State has no plans to set up new banks - Minister

The Government has no plans to set up new banks, the Minister for Public Expenditure Michael McGrath has said.

Speaking at the Oireachtas Select Committee on Finance and Public Expenditure on Tuesday, the Minister said the Post Office network and credit unions had a huge role to play in the provision of finncial services as the Stte's three largest banks announce plans to retrench.

“There has been a lot of talk for many years about setting up new banks and public banking. To my mind the credit unions are a form of community banking. With the right support and the right strategy, I believe that that is a role that they could successfully fulfil,” the minister said.

Mr McGrath said there was huge public concern regarding the decision by Bank of Ireland this week to close over 100 branches across Ireland. However he said the Government could not dictate to individual banks on the nature and manner of services they provided.

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The Minister acknowledged that the Government was a minority shareholder in Bank of Ireland, holding a 14 per cent stake. But he noted that e said there was a framework agreement in place that governed this relationship. He said the Government did not interfere in the day-to-day commercial decisions made by the bank.

The Minister said it would be wrong of him on behalf of the Government to “say we can control decisions made by Bank of Ireland in relation to individual branches because we simply cannot”.

He said the Government wanted “to ensure financial services are provided right around the country and we welcome the partnership agreement entered into between bank of Ireland and An Post”.

He said the bad news from Bank of Ireland on branch closures presented an opportunity for An Post. He said there were also opportunities for credit unions to continue to expand the range of services they offered.

Mr McGrath said the Government was determined to work with the credit unions in developing a strategy that provided a sustainable basis for the expansion of their services in communities.

“From my engagement with them, they are expanding their services, and they are investing in technology. They have issues with certain aspect of regulation. Regulation is carried out in an independent manner and it must be done.”

Mr McGrath said he was liaison with the Minister for Transport and Communications Eamon Ryan in relation to the future of the Post Office network.

"However we do have to acknowledge hard realities as well, the level of capital provision that is required for Irish banks. That is determined by regulation. It is not determined by the Irish Government in any way.

“The truth is that the system ascribes an additional premium to lending in Ireland because it is seen as being [more] risky.”

Peadar Tóibín, the leader of Aontú, said there was a wholeesale absence of competition in Irish banking. He said the two- pillar banking system had created a duopoly. He said those two banks could “literally do what they like to customers because those customers have no where else to go”.

“Either you do business with those two banks or you start bartering in this country.”

Committee chairman John McGuinness of Fianna Fáil said that if the Government was really serious about post offices, it would be quite easy to give them public service obligation payments.