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The cleaning up of legacy debts and the maintenance of the financial crisis recovery here are preconditions for the entry of new lenders into the Irish market, Central Bank of Ireland governor Philip Lane has said.
Speaking at an event at the Dublin Chamber of Commerce this morning, Mr Lane said that the crash resulted in the exit of a number of banks from our market.
“The fragmentation of the European financial system will be eroded if more progress is achieved in the development of banking union and capital markets union in Europe,” he said.
His comments follow remarks from European Central Bank chief Mario Draghi at the Oireachtas Finance Committee on Thursday.
Mr Draghi said that an effective monopoly in the banking market here is the reason mortgage costs are double the level elsewhere.
“The big limit here is the presence of a monopoly,” he said. “The answer there is (more) competition.”
The market is currently dominated by AIB and Bank of Ireland, which control 60pc of new mortgage lending.
At this morning’s event, Mr Lane also said he is plotting a crackdown on financial firms that pose potential risks to consumers.
He said the Bank’s plan will involve “more intrusive and targeted badessments of those firms and products that pose the greatest potential harm to consumers, [and] an enhanced focus on the culture of firms and the individual accountability of the people who run the firms we regulate.”
“These measures are intended to embed high standards of conduct in order to deliver fair outcomes for consumers and will be reinforced by a commitment to take enforcement actions where these standards are not met,” he said.
The crackdown is part of the the Bank’s new strategic plan which is being launched today.
Five priorities for the Bank are identified in the plan: strengthening resilience; Brexit; strengthening consumer protection; engaging and influencing; and enhancing organisation capability.
Mr Lane discussed the importance of the “thriving” enterprise sector to the country’s economic success at the event.
Read more: ECB’s Draghi blames Irish bank monopoly for high mortgage costs
“The employment, investment and innovation decisions made by the over two hundred thousand private sector firms active in Ireland are critically important in determining national economic performance,” he said.
“In addition, the behaviour of firms also has a wider impact in terms of making progress in meeting the country’s social, environmental and regional objectives.”
He warned that while Ireland’s economy is in an expansion phase, it is volatile and open to impacts from potential Brexit scenarios, shifts in international trade or domestic policies.
New bank lending to SMEs outside of the financial and property-related sectors rose from €1.9bn in 2013 to €3.7bn in 2017
Mr Lane said that “while the availability and volume of SME finance have improved over the last five years, the cost of bank lending for smaller firms in Ireland remains high relative to peers elsewhere in the euro area”.
“In this context, it is important to recognise the high levels of concentration in the SME bank lending market: the share of the three largest banks in new SME loans in the first quarter of this year was 93pc,” he said.
Mr Lane said cheaper sterling after Brexit could hurt Irish business, and said he would like to see the Government running more ambitious surplus targets.
Additional reporting Bloomberg
Online Editors
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