Banks will be required to make it easier for customers to switch accounts from next February under a new code of practice published yesterday by the Irish Bankers Federation (IBF).
The long-awaited code is expected to prompt a new era of current account switching away from the two main banks, AIB and Bank of Ireland, to institutions such as National Irish Bank, Ulster Bank and Permanent TSB, which all offer free banking.
Under the code, if consumers decide to switch their current, deposit or savings accounts, their new bank will be obliged to have the new account up and running within 10 working days of the date on which they approve the application.
Currently, consumers must handle the time-consuming process of switching all standing orders and direct debits from their old to their new accounts.
But under the code, consumers sign a transfer form authorising the old bank to give the new bank a list of direct debits and standing orders, which the new bank then sets up. This process must be completed within seven working days.
However, in the UK, where a code has been in place since 2001, the old bank must now give the new bank details of direct debits and standing orders within three working days.
Mr Pat Farrell, IBF chief executive, said this shorter deadline in the UK did not include the requirement of the new bank to set up the direct debits and, therefore, was not comparable to the IBF's time limits.
Mr Farrell said the banking industry here would work to reduce the 10-day and seven-day timeframes, which he described as competitive and realistic for the time being.
Each bank must put the code into practice by January 31st.
Permanent TSB expects to open 60,000 new current accounts in 2005 as a result of the code's introduction.
Almost 30,000 customers have opened current accounts at Permanent TSB this year, with 18,000 of these opened by people transferring from another bank.
Mr Niall O'Grady, head of marketing at the bank, said there was no doubt that the absence of a switching code had acted as a huge disincentive to people to move their current accounts.
"This has stymied competition and played into the hands of the two big banks. Thankfully that cosy arrangement is now coming to an end," he said.
Under the code, banks must provide customers with a step-by-step "switching pack". Each bank is to produce its own version that will broadly mirror a sample model published by the IBF.
Mr Farrell said the code, which was developed in consultation with the Irish Financial Services Regulatory Authority, would provide "a very clear and simple road map" for consumers who wished to switch accounts.
"As such, it will further enhance, in a very significant way, consumer choice and competition in the marketplace."
The code of practice will only apply to personal customers, but the IBF said it would examine how it could be adapted to apply to business customers.
