A new survey from the EU Competition Commission has found that with one of the lowest cost bases in the EU Irish banks are amongst the most profitable.
On average Irish banks have pre-tax profits of over 40 per cent of their gross retail income.
The Commission today published a survey of competition in retail banking across the EU and is invited the public and other interested parties to submit comments.
The survey found that the profitability of European banks has soared since the 1980s with institutions in Ireland, Spain and Finland the most profitable.
The Commission says their is clear evidence of fragmented markets and of areas where markets are not working as well as they should, which means consumers and businesses are paying more for banking than they should be.
A number of competition issues where highlighted in the Irish market including little price competition on interest rates paid on personal current accounts, the absence of clear procedures for evaluating and admitting new network members and the bilateral nature of the clearing system, barriers to SMEs to switching suppliers for term loans and high switching costs.
Competition Commissioner Neelie Kroes said: "Our competition analysis of the retail banking market shows that markets across the EU remain fragmented, that there are still significant entry barriers and that consumers and SMEs have difficulties in finding the best offers for them. We want to discuss with stakeholders how best to tackle these problems."