Banking forum designed to maintain status quo not in public interest, says Minister
Minister for Finance considering alternative to forum on future of changing sector
Minister for Finance Paschal Donohoe: ‘If we do not have an honest view of the needs of our economy and our society in the future, we will not be well served by such a process with regard to banking.’ File photograph: Alan Betson
Minister for Finance Paschal Donohoe has warned against the creation of a banking forum designed to preserve banking as it is, and said he is “giving consideration to an alternative”.
Referring to the request by the Financial Services Union for a banking forum, which is supported by a number of political parties, the Minister said there had to be an honest view of the needs of the economy.
“Our interests would not be served well by a process designed to preserve banking as it is and we have to recognise that a lot of change is under way,” he said.
A process that delivers competition, accepts that people are seeking banking services through their phones as much as through cards, and one which meets a variety of needs requires “an open process that invites genuine debate rather than one that seeks to preserve the present situation in its entirety,” Mr Donohoe said.
“If we do not have an honest view of the needs of our economy and our society in the future, we will not be well served by such a process with regard to banking. I am giving consideration to an alternative.”
The Minister was speaking as he responded to a two-hour debate in the Seanad on the future of banking. Earlier, opening the debate, he said that increasingly banks are competing with new technology-driven firms “regarding services that were previously the preserve of traditional banks”.
The announcement two months ago by Bank of Ireland that it would close 88 branches in the State and 15 in Northern Ireland was evidence of the impact of technology on banking and how the public interacts with banks.
The impact of low interest rates and Covid-19, along with weak enough economic growth in Europe and the US had already been seen in European banking with consolidation and mergers in other European markets, he said.
“There is a view in Europe that the banking sector has too many participants and that there is a need for it to consolidate so that it can more efficiently provide services,” said Mr Donohoe.
It was easy to say there is a problem with the banking market with the further reduction of competition as Ulster Bank and KBC depart, “but it is more difficult to say where the appropriate balance between competition and consolidation lies in the best long-term interests of the economy”.
“While the Government would like to see a more robust level of competition in the Irish banking market, it must be borne in mind that in the early years of this century the Irish banking market was a very competitive one, but not sustainably so, and I think it is fair to say that ultimately it did not serve the best long-term needs of the economy or society.”
In the debate Independent Senator Sharon Keogan highlighted the impact of cryptocurrencies on banking. She said cryptocurrency and its associated technology, blockchain, “could render traditional banking completely obsolete”.
She said that “cryptocurrencies use blockchain technology to avoid the need for a trusted third party, that is, a bank”.
Fianna Fáil Senator Pat Casey said the pandemic “has advanced a cashless society by a decade” and with the closure of post offices and banks, businesses had to transport cash 30km instead of 10km, resulting in agreements with security firms to collect the cash.
“These are all things that are changing but that cash element within business is being diluted year on year and is becoming less of a factor.”
Green Party Senator Róisín Garvey criticised the banks, which she said were not serving older people in the community who had been most loyal. She said she had decided to “do as little as possible with the bigger banks and to work with my local post office” because she can now get her wages into her post office account.
Sinn Féin Senator Paul Gavan said the Government “must engage with credit unions and post offices to explore the possibility of utilising their existing infrastructure for a new public banking system.
“The Kiwibank model, whereby banks and post offices share the same buildings, is an example of how existing infrastructure can be used for banking purposes.”