Press release
Ministers Donohoe and Fleming publish the Retail Banking Review
Published on
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Published on
Last updated on
The Minister for Finance Paschal Donohoe and the Minister of State for Financial Services, Credit Unions and Insurance, Sean Fleming, have today (Tuesday) published the Report of the Retail Banking Review (Review) following its approval by Government, which also approved the implementation of the recommendations in the Review.
The Ministers published the terms of reference for the Review in November 2021 following the significant changes seen in the retail banking sector including the closure of bank branches and the announcement that two of the five retail banks were going to exit the Irish market.
The Review, through its examination of the evolution of the retail banking sector and the current landscape, identified a range of issues and makes recommendations to address them. Looking forward, the Review concludes that the trends seen over the last decade, such as the increasing digitalisation of the sector and the further decline in the use of cash, will continue and the issues arising from these trends, including fewer ATMs and reduced branch networks, are already issues that we see today.
In response to the issues it identifies, the Review makes 34 separate recommendations spread across the themes of access to cash; consumer protection, financial inclusion and financial literacy; competition; SMEs; mortgages; and climate and staffing, including the remuneration restrictions on Bank of Ireland, AIB and PTSB.
The Minister commented:
“The Review is a comprehensive report that identifies and addresses key issues associated with the retail banking sector. These issues arise from a range of factors with technology driving the majority of changes. While many of these changes deliver improvements, the organic and progressive nature of these changes is also leaving some behind.
"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. 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.”
Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Seán Fleming, commented:
“The government wants a healthy retail banking sector that delivers for the public. To compliment the Retail Banking Review, I will soon publish the Credit Union Amendment Bill. This will help Credit Unions grow as a key provider of community banking and meet the challenges posed by the changing domestic banking environment.”
Access the Retail Banking Review: https://www.gov.ie/en/organisation-information/3c122-retail-banking-review/
1. The Retail Banking Review’s terms of reference (TOR) Retail Banking Review - Terms of Reference, which were published in November 2021, specified a deadline for completion in November 2022.
2. The TOR required a comprehensive examination of the retail banking sector following the announced exits of Ulster Bank and KBC and large scale branch closures. The Review concentrated on the basic retail banking products that are essential for most citizens and SMEs, namely current and payment accounts, savings, consumer credit, consumer mortgages and the equivalent products for SMEs.
3. The Review concludes that the trends seen in recent years, driven by digitalisation, are likely to continue. These include further declines in cash usage and increased remote accessing of banking services through apps and online methods. The impact, which is already being seen, includes fewer ATMs and bank branches, although the latter is also being driven by other factors such as the exits from the market.
4. Notwithstanding the more concentrated nature of the market, the Review finds reasonable levels of competition in most products, often thanks to the many non-banks that provide competition, albeit fragmentary competition, in critical areas like current accounts, mortgages and SME credit. However the Review highlights the need for close monitoring by the relevant authorities, the Central Bank and the Competition and Consumer Protection Commission, together with the Department of Finance. In addition, the Review recommends that the credit union sector develop a strategic plan to allow it to compete at a larger scale and that this is supported by the department.
5. There is a comprehensive consumer protection framework in place thanks to legislation, domestic and European, and Central Bank codes, especially the Consumer Protection Code, which is under review. The Review identifies a range of recommendations to improve consumer protection and to enhance financial inclusion.
6. The remuneration restrictions for staff of Bank of Ireland, AIB and PTSB were implemented at the time of the State recapitalisation of these institutions. The European Banking Authority has subsequently implemented remuneration restrictions for banks at EU level. The review concludes that the domestic remuneration restrictions are giving rise to difficulties in recruiting and retaining of staff in Bank of Ireland, AIB and PTSB with the potential for customers of these banks to lose out. The Review recommends the introduction of variable pay up to €20,000 and for the provision of standard non-pay benefits for all employees. The Review also recommends the removal of the pay cap of €500,000 for Bank of Ireland as the State is no longer a shareholder in the Bank, and for the removal of the cap for AIB and PTSB when the State’s shareholding is at an appropriate level.
7. There are 34 separate recommendations grouped into six themes (see the attached Executive Summary, including recommendations). These are:
8. Key responsibility for the implementation of the recommendations mainly lies with the Department of Finance, the Central Bank and the retail banking sector. The Competition and Consumer Protection Commission is involved in areas of competition and financial literacy.
9. The Retail Banking Review was carried out by a dedicated Team in the Department of Finance, made up of departmental staff and secondees from the Central Bank. The Review Team: