An official review of Retail Banking in Ireland has reported that borrowers should not be concerned that the number of bank lenders has declined from 12 before the financial crash in 2008 to three today.

The report of the Retail Banking Review, commissioned by finance minister Paschal Donohoe, adds that with the imminent departure of Ulster Bank and KBC from the market, Ireland is in an unusual position vis-à-vis smaller European states as all the remaining traditional banks are domestically headquartered and managed.

The report declares: “It is the view of the Review Team that the Irish retail banking sector in the coming years will be served by the three traditional banks, credit unions, An Post, digital banks and a number of non-banks.

“The fact no new entrant has come forward to take over the operations of KBC and Ulster Bank, and previous departures of other foreign owned traditional banks, suggests policy formation for the retail banking sector should not presuppose the entry of a new large retail bank, even if such an event would be welcome.

“The Review Team believes that despite the level of concentration, and subject to continued strong regulatory oversight, sufficient competition will remain in the short to medium term.”

In Association with

Despite the Irish retail banking market slimming down to a virtual duopoly, the bureaucrats who compiled the report over the past year have called for more state regulation of non-bank lenders.

Noting that a portion of SME credit is advanced by firms who do not require authorisation by the Central Bank, the Review Team concluded that this results in an un-level playing field for the traditional banks, credit unions and regulated non-banks.

“The Review Team recommends this situation be addressed through legislation so that providers of credit to SMEs are authorised and supervised by the Central Bank,” the report states.

Donohoe’s officials have also proposed legislation to oblige banks to maintain cash services to customers.

The Review Team envisages new laws that will set criteria for the provision of cash services and to manage further decline of cash usage “in an orderly way. It is important future changes in the cash infrastructure do not outpace the expectations or needs of society.”

Ironically, private sector providers who have been filling the cash provision gap left by high street banks will in future be subject to regulation too.

The report notes that a high proportion of ATMs are owned and operated by unregulated non-bank providers, also known as Independent ATM Deployers (IADs).

The report declares: “Cash in transit firms and IADs are of critical importance to the distribution of and access to cash across the country, and currently neither are subject to authorisation or supervision by the Central Bank. The Review Team recommends that both are brought within the regulatory perimeter of the Central Bank.”

Bankers pay

On the issue of executive pay, the Review Team recommends amending the legislative ban on variable pay in banks and replacing it with a limit of up to €20,000, as well as lifting the prohibition on standard employee benefits.

The €20,000 limit would align with the threshold above which variable pay is subject to the ‘super tax’ of 89, which would remain in place, the report recommends.

As the state is no longer a shareholder in Bank of Ireland, the report recommends that the maximum pay cap of €500,000 for individuals in that bank is removed.

The civil servants recommend that the AIB and PTSB pay cap “should be removed in the future when the state’s shareholding in them is at an appropriate level”.

Finance minister Paschal Donohoe said the government has approved the implementation of the recommendations in the Review.

“The Review makes 34 separate recommendations to be implemented by the Department of Finance, the Central Bank of Ireland and the retail banking sector itself,” he said.

“Implementing these recommendations will deliver real benefits for consumers and SMEs and help ensure that the sector continues to fulfil the critical function it plays in our lives and our economy fairly, equitably and effectively.”

Photo: Finance minister Paschal Donohoe (left) and Minister of State Sean Fleming. (Pic: PollingNews.ie)