Varadkar favours a third banking force

Brendan Burgess

Brendan Burgess

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In response to a suggestion from Pearse Doherty in the Dáil yesterday.

Paschal's comments on Morning Ireland

Paschal: This is a long term objective of Irish government policy.

There are many bridges to cross in the aftermath of today.
 
But the governmental and financial regime is responsible for Ulster Bank effectively the third banking force pulling out. Irish banks are the least profitable in Europe due to the onerous capital requirements and being unable to force repossessions in a timely fashion. Again its our legal system that is not fit for purpose
 
@NoRegretsCoyote the fact that Ulster bank was governed from outside the country meant that it was outside the incestuous relationships that happen here. During the financial crisis Anglo, AIB and BOI were all in cahoots , Ulster bank was outside that loop they were ultimately bailed out by the British government which saved the irish government a small fortune at the time
 
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One solution here is more Europeanisation of the banking sector beyond just current accounts. There's no logical reason why Irish consumers and businesses should not be able to get loans and mortgages from banks elsewhere in Europe. Largely due to lobbying by some governments and various vested interests banking and insurance have not been fully subjected single market rules. If the Irish government is serious about more competition that's the area it should focus on.
 
tomdublin said:
Largely due to lobbying by some governments and various vested interests banking and insurance have not been fully subjected single market rules.
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Not at all. EU firms are completely free to enter the Irish market.

Revolut (not a bank) has seen explosive growth in market share of some of the services that Irish banks offer.
 
Various governments have touted the concept of a "third banking force", going back about 30 years. It sounds good, and gets a bit of positive press for the politicans involved.

There's been suggestion of merging ICC, ACC, PTSB and An Post, in times past... More recently, Permo, KBC and UB. All pie in the sky.

The closest that Ireland has ever got, to ever having a third banking force, was while Ulster Bank was committed to Ireland - and that wasn't anything to do with the Irish Government.

Going forward, we'll see the Permo try to press for equal recognition with the two pillar banks, and get some uplift as a result of Ulster Bank exiting the market. That's more to do with the Permo's own struggle to justify its existence, than it being a true force in Banking though. Its still going to be a a very small player, compared with AIB and BoI.

When all is said and done, the reason that Ireland doesn't have a more competitive banking market is simple - Irish people don't move away from AIB and BoI, in significant numbers.
 
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NoRegretsCoyote said:
Not at all. EU firms are completely free to enter the Irish market.

Revolut (not a bank) has seen explosive growth in market share of some of the services that Irish banks offer.
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Banks and other financial service providers can enter and exit national markets within the EEA but they are subject to diverging national regulatory regimes which pose significant entry cost. This could be mitigated by replacing national central banks with a single EU regulator, akin to what exists in other parts of the economy.
 
Bronte said:
Why is Ulster bank pulling out?
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The higher capital requirements of irish banks versus their european counterparts a legacy of the financial crash but now with negative interest rates is causing big problems. The inability to enforce effective repossessions in a timely fashion , therefore many people have been sitting in assets effectively owned by the bank for which they cannot regain possession. If there was an effective repossession penalty then many more mortgages would be performing, they are not all hardship cases
 
tomdublin said:
One solution here is more Europeanisation of the banking sector beyond just current accounts. There's no logical reason why Irish consumers and businesses should not be able to get loans and mortgages from banks elsewhere in Europe. Largely due to lobbying by some governments and various vested interests banking and insurance have not been fully subjected single market rules. If the Irish government is serious about more competition that's the area it should focus on.
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I was looking to get a mortgage in Germany for property here - it is possible but just very difficult and I gave up quickly as I didn't want to go through the hassle.
Most banks only accept it if the mortgage is used against e.g. a house in Germany which is already paid off. I will look into that again in a couple of years time - an interest rate of 0.97% is very tempting
Colleagues of mine got their mortgage in France for buying here but again against a property in France.

The issue of non Irish banks to issue mortgages for Ireland is valuation and security.
 
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NoRegretsCoyote said:
Banking is literally the industry with the most direct EU supervision.

BoI, AIB and Ulster are all supervised by the ECB in Frankfurt.
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Agreed, I don't think it's bank supervision is the issue.

