Banking in Ireland in 2003 is an industry that likes to think of itself as bright, vibrant, responsive and competitive. In my view, it is far from that. It charges excessively, it does not pay a fair price for funds in current account balances and it erects enormous barriers to entry for new players.

If the truth be known, banking in this country is uncompetitive, monopolistic and anti-consumer. And, indeed, the truth may yet be known. The Competition Authority is studying the banking sector. If it comes up with even half of what its UK counterpart found with British banks, it will make riveting reading.

Let me give you a quote from the findings of the UK Competition Commission and see if it sounds familiar. The report was carried out on the service offered by banks to small and medium-sized enterprises and was presented to Parliament in March 2002.

It said: "We have concluded that the four largest clearing banks. . . are together charging excessive prices [including interest forgone on non-interest-bearing current accounts\] and therefore making excessive profits. . ."

So, vast profits derived from their decision not to pay interest on current accounts. Interesting isn't it?

Although I don't believe it should have been necessary, the report had recommend that the clearing banks be required to pay interest on current accounts at the UK base rate, less 2.5 per cent, because the banks wouldn't do so voluntarily.

Ironically, although the report delivered interest-bearing current accounts, such recommendations only ever serve to stifle competition and innovation. My point is that a better recommendation could have forced greater interest on current accounts and more natural competition.

However, bad as it is in the UK there is no bank paying anything near that in Ireland. We plan to change that next week but, in the interest of keeping my powder dry, I'll say no more than that.

Customers of Irish banks in the UK get interest on current accounts there but not here. Why? Because the Irish banks in the UK were forced to do it and competition makes them continue doing it.

When our UK parent, HBOS Plc, took the innovative step of offering interest-bearing current accounts, it is estimated it really hurt our competitors' profits. A reasonable Irish comparison has to be that if our initiative to be announced next week forces our competitors to follow, it will cost them one-25th of the UK experience, or circa 100 million. That's money in the customers' pockets. That's also why current accounts have paid no interest here until word leaked out that we were planning it. And the hasty responses to our planned move, I have to say, have been sad and derisory.

The same thing happened in home loans. Before we entered the market in 1999, the banks were happy to charge 2 per cent higher all round. The home-loans market will never do that again as long as Bank of Scotland operates in it.

Hitting the UK banks where it hurt didn't just involve making them pay an honest return on current account balances from which they were benefiting for free. No, it went further than that with another innovative measure. And I believe that, if the Irish banking industry is to become more competitive, then a similar measure will have to be introduced here.

It needs to be made much easier for customers to switch from one bank to another. It might sound a simple thing but, in practice, it is difficult to achieve. Banks can slow up the transfer of your business, or do a sweet deal with you at the last minute to make you stay. This sweetener also has a name. It's called discriminatory practice. You pay a select few of your customers, the best ones, interest on their current-account balances in case they leave you and you get the other suckers to subsidise them.

A recent Davy report on banking highlighted this practice here and the UK banking report recognised it as anti-competitive.

The other biggest related problem is inertia. Our competitors cite this as an indication that customers are content. In reality, it is a lot of hassle to move banks, which stifles competition. The only way to introduce real competition into the market here is that the banks sign up voluntarily to a customer charter that will make it easier for customers to switch banks.

The Competition Authority needs to force the banks to introduce a regulation allowing customers to move accounts freely, efficiently, without delay or penalty. With that single change, there is no need to force banks to pay interest on current accounts because, with free movement in the marketplace, competition will look after that.

Finally, the banking sector is not an easy club to join. The banks know this is the key to real competition and for competition to work it badly needs to be liberalised. The existing banks are unlikely to do this so it's over to the Competition Authority again.

If we are going to free up the banking market, there are a few things that need to change. However, I sense there are winds of change but without these the market will not change and banking will remain uncompetitive.

Mark Duffy is chief executive of Bank of Scotland (Ireland)