Minister for Finance Michael Noonan has acknowledged the withdrawal of ACC and Danske Bank will have a negative impact on competition in the Irish banking sector.
But he told the Dáil he was confident new financial services providers would enter the Irish market.
Mr Noonan was speaking during a Dáil debate on a Fianna Fáil private member's motion to establish a State-owned enterprise to be established as a permanent solution to the current lending gap in Irish banking.
The Minister described the decision by Danske Bank and ACC as “disappointing” but he said it was consistent across the international financial sector of “retrenchment to national borders” by banks.
He told the Dáil: “There is little doubt that the recent bank exits will have an effect on the level of competition in the Irish financial sector.”
But he said banks were commercial entities, independent of the Government. “They make decisions on the conduct of their business separately to the considerations of the State and have the right to conduct their business as they consider appropriate.”
But he said they had to comply with the relevant codes of conduct as they withdrew from business. “This should mean that customers have sufficient notice to make alternative arrangements,” he said.
He said the Central Bank’s code of conduct on the switching of current accounts with credit institutions would apply when customers are moving current accounts.
In overall terms, however, he was confident there would be new entrants to the market.
“The restructuring of our incumbent banks and the increasing price transparency within financial services” would in time “present opportunities in the market for the entry of new market participants well positioned to be confident in the future profitability of an Irish branch or subsidiary”.
He said the current market might not be attractive to a fully diversified bank challenger in the short term, I would expect new financial services providers to enter the market on a more targeted basis, such as specialised lenders and non-bank finance providers.”
Fianna Fáil enterprise spokesman Dara Calleary said "the Danske Bank and ACC Bank developments are bad for business confidence and the wider economy and follow the loss of Halifax, Postbank, Anglo Irish Bank, Irish Nationwide and EBS, which was folded in to AIB".
But he welcomed the expansion of KBC Bank and the ambition of Permanent TSB to be a strong retail bank following the submission of its restructuring plan to the European Commission.
But the dominance of Bank of Ireland and AIB was returning to levels last seen in the 1980s. "As a result of the loss of competition, the two pillar banks now command approximately 70per cent of the current account market. That is not a healthy development in any market," he said.
