The Republic is now almost unique in Europe in that it is set, for the foreseeable future, to rely on three domestic companies for retail banking, according to the Minister for Finance, Paschal Donohoe.
"For many [other] economies of our size and scale, the majority of financial services would be provided into the economy," he said, during a Department of Finance seminar in Tullamore on Monday on the future of banking.
While he didn't spell it out, Irish banking, with the imminent exits of Ulster Bank and KBC Bank Ireland, has succumbed to market failure. The only banking groups left are those than cannot leave – AIB, Bank of Ireland and Permanent TSB.
Irish banks have to hold almost three times as much expensive capital against mortgages as the EU average – largely down to the extent of the property crash, but also our lengthy repossession regime for borrowers in long-term arrears.
Cautious and difficult
Talk privately to an executive from an overseas bank operating in Ireland and they’ll go on ad nauseum about how Irish regulators, chastened by the crash, are more cautious and difficult to deal with than in other markets in which they operate.
No one wants to go back to the greed of the bubble. But it’s almost forgotten that banks need to make acceptable profit returns to court investors and fund their activities.
Customers of Ulster Bank would be forgiven for having a negative view of the bank as they face the headache of moving their accounts elsewhere. But comments from its chief executive, Jane Howard, from the floor of the conference shouldn't be ignored by the department if anything meaningful is to come from the review.
A big problem in banking is how much money is spent by individual lenders on developing systems and utilities that could otherwise be shared, she said. A move by retail banks to set up a joined mobile payments system remains tied up in a competition assessment more than a year after it was first mooted. Industry efforts to set up an interbank database to guard against fraud are also dragging on with the Department of Justice.
“There’s only so much investment all the banks can make. Ireland could be an example to the rest of the world. Utilities have got to play a part in that,” she said, adding that “we’ll all regret” it if the opportunity is missed. She might be right.