Department of Finance officials had weighed calling on the Central Bank to have a formal focus on competition in Irish financial services as they neared completion of a review of retail banking, according to documents released to The Irish Times under freedom-of-information laws.
However, this was tempered in the final report, published at the end of last month, the documents show.
Draft recommendations circulated in early November showed the review team was planning to propose that the Central Bank set up a formal “working group” with the Competition and Consumer Protection Commission (CCPC) “to share perspectives, information and experience of supervision and competition in the retail banking sector” and facilitate “joint work” in this area.
However, the working group plan did not make the final list of recommendations. The published report, accepted by the Government on November 29th, merely said that the two authorities should build on existing co-operation arrangements and “establish closer co-ordination” in this regard.
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The wide-ranging, year-long review of the banking sector was led by John Palmer, a principal officer at the department.
The CCPC had lobbied review team in a submission during the summer that Central Bank’s mandate should be amended to give it a role in promoting competition in financial services, alongside its current regulatory focus on prudential and conduct supervision and consumer protection.
However, there was little appetite for this among Central Bank officials, who would have seen it as something of a backward step.
Various reports into the Irish banking crisis highlighted conflicts that existed when financial regulators had an explicit mandate between 2003 and 2010 to promote the development of financial services in the State, even if it was supposed to be subordinate to its financial stability role.
Still, the final review report called on the Central Bank to “assess how existing domestic regulation impacts competition within domestic financial markets” when completing its annual performance statement.
It also recommended that the Department of Finance prepare heads of a Bill next year to amend the Central Bank (Supervision and Enforcement) Act 2013 to require the regulator “to carry out and publish assessments of costs and benefits” of rules it proposes. This should include the potential impacts on “consumers and fair and sustainable competition”.
The Irish Times reported on Thursday on how the documents obtained under freedom-of-information laws show that Department of Finance officials wavered over whether to recommend lifting a €500,000 cap at Bank of Ireland (BoI), just weeks before they finalised a key report that led to the scrapping of the restriction.
Then minister for finance Paschal Donohoe ordered his officials in November 2021 to carry out the assessment of the state and prospects of Irish banking and make recommendations.
This followed decisions by the overseas parents of Ulster Bank and KBC Bank Ireland to exit the Republic as the industry grappled with high regulatory capital demands, low demand for credit and an influx of fintech and non-banks vying for parts of their business.
