Study of the Banking Profession
The study
We found that banks in Ireland do not compete aggressively for customers and as a result, consumers and small businesses lose out on interest rate reductions and pay higher charges than they would if there was more choice in the market.
Recommendations and Outcomes
Personal Current Accounts
Prior to our study, it was extremely difficult for personal current account customers to leave their existing bank and switch to another bank. As a result, banks did not work to meet the needs of their existing customers but instead tried only to attract new customers opening accounts for the first time.
Implementing our recommendation to introduce a switching code has made switching banks much easier for consumers and encouraged competition between banks for all personal current account customers.
Lending to Small Businesses
Our study showed that small businesses were not benefiting from competition, particularly in the vital area of working capital lending. Banks were not passing on interest rate decreases to their small business lenders. Based on our recommendations, a switching code for small businesses has been introduced; this helps small businesses shop around for working capital loans.
Payments Clearing System
Since our study, the clearing organisations have greatly reduced entry barriers which were stalling entry to the Payments Clearing System, and therefore into the Irish banking market.
Bank Recapitalisation and the Financial Crisis
In order to secure EU approval for the recapitalisation of the Irish banks, the Government as a substantial shareholder in the pillar banks, has made a number of commitments to restore competition in the Irish banking market by facilitating entry and expansion of competitors and enhancing consumer protection.
The Competition Authority (predecessor of the CCPC) worked closely with the Banking Division of the Department of Finance and the Central Bank of Ireland since the onset of the financial crisis to ensure that the Irish banking system is put on a more secure financial footing while also preserving a competitive landscape which serves the needs of the Irish economy.
Return to Market Studies