Business groups urge probe to ‘break up’ AIB

Business and consumer groups have called on the Government to launch a probe into the grip that Allied Irish Banks and Bank of Ireland have over Irish banking and to consider the possibility of breaking up AIB to boost competition.

Consumer advocates the Consumers’ Association of Ireland and small business group ISME say the Government has a once-in-a-lifetime opportunity to unpick an effective banking duopoly and hive off parts of AIB to promote competition, as it ponders the best timing to offload the huge taxpayers’ stakes in the banks.

The Small Firms’ Association said it wants the newly merged watchdog — the Competition and Consumer Protection Commission — to insist that the banks here publish a full list of their business banking fees.

The calls come after the influential think-tank, the Economic and Social Research Institute, last week flagged serious concerns about whether the banks are meeting the needs of consumers and businesses at a time when the economy is rapidly emerging from the crisis.

The think-tank said that Government decisions about the sale of its bank shareholdings will shape the landscape of banking here for many years to come.

Consumers’ Association of Ireland vice chairman Michael Kilcoyne told the Irish Examiner he was calling for the Competition Commission to investigate the possible break-up of AIB before the Government starts selling down its €13.3bn equity and debt stakes because he said any sale of AIB may not boost competition.

“There is no competition in banking. There is an argument for breaking up AIB. They have control of a fair bit of the market. The Competition Commission should be asked to report on it to see what the benefits may be to the consumer.

"Now is the ideal time to do it. That is what the consumer and competition authorities are supposed to be about. Because we have seen how monopolies have failed and credit is still contracting across business,” Mr Kilcoyne said.

ISME chief executive Mark Fielding said he wants an examination of the structure of AIB before any sale, and favours hiving off some of the bank’s operations for the benefit of small businesses.

“There are effectively two and half banks — Ulster Bank is slowly coming back into the market. Our guys are slowly but surely getting their hands on funds, but the problem because of a lack of competition is the cost of funds. They are foisted on increased fees.”

Patricia Callan, a director at the SFA, said she was cheered by the Government’s initiative such as the Strategic Banking Corporation of Ireland to channel wholesale funds to small businesses through the existing banks.

But she said that lenders need to publish comparative pricing lists for their business banking products.

“You have many comparisons in other parts of banking. It is just much more opaque on the business side. You get what the Competition Commission used to do and go around and get them to publish their fees. It is about helping people understand the market better,” she said.

Associate research professor at the ESRI, Kieran McQuinn, last week said that: “With negative growth rates for credit across all sectors of the Irish economy, the question is whether the sector, as it presently stands, can meet the needs of the recovering economy.”