Government aiming to open up banking sector for new entrants
THE Government has promised to implement fresh measures to open the banking sector up to new entrants, including getting bailed-out banks to offer "certain services" to newcomers, as a trade-off for the massive state aid they have gotten.
Details of the new competition-enhancing measures were revealed yesterday as the European Commission announced that it had approved the latest restructuring plan for Bank of Ireland (BoI), which is 16pc owed by the State and is also supported by the government guarantee on bonds and deposits.
Giving the bank's latest plan the all-clear, the commission noted that BoI had agreed to "offer certain service to new entrants or small banks already active in Ireland" in a bid to "reduce the costs" of developing a banking business in Ireland and ultimately "enhance competition" in the market.
"The Irish authorities committed to a number of market-opening measures in order to enhance competition in the Irish banking market by facilitating the entry and expansion of competitors and by increasing consumer protection in the financial sector," the commission noted.
"This will include, for example, measures enhancing customer mobility between banks, cost-comparison support to facilitate consumer decision making and the enhancing of electronic banking."
The commission said it was satisfied that BoI's plans included "sufficient measures" that would limit any distortion of competition arising out of the bank's state support. BoI has committed to selling off its insurance arm New Ireland, although not until 2013.
The bank is also carrying out a wider deleveraging plan to slim down its balance sheet and reduce the bank's reliance on funding from the Central Bank.
The bank announced another €2.9bn of asset sales earlier this week, bringing its year-to-date tally to €8.6bn. BoI chief Richie Boucher previously said he wanted to sell €30bn between 2011 and 2013.
The slimmed-down BoI will focus on "risk-balanced" lending in Ireland and Britain. The commission said the business plan presented to them would "restore the bank's viability" by "exiting risky portfolios and by implementing more prudent risk-management practices".
The commission's competition chief, Joaquin Almunia, said the bank would be able to "better serve the Irish economy" once that "ambitious" downsizing plan was progressed.
Meanwhile, ratings agency Fitch last night announced that it was putting the three main state-supported banks on "rating watch negative", implying an imminent possible downgrade.
The health warning is on the ratings of BoI, AIB and Irish Life & Permanent and follows Fitch's December 16 decision to put the Irish sovereign on "ratings watch negative".
Anglo Irish Bank and Irish Nationwide, now IBRC, were already on negative watch.