Brendan Griffin (Kerry, Fine Gael)
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541. To ask the Minister for Finance if he will consider establishing a public state bank similar to other European countries to increase competition in the Irish banking sector following the exit of a bank (details supplied); the reports on the potential exit of KBC; and if he will make a statement on the matter. [20804/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy may be aware, under a previous Programme for Government commitment I have thoroughly examined the possibility of implementing a public banking system.

My Department published a paper in December 2019 by Indecon Consulting on an Evaluation of the Concept of Community Banking in Ireland. This was a follow on to a previous paper on Local Public Banking published by my Department in 2018.

The Indecon report concluded that there is no business case for the State to establish a community banking system in Ireland, supporting the outcome of the previous report on Local Public Banking. The report notes that the Exchequer costs and risks involved would not be justified by the analysis of the causes and extent of market failure. The report also notes concerns over the ability of a new State owned bank to provide effective competition.

An Post and Credit Unions are already competing within our banking sector, and are already providing new services to their customers and to new customers. And we have many non-bank operators here in Ireland that are looking to provide lots of services to consumers in a different or non-traditional way. Furthermore, the State does provide supports to aid SME access to credit through a range of loan guarantee schemes operated by the Strategic Banking Corporation of Ireland on behalf of the Department of Enterprise, Trade and Employment and the Department of Agriculture, Food and the Marine. A notable development in recent months has been the inclusion of non-bank lenders offering such guaranteed loans, particularly through the Covid-19 Credit Guarantee Scheme which is available from a range of non-bank lenders and Credit Unions as well AIB, Bank of Ireland and Ulster Bank.

The Indecon report looked at the credit union sector, and concluded that Credit Unions are considered to be a ‘community bank’. Credit unions are a key provider of financial services throughout Ireland with assets of €19.6 billion and loans of €5.1 billion, and are continuing to expand the range of services they provide. The Government is supportive of the Credit Union movement growing as a key provider of community banking in the country.

The report also looked at An Post, noting that it was increasing its financial offerings and that there is a significant network of post offices in areas where there is no bank branch within five kilometres. An Post offers counter services for AIB, allowing customers to lodge and withdraw cash at An Post branches. Bank of Ireland has announced a new partnership with An Post to provide a range of banking services.

There are a wide range of models in the delivery of financial services in the State. These are being augmented all of the time, particularly in the area of online and phone app banking services. Complementing these wide range of models, we have huge diversity in the ownership of firms delivering retail services. Ownership ranges from shareholders, both domestically and internationally in the case of credit institutions and retail credit institutions, to community ownership in the case of credit unions.

The Government wants to ensure that the banking and financial system is one which will effectively contribute and support economic growth and employment. Competition in the sector is vital to ensure that businesses and consumers have a range of options available when using financial services and accessing credit.