphobal san earnáil cultúr na mbanc agus cosaint do thomhalltóirí.

I welcome the debate and the opportunity to speak on the future of banking, a sector that has come out of a crisis and is undergoing profound changes. In response to these developments, many, including the Financial Services Union and Sinn Féin, have called for the establishment of a forum on the future of banking, bringing in all stakeholders to discuss the current state of the sector, the challenges it faces and to chart a path forward that best serves the interests of customers, staff and financial stability. While the terms of reference of such a forum should be wide-reaching, its scope should be clear and well defined. While such a forum will focus on issues such as the digitalisation of financial services and small and medium enterprise, SME, lending, it must also pay attention to the lack of public trust in banks, banking culture and consumer protection.

On 17 May, the Irish Banking Culture Board published the findings of its public trust in banking survey. It found that 43% of respondents said that their perception of banks had worsened since the 2008 financial crisis, with only 23% saying their perception had improved. Overall, 46% recorded a low level of trust in the industry with only 19% recording a high level of trust. In short, the public are not convinced that sufficient change has taken place to improve its perception of the industry. This mistrust finds its origin in the financial crisis of 2008 caused by a combination of Government failure and corporate greed.

However, the financial crash and its consequences are by no means the only explanation for public mistrust of the sector. In its final report on the tracker mortgage examination, the Central Bank reported that more than 33,000 borrowers had been identified as having been affected by the scandal with €683 million paid in redress and compensation by the end of May 2019. As the Central Bank noted, since the examination began in 2015, some lenders initially attempted to minimise the number of affected customers to whom they would have to pay redress and compensation. As a result of the banks' actions, 99 family homes were lost by the end of May 2019.

This scandal left a deep and lasting impression in the eyes and minds of the Irish public, an impression that was periodically repeated as banks continued to mistreat their customers even as the examination was under way. Since 2019, three of the five retail banks have been reprimanded and fined a combined €77.1 million by the Central Bank. Disturbingly, even during the examination harm was meted out by both KBC and Ulster Bank with their failure to comply with the Central Bank's "stop the harm" principles.

Public mistrust in the banking sector is, therefore, a consequence of the actions of banks and nothing else, but responsibility also lies with the regulator and the Government. The most effective way to manage bad behaviour and reduce bad outcomes is to ensure that individuals are aware of the responsibilities and are held accountable for their actions. A lack of individual accountability paves the way for misconduct and the mistreatment of customers. In July 2018, the Central Bank called for a range of reforms that would enhance its toolkit to promote what it describes as "a culture of ethical compliance by firms and individuals". Among the reforms sought was the introduction of a senior executive accountability regime, which would place obligations on firms and senior individuals to set out clearly where responsibility and decision-making rests, thereby ensuring clear responsibility and accountability.

More than three years since these reforms were first requested, the Government has yet to publish the heads of Bill of the legislation that would provide for them. This is simply unacceptable and reveals a Government that does not take accountability in the banking sector seriously. The legislation that provides for its introduction must be published by the Government without delay. Trust can only be earned by improvements in standards and the service provided to customers. As the public trust in banking survey recorded, only 38% of respondents agreed that the banking sector responded well in helping society during the coronavirus pandemic. As we emerge from the pandemic, the sector has an opportunity to rebuild trust and demonstrate change by the way it treats its customers. With unemployment unlikely to recover to pre-pandemic levels until after 2022, a cohort of borrowers will find themselves in some form of mortgage arrears and they must be supported.

The code of conduct on mortgage arrears and the mortgage arrears resolution process should have full legal effect with lenders working through the full suite of alternative repayment arrangements with affected borrowers. This code should be a statutory requirement, not an option. This must be coupled with an end to the selling of mortgage loans to non-bank entities and vulture funds as the option of first resort. As the deputy governor of the Central Bank noted in November 2019, "the Central Bank is still having to push banks and non-banks too hard to take a customer centric approach to resolving arrears". These issues must be included in the terms of reference of any forum on the future of banking.

