Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank the Senator for raising the issue of the promotion of competition in the banking and financial services market.

HEADINGIt is not easy to balance the competing economic processes of consolidation and competition in any market, and the banking market is no different. We have seen some consolidation and it is also very difficult to promote and achieve competition during that process. However, as to the consolidation that is happening, there are new people and organisations providing a greater level of banking services than they would have heretofore, but perhaps are not considered part of the traditional banking system.

In the earlier years of the century, that is, in the past two decades, the Irish banking market was very competitive and one that had diverse banking and credit providers. Now, with the benefit of hindsight, it is not a sustainable banking market and I believe it is fair to say that ultimately it did not serve the best long-term needs of the Irish economy. We have seen that as a result of the financial crash and the banking crash and the banks that had to be bailed out. There was unbridled competition at that stage, which ultimately led to many difficulties in its own right, which we are still dealing with in terms of reserves, etc., that banks are required to hold.

Following the global financial crisis and its impact on the Irish financial system, changes were made to the legislation governing the financial sector and the structure of the Central Bank of Ireland, which included removing the part of its mandate to promote the development of the financial services industry. I wish to ensure that the banking and financial services system is one that will effectively contribute and support economic growth and employment. Competition in this sector is vital to ensure that businesses and consumers have a range of options available when using financial services and accessing credit.

When considering competition in any market, two key aspects are the range of products available to consumers and the various sectors in society and the pricing of those products. In terms of the product range, it is worth noting the provision of financial services is evolving rapidly and it might not be all through the traditional banking system that people talk about in the normal course of events. Innovations in the fintech space, which Senator Byrne referred to clearly, and new initiatives from credit unions, which I wish to highlight as Minister of State with responsibility for credit unions, and the new offering by An Post, are resulting in the provision of new services and products at all times. As regards An Post, any AIB or Bank of Ireland customers can go in to a teller in any post office in Ireland that has one and withdraw up to €1,500 cash, lodge cheques, lodge cash and conduct the normal business that they would have done in the bank branch that may have been up the road and is no longer there. That full range of services is now available through An Post, but perhaps people do not fully appreciate that at this point in time.

For the banking sector to be competitive, it must be acknowledged that it will have to be profitable. In order for banks to survive over the long term they need to generate adequate revenue and profits in order to employ and pay staff, meet business costs and provide economic return for their depositors and other financial providers.

With regard to the issue of the role of the Central Bank and competition, the role of the Competition and Consumer Protection Commission, CCPC, would need to be considered. The CCPC, a body under the aegis of the Department of Enterprise, Trade and Employment, is the statutory body responsible for the enforcement of domestic and EU competition law in the State. Essentially, there is a demarcation regarding competition. It is a matter for the CCPC primarily, and not a role for the Central Bank. It did have that role, and perhaps there was over-competition, and now those two roles have been separated.