Neale Richmond (Dublin Rathdown, Fine Gael)
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73. To ask the Minister for Finance his views on the viability of the banking sector in Ireland in view of recent announcements; and if he will make a statement on the matter. [16451/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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The recent announcements by Ulster Bank and Bank of Ireland represent unfavourable developments for the Irish banking market. These decisions may have an impact on competition in the banking market and are a reflection of the wider challenges banking is facing, not only in Ireland but also abroad.

It should also be noted that the banking sector has been strengthened in recent years through a range of reforms that have improved its resilience to adverse shocks. This resilience has been evident in the lack of any additional amplification of the COVID-19 crisis through the financial sector. These changes have included a large increase in the quality and quantity of loss-absorbing capital on bank balance sheets since the previous global crisis, a reduced reliance on short-term unstable market-based funding, and substantial reductions in non-performing loans. Some facts include:

- The aggregate Common Equity Tier 1 capital ratio of the domestic banking system stood at 18.2% at end 2020 which is between 2 and 3 times the level in the system in 2008.

- Domestic lending is now funded primarily through domestic retail deposits, rather than less stable sources of short-term, wholesale financing from abroad.

- Non-performing loans on domestic banks’ balance sheets have fallen by 85% since 2014.

- Total assets of domestic Irish lenders are around €280bn, less than half the 2008 peak.

Although each of the banks in which the State has a shareholding recorded significant losses in 2020, the second half for the year was an improvement on the first half with both AIB and BOI recording underlying profits. In addition, new lending recovered strongly in the second half of the year. Despite the significant losses recorded in 2020, the funding and capital positions of the banks remain significantly above regulatory minima leaving them well positioned to manage through the crisis and to support the recovering economy.

Notwithstanding recent announcements in the banking sector, Ireland continues to have an extensive network for banking services, including post offices and credit unions that are spread right across the country in addition to the bank networks.

Revised Central Bank lending regulations were enacted on 1 January 2020 which materially expanded the lending capacity of the credit union sector, including for mortgage and SME lending. The sector had a combined mortgage and SME loan book of €344 million at end 2020.

There is a significant network of post offices in areas where there is no bank branch. In addition, An Post offers counter services for AIB, allowing customers to lodge and withdraw cash at An Post branches. Bank of Ireland has announced that it is following suit.