Wall Street Journal queries Irish banking report

RIP-OFF? What rip-off? asked the banks. The one that won’t wash, despite the banks’ charm offensive, replies the Wall Street Journal.

The WSJ's Dow Jones newswire service is extremely sceptical of the Irish Bankers Federation's Comparative Survey of European Bank Charges, which the IBF says shows Irish bank charges are competitive.

Columnist Debra Marks writes that the Irish banks are trying to convince people they're not making excessive profits ahead of a Competition Authority report into retail banking charges.

"They've published a survey in an attempt to prove that their charges are no higher than other banks across Europe. But the banks' argument is not going to wash. They are getting a little bit greedy and no amount of charm offensive is going to help," she argues.

Ms Marks says banks in Ireland have been raking it in for years, enjoying some of the fattest margins in Europe.

"When the economy was booming, no one seemed to read the fine print or complain about the ever-rising fees," she writes.

"Irish finance minister Charlie McCreevy certainly agrees. He slapped a 300 million tax on the banks in December's budget, saying it's not unreasonable to see some of their good fortune applied to the public purse."

She points out that with so few big banks in Ireland, the top two, Allied Irish Bank and Bank of Ireland, control 80% of all current accounts.

"And they're making a pile of money out of the lack of competition. In 2002, AIB's pretax profit rose 5%, even after suffering a $691 million fraud the year before."

Ms Marks also alleges that the comparisons and methodology used in the IBF's independent survey are flawed.

"While the study attempts to show that a basket of Irish banking services are priced at the European average, the survey includes five countries that aren't in the eurozone Switzerland, Norway, Britain, Denmark and Sweden.

"These countries have higher interest rates than those prevailing in the eurozone, so margins between money loaned and interest paid to savers are higher," she says. The study also failed to include any responses from banks in France and Italy, where competition among hundreds of regional banks is far greater.

Looking to the future, Ms Marks said: "The Competition Authority, currently at the data-collection stage of the investigation, will report its findings by the end of this year. Some suggest that banks may be forced to pay interest on current accounts and offer cheaper rates on overdrafts and personal loans."

In the meantime, the IBF is going to have to do better than come up with a meaningless survey to win over hearts and minds, she concludes.

"The banks should enjoy their ability to make handsome profits while it lasts," she advises, warning that the Competition Authority may impose "more costly measures than a one-time windfall tax in the future".