The withdrawal of Ulster Bank and KBC from the market raises other profound questions about our banking sector. In a response to a letter my colleague, Deputy Doherty, wrote to the Central Bank, the deputy governor warned in December last year that the exit of a retail bank from the market "could contribute to upward pressure to lending interest rates and potentially lead to weaker credit availability". We now face the exit of two retail banks. Such change, and the risks it poses, calls for a new strategy towards the sector. I welcome the willingness of the Central Bank to participate in such a forum and regret the position of the Department of Finance in this regard. Just as it was appropriate for Departments to engage with stakeholders in the national economic dialogue, so it is appropriate for the Department of Finance and the regulator to engage with stakeholders on the future of the banking sector. I ask the Minister to now set about establishing the terms of reference for such a forum without delay.

Today's debate also comes after the announcement by the Minister for Finance last week that he intends to sell the State's shares in Bank of Ireland in the coming months. More broadly, Sinn Féin believes it is in the interests of the State, consumer and taxpayer to maintain a shareholding presence in the banking sector. This includes maintaining a majority shareholding in AIB, especially as the market approaches a state of duopoly with the exit of Ulster Bank and KBC. This allows the State to pursue its strategic interests when key decisions and transactions take place. That position should be maintained. Furthermore, disposing of the State's shareholding in AIB at this time, or in the near future, would fail by some margin to recover the €20.8 billion pumped into the bank by the taxpayer.

Sinn Féin has concerns about the timing of this announcement as regards Bank of Ireland, given that its share price has fallen significantly in recent years and its shares are considered to be undervalued presently. It is essential that any sale achieves value for money for the taxpayer and the Minister must explain why now is the appropriate time to sell.

At a meeting yesterday of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach to discuss banking, it came as a bit of a surprise to hear senior officials from Allied Irish Banks say the banking sector here is very competitive. I am sure that also came as a surprise to the many informed observers who may have been listening in. After all, the former President of the ECB, Mario Draghi, told the same committee that when it came to banking we had a quasi-monopoly in this State and that this was a contributory factor in driving up the cost of credit for homes and business borrowers. If a quasi-monopoly was an accurate an description in 2018 when Mario Draghi made those remarks, with the announcement from KBC Ireland that it is pulling out of the Irish market, it is really accurate today.

I listened with interest to the comments of the Minister, Deputy Donohoe, and the Minister of State, Deputy Fleming, on the role credit unions could and should play. I have previously raised with them my view that credit unions have a significant role to play. They are trusted institutions in this State. They are not profit-driven institutions, they are run for the benefit of members and any surplus they generate is returned to members in low interest rates on loans and high interest rates on savings. The credit union movement has within it the seeds of a not-for-profit banking system. If credit unions were allowed to compete, they could become real competitors to the banks. The sector has been saying very clearly that it is being starved out of existence because it can barely get involved in the largest consumer credit market in this State. I have raised this previously with the Minister and Minister of State when I outlined in detail the regulations the credit unions set out to us, as I am sure they have done to the Minister and Minister of State, that place them at a competitive disadvantage. I note that today the Minister and Minister of State have said they believe in the credit unions.

I recall that when the credit unions were before the finance committee they set out what they need. As the Chairman of the committee pointed out, we hear often that people are in favour of the credit unions but we are not seeing action in that regard. Credit unions would be able to compete and would bring a level of fairness and allow the cost of credit to come down if they were allowed to do so. That is important going forward.

I welcome the opportunity to speak this evening on the future of the Irish banking sector. I ask the Minister to respond to three points in his closing remarks, namely, the publication of legislation for the senior executive accountability regime, the establishment of the forum and the reason for the disposal of the State's shareholding in Bank of Ireland at this time and if it will provide best value for the taxpayer now and in the next six months. I am sure the Leas-Cheann Comhairle will be delighted that I finished my contribution early.

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