Seán Kyne (Fine Gael) | Oireachtas source

I welcome the Minister to the Chamber and wish all businesses across the country that are re-opening today the very best of luck and profitability. I hope it is a permanent re-opening. We all hope that. Many businesses across our country have had a horrid 14 months because of the pandemic. I acknowledge the range of supports put in place by the Minister and the Department of Finance.

We know that SMEs are highly important to the banking sector and vice versa. There is interdependency between the two. Regarding the goings-on over the past number of months regarding the banking sector and rationalisation and ignoring the real-life rationale for bank branches in different places, which I am sure will be discussed, the loss of a bank branch, which is often an iconic building on a main street, has a serious impact on the town in terms of sustainability, vibrancy and a visual viewpoint. Banks need to understand the loss of footfall and the casual or opportunity buying and browsing that takes place in a town. This is not engaging with the rationale for bank branch closures.

The last Government initiated a report on public banking in December 2018 following programme for Government calls for an examination into the banking models in Germany. That report was published jointly by the Department of Finance and the Department of Rural and Community Development. It stated that there "are few compelling arguments for the State to establish a new bank" and went on to discuss the role of the Strategic Banking Corporation of Ireland, SBCI, An Post; and the credit unions in providing loans to SMEs and consumers. The SBCI was established as a lender in 2015 and has supported thousands of SMEs since then. It is based on a model that addresses market failure while creating competition but not being the competition itself, which is important. There has been much talk about the Sparkassen model, which in reality has a very prudent nature regarding lending whereby a relatively long period of savings by a customer would precede a loan offer.Therefore, according to that report, there is no expectation an Irish public bank, if one ever came into being, would offer a substantive change to the current mortgage market. Similarly, it argues the new An Post current accounts would provide and have provided additional competition and increased availability of banking facilities throughout rural Ireland, as would the credit unions, which are community based and regional.

The Department of Finance published the Indecon report in December 2019, which states there is no economic case for a State-owned banking network despite some market failure. It goes on to state the analysis indicates that in addition to the community banking role played by credit unions and An Post, the main commercial banks have a large footprint of branches, although matters have changes on that score since 2019. There is also evidence of new entrants to the small and medium enterprise market, including non-traditional providers. The report goes on to state it would have concerns over the ability of such a new State-owned entrant to provide effective competition, and the Exchequer costs and risks involved would not be justified by its analysis of the causes and extent of market failure.

Although those reports are quite recent - the Department of Finance and the Department of Rural and Community Development report was published in 2018 and the Indecon report was published in 2018, the Covid pandemic - bank rationalisation of branches and proposed and planned bank exits or mergers of loan books in the case of KBC raise the question as to whether the Minister is happy the conclusions of both of those reports still stand. They are recent and ordinarily he would probably say he is sure they do, but I would be interested to hear if that rationale still stacks up.

Also, in the 2018 report it was commented there was no impediment to both the Irish Rural Link and the Savings Bank Foundation for International Co-operation engaging with the Central Bank of Ireland, the credit union sector or An Post and other private entities to progress any proposals for a new banking force. Has there been even a cursory engagement on that or is the Minister aware of any engagement from banks outside the current market to enter it? Competition, as we know, is the lifeblood of banking, notwithstanding the Minister's earlier comments to the effect that in the European context there is a view the banking sector has too many participants, which one would not have taught is true to the Irish market. He spoke about consolidation and the balance between competition and consolidation and the long-term interests of the economy. I accept that.

I am sure it would be no surprise to the Minister to note that the level of trust in Irish banking is rather low, although it is still around 40%. We do not need to go into the history of that as we all know it. This is not unique to Ireland but the level of trust in banking is rather lower in Ireland than in many other countries. One of the most important issues young people face when establishing themselves is securing a mortgage. With the lower the level of competition, the lower level of trust in traditional providers is of concern. What does the Minister, his Department and the Central Bank view as being the future of mortgage lending? Does he believe, realistically, we are looking at longer term fixed mortgage rates that might be more common in other jurisdictions? Does he have concerns about the EU Single Market for financial services? What will that mean for competition? Is that a concern he has?

The Financial Services Union published a report recently on the future of banking across the island of Ireland. It referred to the fact we still own shares in AIB, Bank of Ireland and Permanent TSB in the context of a public service obligation they might have. That comes back to the original point regarding the iconic buildings and the branches with respect to there being a community use for some of those and engagement with the community on that. That may be an issue that could be examined as we have those shares. Have the recent decisions by Ulster Bank and the plans for KBC changed the Minister's views on the offloading of the shares we have in the other banks with regard to the timescale and plans?I am not saying there is any solution because this is a difficult area but those are some points I have about an important area for our economy.