Ireland's financial services sector believes that European Monetary Union heralds job losses and greater competition for Irish banks, according to a new survey.
The survey found that the sector views EMU as a threat rather than an opportunity. The research was completed before the revelations of overcharging at National Irish Bank, but its authors suggest that the controversy is likely to add to the industry's difficulties, eroding customer trust and security in the entire banking sector.
The survey, Competing Without Boundaries, found that 26 per cent of Irish financial services companies expect to decrease their staff numbers as a result of EMU. It recorded job insecurity across all sectors of the financial industry, except within the treasury, financial administration and corporate finance units. Questionnaires were sent to senior executives in all sections of the financial services industry in the Republic and Northern Ireland. Fifty seven responded.
The scale of job cuts predicted are not as significant as had been indicated in a similar survey in 1996,when almost 80 per cent of companies surveyed forecast job cuts. The report, which was compiled by Prospectus, notes that this may be due to some industry consolidation in the intervening period.
The survey found that respondents believe EMU will pose the greatest threat to retail banking and life assurance companies, mainly due to the huge level of profits they manage to generate in the Irish economy. Banks in particular are likely to have to contend with greater competition. The threat from new overseas entrants is said to be exacerbated by the relatively large profits earned by Irish banks relative to their competitors in Europe. In some cases, Irish banks are able to generate twice the level of profits compared with those earned by European banks.
This research suggests that new competition could emerge not only from European institutions but also from the US, with Ireland likely to become an attractive location for access to European markets. "US banks have traditionally viewed Europe as one market and the introduction of the euro will make the market more attractive." EMU will also act as a catalyst for mergers throughout the sector, the authors state.
Prospectus managing director, Mr Owen Purcell, said the study had been conducted before the NIB revelations, making it difficult to quantify the impact of the allegations in terms of trust, customer relationship and various retail banking brands. He suggested however that, based on the UK market, banks may ultimately lose some customers to companies such as Tesco, which offer a wide range of financial services in that market. "There appears to be no end to the range of companies interested in entering the financial services market," Mr Purcell said.
