Verona Murphy (Wexford, Independent) | Oireachtas source

I thank the Leas-Cheann Comhairle. The current state of our banking sector is a major cause of concern and has a big impact on many other aspects of our lives, most notably, the housing crisis. In recent months we have seen moves by Ulster Bank and KBC to leave the Irish market. A struggling banking sector with a lack of options and availability in the mortgage market makes affording a house beyond the reach of many people on decent wages. If we can do anything here to help revitalise our banking sector then it should also help to address some of the problems in our housing sector.

We need to ask ourselves why banks have withdrawn from the Irish market. Usually, when a business withdraws from a market it is because it is no longer able to make a profit. If those banks who have left the Irish mortgage market were no longer able to make a profit in Ireland then we need to examine why this is so and take whatever steps we can to create the conditions where Ireland becomes an attractive place for banks to do business. Many of the regulations on lending and mortgages were introduced as a result of the banking crisis and bailouts ten years ago. We must recognise that that level of Government intervention in the market is not sustainable in the long run and we are seeing the consequences of that now.

If we take the average Irish income of about €38,000, the maximum mortgage that a person can get is €133,000. If the person had a 10% deposit then he or she can only afford to buy a house costing €150,000, which is almost impossible to find. Prices are rising but incomes are not rising nearly as quickly. That means that the mortgage rules are no longer fit for purpose and need urgent review.

We must also note that in the past it was more common that a person would get a job for life on a permanent basis at a reasonably young age. The rise of zero-hours temporary employment contracts and things like rolling fixed-term contracts make being able to qualify for a mortgage much more difficult. The housing crisis will only be solved by creating the conditions for increased housing supply through a planning policy that is sustainable and viable, alongside increasing people’s ability to buy a house via appropriate lending rules. Both of those things require a healthy banking sector so that house builders can access credit to create the supply and house buyers can access credit to buy.

I have spoken so far about the link between banking and housing but there are obviously many other reasons a healthy and competitive banking environment is essential. Banks play a vital role in injecting money into a struggling economy. God knows how big the struggle will become once the Government eventually decides to stop shutting down sections of economic activity for months on end. When a bank or credit union lends a small sum to an individual it is because that individual wants to spend it on something, thus creating an income for the person selling whatever it is.

I wish to mention credit unions here also, of which I too am a member. They play a vital role in our financial sector, developed by the people in an area and working for the benefit of the people in that area. Credit unions on the whole are a fantastic example of community co-operation in action. I can see a more prominent and expanded role for credit unions in the Irish banking sector in the future.

I understand that we are currently in the process of selling off our shares in Bank of Ireland. Irish taxpayers invested a great deal of money into this bank to ensure its survival over a decade ago. I hope that the Minister of State and the State will not sell these shares in a bad deal for the taxpayer. We need to see a good value for money return on those shares, even if it means holding off until their value increases. Hopefully, it will lead to a situation where a healthy and vibrant banking sector can develop in a sustainable way without the need for the State having to ever again provide rescue supports.

We have shown over the past 15 months how quickly important laws can be rushed through this House. I am not advocating rushing anything through. However, reviewing and, if necessary, amending rules and regulations in the banking sector to be more reflective of the current situation could and should be done swiftly. It would also be likely to increase the possibility of attracting new companies into the Irish banking sector.

We have to examine if some of these restrictions can be removed or amended to encourage the return of competition into the banking sector. Competition in any sector mainly benefits the consumer. The current lack of competition in the market is bad news for the consumer. Lack of competition not only reduces the number of products available but it also means that the remaining firms have less incentive to provide competitive deals to customers.

We have heard in the last year or two whispers about creating a State bank. Why can we not just create the conditions where existing banks will be encouraged to return to the Irish market. I fear that a State bank will become an endless money pit, similar to the HSE, which will further erode competition and choice for the consumer. The banking sector needs to be competitive if we, as a nation, are to have any chance of being competitive on the European and world stage.

We have seen the disastrous effects of the lack of competition within the insurance sector. We saw many businesses decimated and fail because of an exorbitant and price-gouging structure within insurance. It has taken all of five years from when I first travelled to meet the competition authority in Brussels, the Directorate-General for Competition, to ask it to investigate the matter. We now have a preliminary finding of anti-competitive practice but it is too late for many who did not have the moneys available to facilitate the lack of competition and exorbitant charging. I am calling on the Government to act in time on this and not to ignore it as the Competition and Consumer Protection Commission did on the insurance issue, which is why I had to go to Brussels in the first place.

The Government must put a framework in place that ensures competitive trading practices in the banking sector. That includes attracting new banks, resourcing post offices and increasing the financial remit of the credit unions. Our very survival is in the balance and if this does not happen then the Government can close the door behind it. I thank the Leas-Cheann Comhairle.

See this speech in context