Written answers

Thursday, 23 January 2014

Department of Finance

Banking Sector Issues

Photo of Terence FlanaganTerence Flanagan (Dublin North East, Independent)
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61. To ask the Minister for Finance his views on the consolidation in the banking sector; and if he will make a statement on the matter. [3423/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Given the extent and nature of the financial crisis in Ireland it was inevitable that the banking sector would consolidate in order for the sector to better match the needs of the economy.  That process is still underway with the announcements last year by ACC Bank and Danske Bank.  

I do expect that the restructuring of the banking sector in Ireland 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 continues to work to create an environment conducive to the entry of such new entrants primarily through the implementation of policies to promote economic recovery and employment creation but also through different initiatives to ensure that there is an adequate pool of credit to underpin the recovery.  This is a theme common to our EU partners and Ireland has been leading the debate at EU level on the mechanisms to promote, for example, alternative forms of financing for SMEs. It is important though that we establish an environment conducive for banks and alternative credit providers 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 equality 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. The Credit Reporting Act was passed at the end of 2013; 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; alternative innovative mechanisms to involve other lenders are actively being explored and progressed such as the initiative with the German State Development Bank, KfW; and 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 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 believe 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.

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