Banking report to usher in new era

THE report into the banking sector could be the start of a gentle revolution in banking.

While it may not set the world on fire, it is expected to facilitate account switching. It will also throw open the money transmission system opening up competition to the current account sector.

Even prior to the report the Irish Bankers Federation announced the banks will facilitate switching of all accounts except for home loans and business accounts. Switching will apply to personal and current accounts initially.

In Britain the switching factor was slow to take off. After its introduction in 2001 just 100,000 moved account. By last year that figure had jumped to 1.6 million. It does not imply total switching. People are using the freedom to move aspects of their finances where they get better value.

What will please Mark Duffy of Halifax Bank of Scotland is the opening up of the money transmission system. That will bring several new players into the current account market.

The changes in Britain have had a definite impact and the Competition Authority believes its announcements today will help push the process on.

It is also mindful that the market is dominated by Bank of Ireland and AIB, who between them hold 80% of the market.

Sources close to the Competition Authority say it would be wrong to expect the reforms to bring about a huge change in the banking environment at the start. But one reliable source said it will set a trend in motion that will have significant effects on the market in the coming years.

All sectors including the Consumers Association (CA) made submissions to the authority. The CA was particularly vociferous in its complaints in relation to the cost of credit cards in Ireland. It forced a sharp response from the Irish Bankers Federation who said the association wasn't comparing like with like. Overall the report is expected to hit the banks where it hurts, but how hard we will have to wait and see.

John Fingleton, the head of the authority, commands a lot of respect in the banking sector and many believe he will set in motion definite changes that will benefit all consumers be they business or personal.

Last night a spokesman for the Competition Authority said the report will also endeavour to make the overall banking system more open to lesser players thereby making the Irish financial services market that bit more accountable.

However a key business advocate accused the authority of backing down in its report into the insurance industry. "It blamed the brokers then for the high cost of insurance and they could fail at stitching it into the banks this time as well."