Holly Cairns (Cork South West, Social Democrats)
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292. To ask the Minister for Finance the steps that he is taking to support community banking. [55432/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy may be aware, 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. The report also notes concerns over the ability of a new State owned bank to provide effective competition.

While Indecon’s report concluded there are some areas of market failure, it noted that there is extensive provision of and access to banking services through bank branches, credit union offices and An Post branches, as well as a wide range of Exchequer funded existing supports. Notwithstanding recent announcements in the banking sector, this continues to be the case.

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 and are continuing to expand the range of services they provide.  The Government is supportive of the Credit Union movement and the current Programme for Government contains commitments to enable the movement to grow as a key provider of community banking in the State.

In order to provide “additional services” to member savings and lending, a credit union must receive approval from the Central Bank. In 2016, the Central Bank defined and described a suite of additional services known as Member Personal Current Account Services (MPCAS), under which approved credit unions may offer personal current accounts with debit cards, overdrafts and a wide range of payment services within an appropriate risk framework. To date, 77 credit unions are approved to provide such MPCAS/current accounts.

The Government is supportive of credit unions who have the financial strength, the competence and the capability to undertake SME and mortgage lending. However, the decision to lend is to be made by the board of each individual credit union, taking into account their own specific commercial, risk appetite and regulatory factors.

As of June 2022, credit unions had a combined mortgage and SME loan book of circa €445 million, an increase of 19% year-on-year. The Strategic Banking Corporation of Ireland (SBCI) has 19 credit unions engaged as SME lending partners, across 3 credit unions groups: Metamo, Irish League of Credit Unions (ILCU) and Credit Union Development Association (CUDA).

The Indecon report also looked at An Post, noting that there is a significant network of post offices in areas where there is no bank branch within five kilometres. An Post has begun transforming its retail network by delivering new financial products. These include loans, credit cards and more foreign exchange products, local banking in association with the major banks and a full range of state savings products.

Two new dedicated sub-brands, An Post Money and a new business-to-business brand - An Post Commerce, were launched in 2019. An Post invested €50 million in the network to encourage communities to use the enhanced services in their local post office.

The Government is committed to a sustainable An Post and post office network as a key component of the economic and social infrastructure throughout Ireland. This commitment can be seen in the recent agreement by Government that €10 million/annum will be provided to An Post from within the existing capital provision of the Department of Environment, Climate and Communications, over a three-year fixed term 2023–2025.

This funding aims to ensure access to important services of social value across the post office network throughout the State. These include banking services, social welfare and state savings, together with SME services and support.  Currently 900 Post Offices are providing these essential services nationwide, acting as an important community-based provider, in relation both to access to credit and to basic financial services.

As the Deputy may also be aware, on 23 November 2022, I published the terms of reference for a broad-ranging review of the retail banking sector in Ireland. This review will consider retail banking in a broad sense. The review team is well advanced in drafting the report, which I expect to be delivered to me later this month as scheduled.