The seeds for Ulster leaving were sowed a decade a go when we as a varies agencies (the government, the CBI through its mortgage code and the legal profession) placed the emphasis on keeping people in their homes over having people face to to their contractual committments. In other countries a mortgage is a safe form of lending for a bank. Defaults are low and their is an underlying asset you can reclaim.
Not Ireland in afraid. CBI mortgage measures might help with defaults but foreclosure and repossession laws don't favour "secured lending" at rates comparable to Europe.

Yes the approach taken helped some people in the short term but big picture Ireland is seen as a country where if things go bad you'll be in a legal quagmire for years. We will all suffer for our now.

The long drawn out saga that has been the response to the last crises will hardly encourage any back executive to put their job on the line and target Ireland as a market to grow in.
 
Merowig said:
I was looking to get a mortgage in Germany for property here - it is possible but just very difficult and I gave up quickly as I didn't want to go through the hassle.
Most banks only accept it if the mortgage is used against e.g. a house in Germany which is already paid off. I will look into that again in a couple of years time
Colleagues of mine got their mortgage in France but again against a property in France,
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Logistically any issues a foreign bank would run into in this situation would have to go through the Irish legal system. Unless they're doing it on scale it's just not worth their while setting up that infrastructure. That on top of the lender having to assess the odds of getting it's money back under Irish law.
 
NoRegretsCoyote said:
Banking is literally the industry with the most direct EU supervision.

BoI, AIB and Ulster are all supervised by the ECB in Frankfurt.
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They are subject to divergent national rules and regulatory regimes much more so than most other industries. That's why they generally cannot offer services in a member states without being authorized by that member state's central bank. If you are a German retailer you can just open branches in Ireland or serve Irish customers online, but if you are a bank you can't. That's a major impediment to competition especially in small markets such as Ireland.
 
tomdublin said:
One solution here is more Europeanisation of the banking sector beyond just current accounts. There's no logical reason why Irish consumers and businesses should not be able to get loans and mortgages from banks elsewhere in Europe. Largely due to lobbying by some governments and various vested interests banking and insurance have not been fully subjected single market rules. If the Irish government is serious about more competition that's the area it should focus on.
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I would go one further, and wonder about the need for a retail banking sector at all. Instead, everyone should be allowed borrow direct from ECB at their prevailing rates, same as banks do - which elimates the need for commercial and retail banks.
I don't say that lightly, the careers and livelihoods of thousands of banking workers are under threat as a consequence of emerging technology, 5G, 6G , AI etc and Ulster Banks withdrawal, to me, is just another death knell of the banking sector.
Before this health crisis, I found it rare to go into a bank and when I do it is mostly automated. As an Ulster Bank customer, it is somewhat sad, as I found their customer service over the years to be excellent.
 
tomdublin said:
They are subject to divergent national rules and regulatory regimes much more so than most other industries. That's why they generally cannot offer services in a member states without being authorized by that member state's central bank. If you are a German retailer you can just open branches in Ireland or serve Irish customers online, but if you are a bank you can't. That's a major impediment to competition especially in small markets such as Ireland.
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You’re not comparing like with like. Selling groceries isn’t regulated and isn’t intrinsically linked to the country’s legal system. We have a common law system, whereas Europe is mostly civil/Napoleanic Code based. Why would any foreign bank be bothered dealing cross border into Ireland? It’s a tiny country and the system is designed to stop you making money!
 
tomdublin said:
They are subject to divergent national rules and regulatory regimes much more so than most other industries. That's why they generally cannot offer services in a member states without being authorized by that member state's central bank. If you are a German retailer you can just open branches in Ireland or serve Irish customers online, but if you are a bank you can't. That's a major impediment to competition especially in small markets such as Ireland.
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The single market means a bank from anywhere else in the EU can open a branch here. There's very little supervision if any of that branch carried out here, it would all be done from the county is headquartered in. Once you're licensed somewhere in the EU it' s pretty much an open door in terms of banking regulation.


It's our approach to the legal enforceability of a loan contract, plus our small size that count against us.

Using your German retail analogy I doubt you'd get a Lidl or an Aldi opening in Ireland if 10% of shoppers wheeled their trollies past the til and told them they'd pay later ;) All while the local security guard just shrugged.
 
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