The Competition and Consumer Protection Commission (CCPC) has expressed concern about the concentration levels of the retail banking sector ahead of the impending exits Ulster Bank and KBC Bank Ireland.
The regulator has published its recent submission to the Department of Finance's public consultation on banking, outlining its apprehension at just three retail banks operating in Ireland and its recommendations to promote competition and the consumer interest.
The CCPC said that non-bank lenders had entered the market offering mortgages and business lending products, but that no full service banks have been established in Ireland and that there are no indications that any new banks would begin trading in Ireland in the near future.
The organisation said that Ireland would be "unique in having such a low level of choice, comparing poorly against other EU countries, and that the situation "risks leaving certain consumer and business segments with little choice for a range of products."
It added that it would be vital that public policy and regulation can facilitate new entries into the Irish banking market and ensure effective competition.
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The CCPC recommended that the Retail Banking Review should assess the full impact of higher concentration in the banking sector on consumers and small businesses with benchmarks against the international experience with full service banking.
It called for the Central Bank to take an active role in promoting competition with the establishment of a regulatory sandbox and specific guidance for fintechs seeking authorisation.
"The CCPC is aware that it has been suggested that the Central Bank’s macro-prudential requirements are excessively intrusive and this may be adding to the cost of financial services and potentially acting as a barrier to entry," it said in its submission.
"It is difficult to establish whether this is the case as the Central Bank has imposed capital requirements that are in line with those imposed by the rest of the EU financial services competent authorities."
The CCPC also said the Central Bank should examine the loyalty costs arising from consumers rolling over onto higher mortgage rates at the expiry of their fixed rate and identify measures to address them in a revised consumer protection code.
Among its other recommendations, the CCPC listed changes to regulation in the credit union sector and early government engagement with the EU Digital Identity Wallet product for maximum consumer engagement.
The CCPC also recommended that the use of suspended possession orders by the courts be reviewed as the property repossessions and wider difficulties in enforcing the security of mortgage debt have been cited as potential barriers to entry for banks.
The regulator has called for improvements in the financial literacy of consumers and small businesses and innovative options in relationship management for SMEs due to the reduced number of banks available.
(Pic: Getty Images)
