Access to bank cash services to be protected by law following review

The Government has committed to drafting legislation to protect consumers’ and businesses’ access to cash, at a time when the pandemic has accelerated the use of digital payments globally and the remaining Irish banks are continuing to cut costs.

It is on foot of a recommendation in a Department of Finance banking review report, published on Tuesday, which said banks should look into setting up shared banking hubs in locations where all branches have closed and collaborate “wherever possible” to reduce expenses and improve customer services. The review came in the wake of plans by Ulster Bank and KBC Bank to leave Ireland.

The aim of the proposed access-to-cash legislation is that banks “meet objective criteria to provide reasonable access to cash”, which would be defined following consultation with the Central Bank and “other stakeholders”, it said. In the meantime, banks should seek to preserve cash services at December 2022 levels. The review called for heads of a Bill to be written next year.

The UK government is pushing through legislation which would give oversight of that country’s cash network to the Financial Conduct Authority, meaning branches cannot close in communities if there are no alternative methods to withdraw or deposit money.

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Elsewhere, the Swedish government enacted a law last year obliging credit institutions to offer, either directly or through agents, reasonable access to cash services with sufficient regional coverage throughout the country.

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The report said that the Central Bank should, as part of its review of its Consumer Protection Code, require banks to submit “robust, board-approved assessments” to regulators when planning to close branches or alter services. The minimum notice period for significant service changes should be increased from one month to four, it said.

The code should also require all providers of retail banking products and services to set out and publish “customer charters” outlining standards of service that customers can expect to receive when engaging with them, it said.

The report also urged that a national payments strategy should be developed and completed in 2024, setting a roadmap for the future evolution of the entire payments system.

The report urged the Central Bank, which has been criticised in quarters for having onerous regulatory hurdles for firms seeking authorisation to clear, to provide guidance regarding its expectations, processes and timelines to companies going through the approval process.

It recommended that legislation should be developed to require unregulated credit providers to small and medium-sized businesses (SMEs) to be authorised and supervised.

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The regulator should, according to the report, review its innovation hub and consider setting up a “sandbox” programme – similar to one offered in some other countries, such as the UK – to allow companies to test new products in a safe environment in advance of them being made available publicly.

The report called for the Department of Finance to prepare heads of a Bill next year to amend the Central Bank (Supervision and Enforcement) Act 2013 to require the regulator “to carry out and publish assessments of costs and benefits” of rules it proposes. This should include the potential impacts on “consumers and fair and sustainable competition”.

The report also called for co-ordination between the Department of Finance, Central Bank, Department of Justice and Insolvency Service of Ireland in seeking to resolve long-term mortgage arrears. The International Monetary Fund (IMF) has also recommended that this approach be taken.

More than half of the 27,000 mortgage accounts in long-term arrears as of the end of 2021 made no payments towards their home loans in the past two years, according to the Central Bank.

The report also recommended, as The Irish Times first reported on Monday afternoon, that bailed-out banks be allowed to pay bonuses of up to €20,000 and put on a path to free themselves from executive pay restrictions.

Minister for Finance Paschal Donohoe secured the backing of Cabinet colleagues on Tuesday for this and more than 30 other recommendations the report called to be implemented by the department, Central Bank and the retail banking sector.

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The Minister asked his officials 12 months ago to conduct a review of Irish retail banking, in the wake of the decisions by the overseas owners of Ulster Bank and KBC Bank Ireland to quit the market. He is due to swap roles next month with the Minister for Public Expenditure, Michael McGrath.