Róisín Shortall (Dublin North West, Social Democrats) | Oireachtas source

Provision of banking and access to banking and financial services generally is core to the future prosperity and well-being of people across this island. Providing these services well is crucial. Getting them wrong, as we know from experience, can be disastrous.

The approach to banking of successive Ministers of Finance and the Department leaves Ireland hostage to the big banks. Since the beginning of 2015, about 340 bank branches around Ireland have closed or their impending closure has been announced. That is one third of all bank branches in Ireland at the beginning of that period. That is worth saying again: a third of bank branches in Ireland have closed or will close over a seven-year period.

The Central Statistics Office, CSO, has found the average distance to a bank - and this is prior to the departure of Ulster Bank - is 11 km in rural areas and 2 km in urban areas. In excess of 900,000 people live more than 10 km from a bank branch. Even where branches remain open, the range of services they provide is diminishing. Many branches are now cashless and do not provide over-the-counter services. Instead, they provide advice and self-service through ATMs.

The needs of small businesses are likely going unmet. Findings from the CSO indicate that 31% of enterprises valued the local connection when choosing where to bank. Some 22% of enterprises choose a particular bank because it has a local branch. An additional 10% choose a bank because the branch was known for good client relationships. When refused a loan, 42% of SMEs will forgo the funds rather than apply to another bank.

The consolidation of the market around pillar banks has many negatives for the economy, businesses and borrowers, yet every attempt in the past ten years to break the stranglehold of the shareholder banks has been frustrated by the Department of Finance.

A proposal for a strategic investment bank was throttled and instead we got the Strategic Banking Corporation of Ireland, SBCI, lending through the pillar banks. Proposals for regionally based public banks were thwarted during the most recent programme for Government negotiations. Proposals for an examination of public banking were blocked by the Department, with a whitewash report in 2019 saying there was no case for it. That report, in effect, closed down real and open debate on solutions to the crisis confronting Irish banking. The repercussions of that, as the sector continues to consolidate around two pillar institutions that are shrinking their presence in the community, are now becoming even clearer.

The Department of Finance and the Minister seem institutionally committed to restoring AIB and Bank of Ireland to the role of all-dominant, privately owned shareholder banks with a stranglehold over the entire Irish economy. If only they showed the same commitment towards rejuvenation of the credit union movement, expanding SME lending outside the Bank of Ireland-AIB-Permanent TSB monopoly or restoring the diversity of financial services provision in Ireland. Events in banking in 2021 have once again exposed the shortcomings of the strategy of shoring up the pillar banks while hoping the credit unions and post offices will fill in the gaps. A second tier of banking, with local knowledge, between the level of the credit unions and the three big banks would make a significant positive difference to the Irish economy. The massive deposits in credit unions nationally show the appetite for community banking. However, the tiny proportion of those savings that is on loan productively in the community shows the limited capacity and skills in the sector to open up a full community banking service.

At a time when the viability of much of the post office network is being called into question, it is amazing that the possibility of looking to expand An Post as a community bank is not being considered. While An Post is increasing its financial offerings and has a significant network of post offices in areas where there is no bank branch within 5 km, it does not provide services at the level or scale needed. Perhaps the most obvious choice of a model to copy is that of the Sparkasse in Germany. It is an EU-based model and, as such, falls under the same regulation as Ireland. Representatives of the Sparkasse system have long expressed a willingness to consult with Irish officials and help us to get started.

Any proposed forum on the future of banking must examine community banking, both in terms of increasing the capacity of credit unions and the question of whether we need to establish, at regional or provincial level, larger community public banks to fill the gaps in financial services that will only widen further in the coming years, when the three remaining banks return to private ownership and withdraw services from communities.

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