Update: Bank Charges 4th July 2014

4th July 2014 - Bernard Durkan TD

QUESTION NO: 60

DÁIL QUESTION addressed to the Minister for Finance (Deputy Michael Noonan)

by Deputy Bernard J. Durkan

for WRITTEN ANSWER on 03/07/2014

To ask the Minister for Finance the extent to which bank charges in this country are comparable to those that exist in other EU jurisdictions; and if he will make a statement on the matter.

REPLY.

The Programme Documents (the Memorandum of Understanding on Specific Economic Policy Conditionality and the Memorandum of Economic and Financial Policies) agreed following the 10th Review of the EU-IMF Programme of Financial Support included a commitment to carry out an assessment of banks’ fee income by end-December 2013 as follows:

The authorities will assess banks’ fee income relative to peers in selected other jurisdictions. Based on this assessment they will complete an external review of the regulation of bank fees.

The Department of Finance undertook this assessment and review. Part of the review process involved comparing bank charges in Ireland with those in other EU jurisdictions. In this regard the review found that:

· net fee and commission income divided by average assets in Irish banks was well below the average of their peers,

· net fee and commission are lower in the Irish banks than in their European peers relative to net interest income,

The review concluded that it would not be appropriate to repeal Section 149 of the Consumer Credit Act 1995 at this point in time. The lack of competition in the banking sector means that the removal of section 149 would give unfettered price setting power to the incumbent banks. This issue should be revisited when competition in the banking sector has improved significantly.

However, as part of the conditions under which the Irish banks received state aid, Ireland made various ‘sectoral commitments’ to the European Commission in order to promote competition in the Irish banking sector. Among these commitments, Section 1.1 (b) of the approved State Aid for Bank of Ireland states: “Legislation will be enacted that will provide that Section 149 of the Consumer Credit Act, 1995 regarding price regulation and fees will not be applied to new entrants in their first 3 years of commencing business in Ireland”. This exemption was provided for under the Central Bank Supervision and Enforcement Act 2013.

In addition, the review conducted by the Department of Finance made a number of recommendations with regard to the process of assessing notifications under Section 149. The Central Bank of Ireland recently confirmed that it had begun to implement these recommendations. A copy of the report is available on the Department of Finance website as follows: http://www.finance.gov.ie/news-centre/press-releases/results-review-regulation-bank-charges-ireland-section-149-consumer.

Update: Bank Charges 4th July 2014

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