At the end of January, the Minister for Finance, Michael McGrath, published the heads of the much-anticipated provisions of the Access to Cash Bill.
Cash, and the debate surrounding it, has been a contentious one and, as many will be aware, the aim of the forthcoming legislation is to ensure the continued reasonable access to cash in the State. Our three retail banks (AIB, Bank of Ireland and PTSB), who have become front and centre in this issue, are fully supportive of this intent, recognising as they do the vital importance of cash for many consumers and small businesses who rely on it in their daily lives.
Cash is legal tender and is here to stay, but its use has declined as contactless and card payments have dramatically increased. The entire debate now is about how that decline in cash usage is managed and about keeping an infrastructure in place to serve customers in an effective way.
We are further supportive of the other core purpose of the Act, which is to develop a framework to manage this access and, as stated in the Bill, to do so in a “fair, orderly, transparent and equitable manner”. As ever with such provisions, the devil is in the detail and, upon lifting the lid on a number of elements within this Bill, it is clear they are neither fair nor equitable but – alarmingly – pose a very real threat to the present and future competitiveness of the Irish retail banking sector.
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To date, much of the debate has often been narrowly focused on ATMs. And while ATMs are indeed a central part, the Bill also deals with the provision of counter services, where cash can be withdrawn, deposited and where in-person assistance is available.
Under the proposed provisions, it is the three retail banks that will have sole and legal responsibility for maintaining both the prescribed levels of access to ATMs as well as counter services across the State. This is despite the fact they only control about one-third of the general infrastructure.
All other providers who make up the remaining cash access infrastructure, including An Post, independent ATM operators and credit unions, will bear no responsibility.
Under the current criteria, at least 97 per cent of the population must be within 10km of an ATM and at least 99 per cent within 10km of a counter service. In a scenario, therefore, whereby an independent ATM provider withdraws one or more ATMs, or indeed leaves the market entirely, leading to a breach of these criteria, it will fall to the retail banks to fill the gap.
Similarly, in the event one or multiple post offices or credit unions are closed, breaching the criteria, the retail banks will be responsible for replacing these services, even in circumstances where they have closed because they are no longer commercially viable.
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Replacing an unknown number of a bricks-and-mortar counter services into the future will unquestionably lead to an increase in new and unquantifiable fixed costs for retail banks, which could ultimately increase the cost of everyday banking services. And while many may point to the profits our banks have been recently making, we cannot forget banking is a cyclical business linked with economic performance, and fixed costs that are sustainable now may not be into the future.
The knock-on impact of these potential and significant costs further raises the risk of creating a significant barrier to entry for new retail banks into the Irish market. Following a period where we have seen a steady stream of bank departures, two of which were in the last year alone and who closed their doors after 50 and 175 years respectively, this latest proposal highlights again the arbitrary and selective decision-making against retailing banking in Ireland.
In light of this, we are therefore calling for an impact assessment by the Competition and Consumer Protection Commission (CCPC) of this proposal.
Last week the Banking & Payments Federation Ireland (BPFI) met the joint Oireachtas finance committee, which is undertaking pre-legislative scrutiny on the Access to Cash Bill. During that meeting we set out these and a number of other concerns we have in relation to some of the current provisions, including the scope of the criteria, how and by whom it will be reviewed, and the lack of detail that currently exists in relation to what are known as “local deficiencies”.
Crucially, we have also set out ways in which these provisions could be amended to ensure that the protection of access to cash into the future does not embed an unlevel playing field in the retail banking sector. We accept our responsibility in providing cash, but we believe that responsibility should be shared across all relevant market players working within realistic parameters.
We are not trying to hinder or prevent this legislation. On the contrary, we have stated time and again our commitment to playing our part in the delivery of cash services appropriate to the current and future requirements of consumers and businesses.
However, as intended by the heads of the legislation, this must be done in a fair, orderly, transparent and equitable manner. Putting into law an unquantifiable and fixed cost on three public limited companies, to the exclusion of every other player in that marketplace, would not be tolerated in any other industry. When people ask why we have just three retail banks remaining in Ireland, maybe the proposed legislation will go some way in trying to answer that question.
Brian Hayes is chief executive of the Banking & Payments Federation Ireland
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