Forum on financial services ‘necessary’

A SPECIAL forum on the Irish financial services industry is necessary to ensure best practice and protect consumers, according to a leading academic.

Professor Ray Kinsella of the Institute of European Finance said current criticism of Irish banks should not be overstated and that it was important to restore public confidence in the Irish banking system.

Speaking on RTÉ radio yesterday, Professor Kinsella called for a financial services forum that would consist of key stakeholders in the industry. The body would be non-political in nature and would examine developments in financial services in continental Europe.

It would also address issues such as how best to regulate the industry, measures to boost consumer confidence, and the promotion of best practice.

Professor Kinsella said the Irish economy benefited from having a strong domestic banking sector. Professor Kinsella also quoted situations where Irish banks responded to government initiatives, such as setting up funds to provide venture capital support for businesses. These benefits would be reduced if the banking system were to fall under the control of foreign-owned banks, he said.

Too much criticism of Irish banks would have an effect on employee morale and performance and would also affect the standing of Irish banks with overseas observers, he added.

Overseas investors and institutions hold significant shareholdings in Irish banks. Banks’ share prices would be likely to suffer if these investors offloaded their stocks in large amounts and this would have a knock-on effect on the value of Irish equity-based investments, such as certain SSIA special savings accounts, and pension funds.

Professor Kinsella said Irish banks had responded to external influences to change their practices and strategies in the past. The financial authorities recommended in the early 1960s that the Irish banking sector was too fragmented and that smaller banks needed to merge to achieve the scale necessary to survive. Bank of Ireland acquired the National Bank in 1965, while what later became AIB was formed in 1966 from the merger of the Munster & Leinster, Provincial and Royal Banks.