Written answers

Tuesday, 8 July 2014

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Independent)
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190. To ask the Minister for Finance if his Department has undertaken any study into the competitiveness of the retail banking sector here; the way competitiveness has decreased in the past six years; if he has concerns for the present level of competitiveness in the sector; and if he will make a statement on the matter. [29476/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I accept that the level of competition in the Irish banking sector has reduced as a result of the decisions by ACC, Danske Bank and Bank of Scotland (Ireland) to withdraw from the market. As the Deputy may be aware, towards the end of last year, my Department undertook an assessment of banks' fee income relative to peers in selected other jurisdictions and carried out a review of the regulation of bank fees. The review concluded that it would not be appropriate to repeal Section 149 of the Consumer Credit Act 1995 now. Specifically, in relation to competition, the review found that the lack of competition in the banking sector means that the removal of section 149 would give unfettered price setting power to the incumbent banks. This issue should be revisited when competition in the banking sector has improved significantly.

As part of the conditions under which the Irish banks received state aid, Ireland made various 'sectoral commitments' to the European Commission in order to promote competition in the Irish banking sector. Among these commitments, Section 1.1 (b) of the approved State Aid for Bank of Ireland states: "Legislation will be enacted that will provide that Section 149 of the Consumer Credit Act, 1995 regarding price regulation and fees will not be applied to new entrants in their first 3 years of commencing business in Ireland". This exemption was provided for under the Central Bank Supervision and Enforcement Act 2013.

The Deputy may be aware that Bank of Ireland announced on 26 June last that it had agreed to sell the distribution platform, together with €250 million of mortgage assets at par, to Dilosk Limited. No deposits are transferring as part of the sale. That follows an amendment to the bank's restructuring plan which allowed the bank to retain its life assurance subsidiary, New Ireland. The bank committed to certain substitution measures including the sale of the ICS distribution platform together with, at the option of the acquirer of the platform, up to €l billion of mortgage assets and a similar quantum of matching deposits. The purpose of the ICS substitution measure is to support new entrants in the Irish mortgage market thereby increasing competition to the benefit of the consumer.

Dilosk Limited has confirmed that it has applied for authorisation from the Central Bank of Ireland to operate as a retail credit firm and once it is so authorised, it will be required to comply fully with all relevant consumer protection codes, including the Code of Conduct on Mortgage Arrears. Mortgage holders will therefore be afforded protection. Given the reduced number of lenders now operating in the mortgage market, this transaction is to be welcomed as it introduces a new entrant and should therefore contribute to greater competition.

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