Bankers group welcomes study on competition

The Competition Authority is to hold a brief consultation process before deciding on the terms of reference of a study of competition in the banking sector.

The study is likely to take more than a year to complete and to involve the engagement of a private consultancy firm.

Yesterday a spokesman for the Irish Bankers Federation said the industry had "nothing to hide" and welcomed an increase in transparency in the sector.

He said the federation believed competition existed. The study, if it was fair and reasonable and examined a typical basket of consumer products and service, would find Irish banking to be competitive when compared with banking internationally, he said.

The Competition Authority yesterday issued a statement confirming it was to conduct a study into banking and that it was examining the case for studies into a number of other areas.

"In deciding what sectors to study, the authority takes account of the importance of the sector for the economy, indicators of the level of competition, the existence of public or private barriers to entry, and the public interest generally."

Recent examinations by the Director of Consumer Affairs, Ms Carmel Foley, and the Strategic Banking Review, had highlighted potential competition issues in banking.

"The authority is also informed by complaints it receives from the public generally in relation to the banking sector."

The Irish Small and Medium Enterprises Association (ISME) said it endorsed the decision of the authority to "investigate excessive fees and uncompetitive practices in the Irish banking sector".

ISME chief executive Mr Mark Fielding said the announcement was "particularly good news for those small business customers who have for years been subjected to exploitation by the banks".

He said the only area where real competition existed was in the home loan sector, due to the entry to Bank of Scotland into that market.

"Irish banks are among the most profitable in Europe, second only to Portugal for profits made on overdrafts. This has been achieved on some of the highest interest margins of any banks, which in turn increases the cost to the consumer and small business customers."

The authority said other areas being considered for studies are healthcare, insurance and food distribution. A study into the insurance sector has been widely flagged and is to be conducted jointly by the authority and the Department of Enterprise, Trade and Employment.

A study on casual trading will be published shortly. A study on seven professions, from the medical, legal and construction sectors, was initiated in December 2001 and the "fact-finding" phase of that study, which is being conducted by a private consultancy firm, is due to be completed in November.

The results will be presented to the authority, which will analyse them before drafting its report and making recommendations to the Government. The banking study is likely to follow a similar model. The authority can make recommendations, but it is up to the Government to draft legislation to impose changes.

A spokesman for the Irish Insurance Federation said it had no objection to any study being conducted into the insurance sector. He said the high cost of claims was the cause of high insurance prices. He said the priority should be "action" rather than studies. "What we need is action in relation to the cost of claims. That is what we believe is the most important issue."