Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

24. To ask the Minister for Finance the future role he sees for lending institutions here that have closed down their business in the domestic market but have remained open to the corporate or investment sectors; if the banking licence in such cases is likely to be restricted in the future; and if he will make a statement on the matter. [49208/13]

Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

69. To ask the Minister for Finance the role he sees for redundant banks that have ceased to trade in the domestic market but have remained open to investment in corporate sectors; and if he will make a statement on the matter. [49794/13]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I propose to take Questions Nos. 24 and 69 together.

A banking licence allows the holder to undertake certain business activities set out in Annex I of Directive 2006/48/EC, which has been transposed into Irish law by the Central Bank Act 1971, the amended S.I. 395 of 1992, S.I. 661 of 2006 and S.I. 475 of 2009. It is a matter for the licence holder as to which of the permitted activities it will undertake and therefore a decision not to undertake certain forms of business activity will not affect the licence.

While it is disappointing that ACC and Danske Bank have taken the decision to withdraw from the Irish market one of the key features of banking strategy in the financial crisis has been the retrenchment to national borders. One of our expectations from the financial crisis is that market shares in traditional banking services will become more fluid during the recovery as the banking landscape continues to adjust to the withdrawal of foreign players, the restructuring of our incumbent banks and the increasing price transparency within financial services. The withdrawal of particular services and closure of certain aspects of the business of some banks is a realisation of this expectation.

We expect that over time this will present opportunities in the market for the entry of new market participants well positioned to be confident in the future profitability of an Irish branch or subsidiary. While the current market may not be attractive to a fully diversified bank challenger in the short term, I would expect new financial services providers to enter the market on a more targeted basis – such as specialised lenders and non-bank finance providers.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

25. To ask the Minister for Finance his view of the level of competition in Irish banking sector for both personal and business customers; the actions that can be taken to improve the level of competition; and if he will make a statement on the matter. [49203/13]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I fully accept that the level of competition in the Irish banking sector has reduced with the recent decisions by ACC and Danske Bank to withdraw, following the withdrawal of Bank of Scotland (Ireland) some time ago. This is consistent with a trend evident through the course of the financial crisis of retrenchment to national borders.

Over time, I expect that the restructuring of the banking sector and the recovery of the economy will present opportunities for the entry of new market participants well positioned to be confident in the future profitability of an Irish branch or subsidiary.

This Government has been working hard to create an environment conducive to the entry of such new entrants through a number of initiatives and have been leading the debate at EU level on the mechanisms to promote alternative forms of financing for SMEs.

It is important that we establish a level playing field for all banks if they will be willing to enter the Irish market and compete. In this regard:

- we are working to manage and minimise potential market expectations of future State support for the state owned banks which could act as a deterrent to new market entrants;

- we are working to establish a level playing field in the assessment of credit risk through the establishment of an industry wide credit register to allow for the appropriate measure of risk in lending, allowing incumbent and new lenders to lend with full visibility of the risk of that lending;

- we are working to reduce switching costs to allow customers to move between banks more easily, enhancing competition and forcing banks to work hard to retain their customers on a commercial basis;

- we are encouraging risk sharing partnerships to encourage new lending, such as the AIB / European Investment Bank lending initiative;

- we are in regular dialogue with potential market entrants as they evaluate potential opportunities in Ireland and will be supportive of new entrants as they emerge.

The recent RBS review by the UK Government confirms the continuing role that Ulster Bank will have in the lending and deposit taking business for all customers here in Ireland. KBC have been expanding their network and their ambitions in Ireland. I think that it is fair to say that it is not all bad news and that the Irish financial market does offer opportunities to institutions. This Government has also taken steps to ensure that the Irish financial market is accessible to any financial institution considering establishing in Ireland. In seeking to reduce the barriers to entry which are specific to the Irish banking market, Section 149 of the Consumer Credit Act, which provides for the regulation of bank fees and charges has been disapplied for three years in the case of new financial service providers setting up in Ireland.