THE MORTGAGE PRICING, savings accounts and credit that is available to customers in Ireland will be reviewed under the new government review of the Irish retail banking sector. 

Announcing the terms of reference of the review today, Finance Minister Paschal Donohoe said his department is to conduct a broad-ranging review and will report back by November 2022.

Speaking today, Donohoe said NatWest’s announcement that it is going to undertake a phased withdrawal from the Irish market, as well as KBC’s announcement that it is undertaking a number of transactions that will, if completed, lead to its withdrawal from the Irish market feed into the decision for the review at this time. 

Bank of Ireland’s decision to close over a third of its branch network, as well as the banking sector has undergoing a period of significant change over the last decade in terms of technology, Covid-19 and Brexit have further accelerated the rate of change, he said. 

The review will look at the current retail banking landscape and likely market trends over the next decade. It will also deal with competition, consumer protection and consumer choice, as well as options for the mortgage market.

This review is separate to the mortgage lending review being carried out by the Central Bank. 

Services provided by both banks and non-banks will also be assessed, with the minister stating that the latter are becoming increasingly more active in the provision of SME credit and, more recently, in the mortgages market.

Community banking

Donohoe told The Journal that he “looks forward” to hearing the views of those that are advocating for a community banking system.

The 2019 Indecon report on banking found that there was no business case to be made to establish a public banking system in Ireland. 

The report said there was no economic case for a State-owned banking network, despite some areas of market failure.

It noted that there was an extensive offering to customers with credit unions, An Post, as well as a number of commercial banking providers in the market.

However, two years on, the Irish market landscape has changed somewhat. 

Donohoe acknowledged that representatives from Germany’s Sparkasse public banking sector, who presented the model to Irish politicians in an Oireachtas Finance Committee in 2017, have been advocating for a similar system  in Ireland for some time. 

“All of these things will be assessed as part of the review,” said Donohoe, whoa added that the government would be guided by the review. 

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Bankers’ pay

In terms of bankers’ pay, the banking review is going to examine the €500,000 salary cap for bankers employed in the banks that were bailed out by the State.

This will fall under the review of “operational issues arising from the difficulties with staff recruitment and retention”. 

Donohoe said “there are no plans for change” in relation to the remuneration policy, but said he accepted that banks will make submissions on the policy in place here, and they will be assessed as part of this review.

Reaction

John O’Connell, General Secretary of the Financial Services Union, has welcomed the publication by the Department of Finance of the terms of reference for the review, stating that it is important that the review is inclusive of different voices and is transparent in its nature.

Donohoe says he expects to hear from all stakeholders, including An Post and the credit unions. He said a public consultation will also form part of this review.  

Brian Hayes, Chief Executive of the Banking Federation of Ireland, said:

“What’s needed at this stage is an honest discussion on the challenges and opportunities that banking in Ireland faces. We see this Review as an opportunity to focus on the future and to learn from the past. Banking in Ireland today is entirely different to banking in Ireland a decade ago.”