Jan O'Sullivan (Limerick East, Labour)
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Question 126: To ask the Minister for Finance if his attention has been drawn to the recent report of the Competition Authority showing that Irish consumers were continuing to pay over the odds for bank services; the steps he will take to ensure transparency and fair treatment for users of the banks; and if he will make a statement on the matter. [26641/05]

Michael Ring (Mayo, Fine Gael)
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Question 143: To ask the Minister for Finance if he has endorsed the recommendations of the Competition Authority which fall to be implemented by him in respect of competition in the banking sector; and if he will make a statement on the matter. [26698/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I propose to take Questions Nos. 126 and 143 together.

The publication of the Competition Authority's final report on competition in the non-investment banking sector on 22 September 2005 is welcome. The report focuses on two markets — personal current accounts and SME lending. It finds that Irish banks do not compete aggressively for existing customers in those markets. The report maps out a series of steps to be taken to build greater competition in the banking industry. It highlights several areas in which financial institutions can through increased competition be more responsive to customer's needs, thereby increasing choice and the quality of services provided.

The 25 recommendations contained in the Competition Authority's report are directed largely at the industry, its representative bodies, the financial regulator and Central Bank, as well as to the Minister for Finance.

In summary, the authority recommends action to make it easier for both personal and SME customers to switch both loan and current account providers. It also identifies a need for improved information on financial products. Finally, the authority recommends actions aimed at creating a more open and flexible payment clearing system.

Some important actions have already taken place in line with these recommendations. The IBF has adopted a voluntary switching code aimed at streamlining the process of changing banks by personal current account holders. The authority recommends both the extension of this code to cover SME current accounts and that the financial regulator should monitor its operation with a view to implementing a statutory scheme if it proves ineffective. The authority acknowledges that the Irish Payment Services Organisation, IPSO, has acted to remove some barriers to entry to the clearing system, and is engaged in further reforms of its organisational structure.

Points addressed for the attention of the Minister for Finance include the issues of stamp duty, the regulation of banking charges and the question of improvements in the area of mortgages and cheques.

Measures have already been taken, through the Finance Act 2005, to eliminate a double stamp duty charge on switching of financial cards. The authority suggests that the existence of the stamp duty may be an inhibitor to competition as it acts as a disincentive to the holding of multiple accounts, and recommends that an analysis to see if this is the case be done. Since the duty is levied without discrimination on issues of financial cards and, in view of the Finance Act 2005 changes, there would not seem to be a persuasive case that the duty, per se, creates any significant competitive distortion. Accordingly, while I am having the report examined, I do not see a prima facie case to incur the costs of performing such a general analysis.

The authority recommend that regulation of non-interest bank charges should only end once its other recommendations to facilitate and improve market entry and switching have been successfully implemented and are working in practice to improve competition.

The report acknowledges that any measures aimed at improving competition in the mortgage market needs to take account of relevant EU developments. The question of facilitating the transfer of mortgages raises important legal issues, including in relation to conveyancing and contract law.

At present paper cheques are returned to issuing banks as part of the clearing cycle. The authority suggests that IPSO should investigate if new technology, allowing banks to exchange electronic images of cheques, known as cheque truncation, would yield efficiency benefits. I support the authority's view that legislation should not be passed unless this investigation establishes a business case for cheque truncation. I am open to proposals for changes to legislation to facilitate improved cheque handling technology, if such is required.

In addition to the recommendations addressed directly to me, I will be monitoring closely progress in implementing all the recommendations contained in the report and their impact overall to ensure that the legislative and regulatory framework for financial services supports a competitive market environment.