Branch cull will blaze a trail for rest of 'old Europe'
Published 31/10/2012 | 05:00
THE plans by Irish banks to close around one in four branches over the coming two years will put Ireland at the forefront of a wave of closures that the rest of "old Europe" seems unlikely to escape.
The collapse of banking profits since 2007, combined with a technology driven revolution in the way consumers manage their money, appear to make the changes inevitable not only here but across the Continent.
Mass branch closures remain largely the dream of executives, though, according to statistics released by the European Central Bank (ECB) yesterday.
Since 2007, in the midst of a banking and financial meltdown unprecedented since World War Two, just 10,000 European bank branches have actually closed -- fewer than one in 20.
The numbers of staff working behind those banking counters has also proved remarkably stable.
It may be a case of delayed reaction. Up to the start of this year, Ireland's domestic banks had pulled the shutters down on fewer than 60 branches -- leaving a 1,100-strong network standing after five years of horrific losses. But change is happening. Around 200 AIB, National Irish Bank, Ulster Bank and Permanent TSB branches are expected to close over the next two year, shrinking the national network by just under 25pc.
Spain has already lost one in 10 branches, with more to come. The ECB figures show the UK going through a similarly restructuring but much of Europe remains immune.
France and Germany have been almost completely cushioned from branch closures, even though banks in both countries have needed substantial state support in order to continue trading through the financial crisis.
One reason may be the different licensing rules for Europe's banks and widely varied population densities.
The distribution of branches varies hugely from country to country.
Ireland's current ratio of almost three banks for every 10,000 people compares to 1.7 banks for the same population in Germany.
In Italy there are almost seven branches serving the same number, and the country has seen branch numbers increase rather than fall over the past five years.
The Italian figures might seem excessive, even for a country that invented banking, but the county is blessed with low levels of personal debt and massive consumer savings -- a fact that has helped keep it out of bailout, despite horrific levels of government debt.
If banks have been inexplicably spared some of the effects of the crisis, two segments that really have seen big moves in terms of the assets they manage since 2007 are insurers and pension fund managers.
The funds they manage means both are key pillars of the entire financial system -- funnelling money from households into everything from commercial property and companies to the markets for government debt.
The latest ECB figures show that the two sectors are on completely divergent paths in Ireland.
In 2007, Irish insurance corporations managed €163bn of assets, rising to €217bn by the end of last year.
Pension fund managers, in contrast, over the same period witnessed a huge fall in assets under management, which fell almost 30pc from €87bn in 2007 to €61bn.
Strikingly, that fall was against the European trend. In Germany, for example, pension managers' assets under management almost doubled in the same period.