Bank fees remain subject to Central Bank oversight

There is not enough competition in the banking sector to allow the banks to set their own fees and charges without the oversight of the Central Bank, according to a report by the Department of Finance.

As part of the reform programmes that Ireland signed up to in the bailout programme, the government gave a commitment to review the process by which banks set their fees.

Irish banking fees are regulated by the Section 149 of the Consumer Credit Act 1995, which requires banks to submit requests for fee increases to the Central Bank.

The department report concluded competition was not adequate to allow banks set their own fees without supervision: “It would not be appropriate to repeal Section 149 at this point in time. The lack of competition in the banking sector means that the removal of section 149 would give unfettered price-setting power to the incumbent banks.

“This issue should be revisited when competition in the banking sector has improved significantly.”

The initial review was undertaken as it was felt by the troika that the free banking regime in Ireland was unsustainable. The report states that the EU-IMF delegation expressed concerns that the Irish banks “fee-free”, regime was losing the troubled banks more money.

Bank fees have now become a fixture in the Irish banking landscape with only PTSB offering fee free banking, the banks have managed to do this within the restrictive framework of section 149.

“We can conclude that fee and commission income have become more important to the banks in recent years and that the banks have been able to increase fee and commission income as a percentage of total income since 2009, despite the requirements imposed by section 149,” the report states.

Businesses have welcomed the retention of the section 149 restriction as it protects them against the banks urges to ratchet up fees.

ISME CEO Mark Fielding said that small businesses need every protection possible against bank profiteering.

“The rescued banks are scurrying around looking to see where they can increase income and Government must continue to intervene to stop this profiteering before it leads to more business closures and job losses,” he said.