Dempsey at Large: community focus needed for Irish banking

Banks are different and never was it clearer than in the last week. But one statement stunned me and that was the Governor of the Central Bank acknowledging quite clearly that banks were focused on profits rather than the welfare of their customers.

Looking at the differences in interest rates across the eurozone, it should not be a surprise that AIB is now ranked as the most profitable bank in Europe based on its size/assets, etc.

While most of the recent comment has focused on the tracker mortgages, there are much more basic questions to pose.

At long last, it is being acknowledged that the consumer protection mandate is inappropriately placed under the umbrella of the Central Bank.

It is very clear that consumer protection, service and welfare rank far down the Central Bank’s agenda.

It is only a few years ago that you could walk into a Bank of Ireland branch and lodge a cheque to your account in AIB or Ulster Bank and vice versa. That, despite the huge advance in technology, is no longer allowed though of course if desired, it could be easily implemented across the board.

I must admit I have a real problem seeing a banking presence disappearing from rural towns – there has to be some community focus to their mandate if they are to operate in such a favourable legislative climate.

For those with savings, money on deposit is earning close to zero but I have come across many cases where vulnerable young people with a mortgage and who borrow for home improvements are charged 10% to 12%, despite the bank having full security with the deeds pledged against the mortgage. The hardship being inflicted by such practices is ignored.

In most businesses, if your regard for the welfare of your customers is so lacking, the institution loses customers but there are always more customers out there and existing borrowers are usually locked in.

The case for a strong, independent consumer protection unit is very clear, as is the case for extra, real competition.

I was struck listening to the Groceries Code Adjudicator Christine Tacon in London recently, as she explained how she could levy 1% of a supermarket group’s turnover for unfair trading practices. A unit with that kind of power would concentrate minds in a very real way.

Ironically, this week the director of the Confederation of British Industry (CBI) spoke of companies having “a fixation on shareholder value at the expense of purpose”. It also applies closer to home.