New bank code excludes basic products

Basic banking products will be excluded from most of the regulations in the Irish Financial Services Regulatory Authority's consumer protection code, due to be published tomorrow.

In a move likely to be viewed as a victory for the banks, current accounts, overdrafts, ordinary deposit accounts and term deposits of less than one year will be excluded from common rules requiring regulated firms to recommend a suitable product. There will be no obligation on the banks to conduct factfinding exercises on the financial objectives and position of new customers who want to take out these products, nor will the banks have to issue customers with a "reason why" statement explaining why a particular product is in their best interests.

While the exclusion of current accounts and overdrafts from the common rules is broadly considered practical, groups representing independent intermediaries do not regard deposit accounts as basic products.

Irish consumers hold around €55 billion in deposit accounts with terms of up to and including one year. But these accounts are generally low-yielding, often failing to keep up with inflation, and financial advisers argue that in some cases a higher-return investment product would be more suitable and that consumers should be informed of their options.

Brokers, who are already obliged to conduct factfinds and prepare reason why statements on most products, were hoping that the consumer protection code would introduce a level playing field in terms of the paperwork firms must complete.

Insurance and mortgage intermediaries are likely to object to the regulator's decision to include insurance products, such as home insurance and term life assurance, under the common factfinding and suitability rules but exclude basic banking products.

In their response to the financial regulator's consultation paper on the code, the Republic's two biggest banks, AIB and Bank of Ireland, said that the common rules on suitability and factfinding made no sense in relation to banking products and called on them to be made exempt.

The regulator's consumer protection code, which is expected to include a ban on unsolicited pre-approved code, will be implemented over the coming months.