Jennifer Carroll MacNeill (Dún Laoghaire, Fine Gael) | Oireachtas source

I thank Deputy McGuinness and the members of the committee for the invitation to discuss the Report on Banking 2022, which was published ten months ago. I appreciate that it is a wide-ranging report, and I want to address all the points. I also want to address the specific issues that Deputy McGuinness raised. I will try to do both in my time.

The first ten recommendations in the report deal with the withdrawal of Ulster Bank and KBC from the Irish market. I ask to be allowed to address that because it is a substantial part of the report. Obviously, the withdrawal came as something of a surprise and changes the landscape of retail banking significantly. The retail bank population has dropped from five to three banks, leaving only domestic banks in each of which at the time the State had a shareholding. There are considerable concerns about the impact that would have on the mortgage market, personal and business finance, deposit investment and cash services. The State has had to react to that.

The big unknown related to current accounts because more than 1 million deposit and current accounts needed to be moved. That is of enormous practical significance to anybody who has to do it - to find a new account and to go through the practicalities of switching direct debits, etc., to be able to do that. That happens in an environment of traditionally very low levels of switching. Ordinarily, only 4% of accounts are switched each year. What happened created an enormous practical challenge, and everybody had to play their part. The Central Bank oversees withdrawals from a supervisory standpoint but many other stakeholders are involved.

I thank the members of the committee who have worked directly with departing and remaining banks in this process. Of course, the mass migration was an opportunity for some new players such as Revolut and for established players to play a more integral role in the market. As Minister of State with responsibility for credit unions, I was very pleased with the role that the credit union sector had to play as part of that switching process.

To date, 84 credit unions have received approval from the Central Bank of Ireland to provide current accounts and more than 75,000 credit union members now have current accounts.

The mass migration of consumer and business accounts is now nearly complete, with more than 99% of active accounts now being closed and 1.3 million new accounts having been set up in the remaining retail banks. It is fair to say that it was a stressful time for many people and switching all the payments, such as direct debits and recurring card payments, was highly inconvenient. To be honest, contacting banks for assistance was not always easy in that process. Despite the effort put in by customer-facing teams, it was a difficult process in my view and my constituents’ views. There are very significant lessons to be learned from that experience. The Central Bank will reflect on that carefully.

It is important to reflect on competition in the market and on the retail banking review in that regard. In that way, I again would like to mention the role of credit unions because in the overall consideration of the new banking environment and the retail banking review, it is clear that we need greater competition. We need a community bank that is focused in a not-for-profit way on serving the interests of its members. I wish to highlight how credit unions have stepped up to support their members and, additionally, have grown not just their current account offerings but their mortgage lending. At the end of June 2023, the total credit union mortgage books stood at €418 million. That was up by 39% over the last year and up 69% over the past two years. Deputies up and down the country will know the role credit unions play in their communities and I am keen to try to expand that.

The Irish League of Credit Unions has seen its combined mortgage book grow by 50%, with more than 1,100 new mortgages being issued so far this year. Commercial lending to our small and medium enterprises is now up to €161 million. I highlight this because these are not traditional areas in which credit unions have operated. It goes to show how they have adapted to try to serve the needs of their communities. Deputies will be aware that legislation has passed Committee Stage in this House to enable credit unions to form an even bigger part of retail banking in Ireland. I thank them for their support in relation to that. A practical example of that is through the mortgage credit union service organisations, CUSOs, which will provide the sort of collaboration that will deliver better for customers and members right across Ireland. It will significantly expand the role of credit unions in Ireland. That is a rebalancing effort, considering the difficulties that Deputy McGuinness highlighted in his report as a result of the changing banking landscape.

We can agree that it has changed considerably in a number of different ways. The way many people interact with their banks has changed. It does offer opportunities for customers, such as ease of access and increased access to different range of products and services. Customers have many different options and different providers for different products. It is also fair to say, and Deputies will know this, that some of the changes have had a highly negative impact on some customers. The closing of branches, the reduction of cash services or other in-branch services can affect consumers, especially those in smaller towns and rural areas. I am thinking of those in my own area and elderly people who are accustomed to a particular type of access to their banks. Many of those issues have been raised by Deputies before in the Dáil and I wish to reflect on how the Government is taking action to address some of those concerns. The retail banking review recommended that banks should submit robust board-approved assessments to the Central Bank where they are planning to significantly alter their services or close their branches. That should examine the impact on customers, the suitability of alternative service provision and plans for migrating customers to them. The minimum notice period was recommended to increase from one to four months for significant banking changes. In April of this year, the Central Bank wrote those “Dear CEO” letters to the remaining retail banks. Banks should aim to adhere to the new notice periods and that also will be part of the Central Bank review of the consumer protection code.

I again highlight some of the offerings by credit unions and where they stepped up. Ballyconnell Credit Union in County Cavan decided to offer current accounts after becoming the only financial institution left in the town. Their current account provision has been a game-changer in the local community. While that is success, I am highlighting how many towns in Ireland have suffered as a consequence of the withdrawal of retail banks and how there are large tracts of Ireland in which there is no retail bank offering. We have to support the credit union movement to fill that gap. For example, in Ballyconnell, they had a modest expectation of approximately 300 accounts per year but it has worked out much better than anticipated, with 750 current accounts opening since the launch in March, including 500 new members. It should be the case that no matter where you live in the country, you should be able to access all the financial services you require, whether that is in person, in a reasonable way, or online. Credit unions offer that. You also should be able to access cash.

The Deputies are aware of the retail banking review’s recommendation in relation to access to cash and this is referenced in the report. The Department of Finance is preparing legislation and the heads of the Bill will be available before the end of this year. It will require ATM operators to be authorised and supervised by the Central Bank. We look forward to engaging with the Oireachtas on the proposed Bill early in the new year because it is quite obvious, and Deputies have raised this a number of different times, how important it is to be able to access cash. Again, I can give the example of how wonderfully the credit unions have done that, and in Roscommon in particular.

