Kathryn Reilly (Sinn Fein)
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The issue I raise is one I mentioned briefly during my contribution on Private Members' business, for which the Minister was present. He might be familiar with what I will say. When banks are restructuring the Minister for Finance should ensure that, as they deleverage, they do it in a way that does not alienate local communities and leave them without vital services. We all know there is a need to reduce the size of the banks. After their excessive growth during the boom it would be naive not to expect them to undergo significant restructuring. However, the process of deleveraging agreed between the Government and the troika must not leave communities, particularly small communities in rural areas, without an adequate provision of banking services.

Given the volume of public money that has been pumped into our banking system, there is a social responsibility on bank chiefs and the Government to ensure the restructuring of banks not only makes commercial and economic sense but also social and community sense. I see the potential impact that recent bank closure announcements is having in my home county and particularly in towns such as Belturbet, Killeshandra and Kilnaleck. In many ways banks are the bedrock of communities and towns. They are the bedrock for businesses and also attract people into towns. When people are in the town they will call into local shops and other businesses in the area. That supports the local economy. However, once the bank branches are closed there will inevitably be a knock-on effect on the local economy and businesses.

Apart from the inconvenience these closures will cause for the customers of Ulster Bank in the affected locations, there is a more worrying dimension in terms of the provision of banking services in rural areas in the wake of branch closures by AIB, the former National Irish Bank and Northern Bank and the reduction in services by Bank of Ireland in other locations. We must consider the bigger picture and the impact on many rural areas, where the lesser alternative of online banking or mobile banking might be very difficult due to problems with connectivity. We must wake up to the fact that with the closure of small banks in rural areas, particularly in areas where the Garda stations have already been closed, there is a danger of more criminality and theft. Businesses must transport their money to deposit it in banks, which leaves the people concerned vulnerable to attacks.

We are watching the withdrawal of vital services from communities which already have been negatively affected by the economic downturn. On a personal basis, many customers, particularly elderly customers, will not travel the extra distance to the bank. They might not be able to do so. Where will they keep their money? This might result in people keeping more money at home, which will be another problem. It will make them the target of burglars, which does nobody any favours.

The closure of bank branches due to deleveraging marks the withdrawal of another vital service from rural towns and villages. The value of such services should not be underestimated because they are important for businesses and individuals in such towns and for people who are unable to travel longer distances to the nearest branch. We talk about economic regeneration in the indigenous economy and trying to achieve economic growth on a widespread geographical basis. In that context, we should examine how to retain as many of these bank branches as possible to serve the local communities and local businesses, rather than close them and make those local areas uncompetitive.

Not everybody can conduct their banking online or by telephone, and not everybody has the capacity to travel extended distances to branch offices. These points must be made to the banks in question when they are being restructured.

Dinny McGinley (Donegal South West, Fine Gael)
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I thank the Senator for raising this matter. Being from a rural background I understand her concerns very well. Unfortunately, a number of bank branches are being closed in my constituency as well.

As the Senator will be aware, operational decisions for the covered banks - AIB, Bank of Ireland, Irish Bank Resolution Corporation, IBRC, and Permanent TSB - remain the responsibility of the boards and management of the institutions. Notwithstanding the fact that the State is a significant shareholder in these institutions, we must ensure that the banks are run on a commercial, cost-effective and independent basis to ensure the value of the banks as an asset to the State. The relationship frameworks between the Minister for Finance and each bank define the nature of the relationships with those banks as per the memorandum on economic and financial policies agreed with the EU Commission, the European Central Bank, ECB, and the International Monetary Fund, IMF. These frameworks were published on 30 March 2012 and can be found on the Department of Finance website. Likewise, the State has no control over operational decisions made by the non-covered institutions operating in the State.

As the Government has stated previously, it is an inevitable but unfortunate consequence of the necessary restructuring of the banking system, and return to viability of the sector, that branches in certain towns and villages across the country will be closed. Each branch is looked at on an individual basis regarding income and costs. Banks also assess the level of usage of each branch in the decision-making process. Other factors affecting the decision may include whether the premises is owned or leased. The Government appreciates that any branch closures will have an impact on the affected towns and villages. However, it is an inevitable consequence of the cost cutting programmes currently being undertaken across the banking sector.

Nevertheless, to mitigate the impact of the branch closures on customers, both AIB and Danske Bank have developed a relationship with An Post that allows customers to perform a range of banking functions in their local post office. In the case of AIB, additional banking facilities are available in over 90 selected post office outlets in areas affected by branch closures. AIB has also launched a new mobile bank service to provide certain banking services to customers in remote locations.

All the banks are keen to embrace new technologies to enhance the customer experience and there has been increased investment in new and innovative ways for people to bank. The availability of Internet and telephone banking along with mobile and iPad applications allows customers the opportunity to perform banking transactions outside traditional hours. It is now possible for customers to access banking services 24 hours a day and 365 days a year.

The Government is committed to the development of rural areas and supports this commitment with resources that aim to diversify the rural economy and improve the quality of life in rural areas. Programmes managed by the Department of the Environment, Community and Local Government, such as the rural development programme and the local and community development programme, continue to provide the financial resources necessary to support both economic and community activity in rural Ireland, thereby laying strong and sustainable foundations for vibrant rural communities for the future. The Government is committed to the roll out of broadband services to rural Ireland and will ensure that all customers can avail of the full range of new innovative services provided by the banks.