Lack of banking competition ‘very costly’

THE independent voice of small business ISME, says the loss to its sector based on the €5 billion lent by banks to SMEs this year is closer to €230 million than the €85m claimed by the Competition Authority in its report into Irish bank charges and practices.

According to the report Ireland’s uncompetitive banking sector is also costly to current account holders.

AIB lost $670m in its Allfirst subsidiary a few years ago and it was hardly missed. How many other non-banking operations could live with a similar loss?

Mark Fielding of ISME said the €85m is just part of the story. It fails to take into account the fact that by comparison with other

European charges for current and overdraft accounts the gap here is of the order of 66% in the case of current accounts and 46% on overdrafts.

Allowing for the fact that up to €5bn is lent to the SME sector that suggests a total overcharge on Irish business of closer to €240m per annum, said Mr Fielding.

The big question for Mark Fielding and Mark Duffy of Halifax Bank of Scotland is: “Will the Government and the Irish Financial Services Regulator Authority now get behind the report.”

One of the difficulties for some of those seriously concerned about where this market is headed is neither IFSRA nor any other Government-backed entity has the legal support to really make a difference.

It is also forgotten that the Government slapped a €40 tax on credit cards that also applies to new cards when people switch from one supplier to another. That anomaly will be removed next year, but the State nets €70m from credit card tax.

Bank of Ireland revealed recently its average annual current account charge is around €45 per annum.

It would be wrong to be churlish about this report. John Fingleton and his team have done a good job in making it plain this country needs to clean up the banking sector. Its not his fault nor IFSRA’s that the statutory teeth required to give IFSRA a much stronger say is missing.

To be fair, ISME is never happy. It is not in its nature, and on reflection, Mark Fielding would probably agree with that assessment.

It must be said however, that the report identified the areas that need to be tackled if this country’s 3.9 million current account holders and the small business firms are to get a better deal from their banks.

Those who have put their backs into this report belive the Irish market can be opened up to the benefit of the consumer.