I want to address the points raised by Deputy McGuinness also. I note the Deputy has raised a number of individual cases in relation to whistleblowers and I respect him for doing so in this forum. I recognise that. He will appreciate that I, as Minister of State, cannot comment on individual cases but I am aware that the Central Bank has met individuals. It has a strong focus on the role of whistleblowers. While it of course should not be the case that somebody is prejudiced because they have engaged in whistleblowing, I will not comment on individuals as I wish to be careful.

I will reflect that the role of the Oireachtas committee is an extremely important one. We should be able to go through all the different issues that are facing customers in the area of financial services. I will also offer a note of caution. As a former member of the Committee of Public Accounts, we must be very careful about the role of Oireachtas committees, their scope and how that is managed. The way in which the committee has provided this report is an excellent example of being able to highlight these different issues.

I understand the frustration that Deputies may have in their representations of constituents who are dealing with some of the non-bank lenders or the newer lenders. I am a constituency TD. I understand exactly the sort of dynamic that Deputies occasionally raise. I have spoken to the Department about a way through which we can facilitate hearing their voices in a concrete way within the Department, as well as with other stakeholders, in order that every dialogue in this regard is balanced and understanding of the pressures and frustration that our constituents face from time to time. I want to address those points for the Deputy before sitting down.

I might address some of the other points. In relation to the report, I note it has particular concerns. This was from ten months ago but I am sure the concerns persist in relation to interest rates, which have increased in the period since the publication of the report. At this moment, it looks as though they have settled or paused. We hope this is to be more than temporary, but I say this on reflection. It is an extremely important challenge from cost-of-living and inflationary perspectives.

Monetary policy is set and implemented by the ECB. The setting of retail interest rates in the economy is a commercial matter for individual firms. Of course, neither the Minister for Finance nor I have any function in the setting of interest rates. Yet, it is helpful to set out some of the rates. As of June 2023, banks average weighted mortgage interest rates had increased from 2.58% in June 2022 to 3.42%. Banks have seen increases in all interest rate types of mortgage lending. New non-bank non-lenders have seen the largest increase, moving from an average interest rate of 2.47% in June 2022 to 4.73% in June 2023. I am told that is driven primarily by a larger tracker book. Non-bank lenders have seen the smallest increase year on year, mainly due to a reduction in new lending for 2023, having predominantly fixed product mortgages in their portfolio. The Government is very acutely aware of the difficulties that increased interest rates are causing for some mortgage borrowers. We are revising the bank levy to try to provide a more proportionate contribution to our public finances to be able to provide support, including mortgage interest relief in a targeted way.

It is important to say what we need to do to support the sort of borrowers the Deputy is correctly highlighting, namely, those who are in particular difficulty. We have all met them as constituency TDs. First, the Central Bank’s regulatory framework is focused on protecting customers. It compels all regulated firms to have high standards of transparency and fairness in their dealings with borrowers. The Minister met the CEOs of banks and other mortgage entities at the end of August to reiterate his concerns about the impact of rising interest rates on borrowers.

He clearly set out the expectation that all firms should support their customers at this time. The industry responded to the Minister on 6 September and it announced additional measures to support customers who may be experiencing difficulties. The industry has launched the Dealing With Debt campaign. Government supports are available through the insolvency service and the Money Advice and Budgeting Service, MABS, which are important resources to help with personal debt difficulties. Struggling borrowers should continue to engage with the different organisations. I appreciate the imbalance there is in the nature of that engagement and how difficult and stressful it can be for a borrower to be in that situation. The process can be extremely difficult and stressful and I acknowledge that, having tried to support people with such representations in the past.

Another new initiative arising from that meeting with the Minister is that MABS is collaborating with all of the mortgage servicing firms. It has developed and expanded a streamlined customer engagement framework, which I hope will work, and it meets regularly to discuss individual cases. That is a necessary improvement to the engagement between these firms and borrowers facing difficulty. The final initiative that the industry has agreed is a new set of common eligibility criteria, which would make it easier for customers of credit servicing firms to switch mortgages, as the Deputy has highlighted. They say that would give important clarity to borrowers who would like to switch mortgages from non-banks back to the retail banks. I have spoken to the credit unions and the representative organisations that are keen to engage in this also. As the Deputy said, however, it can be extremely difficult. My colleague, Deputy Griffin, has highlighted a number of individual cases in recent days. Deputies from every side of this House could highlight difficulties. Whatever about resolution, there are difficulties with the nature of engagement. It is important that the balance is flatter between borrower and lender and that engagement is supported and rewarded

Let me see what else I can cover for the Deputy on the different recommendations. It is important, today of all days, to highlight the impact of digitalisation and fraud. Fraud is on the rise and fraudsters are taking advantage of the shift to digital banking. Every one of us has received emails and text messages purporting to be from banks or delivery companies, or in my case from eFlow for the M50 toll. There is a real risk, particularly now. I see this anecdotally but coming up to what is known as Black Friday, there is a risk of small transactions being sent to people on their phones and them having to click on the link for €3.99 or something else. There appears to be increased fraudulent activity this weekend as the shopping frenzy of Black Friday goes on. We need to be aware and highlight to people across Ireland the risks, coming up to Christmas, of increased fraudulent activity as they perhaps buy more online, and it is difficult to keep track of what delivery may or may not happen. We should be especially vigilant of fraud at this time of year. Consumers can feel under pressure to either borrow or engage in buy-now and pay-later arrangements. We should seriously consider the types of credit for people and help them understand what they may be getting into.

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