Farm Ireland

Monday 21 May 2018

ICMSA demands clearer guidelines for bank charges

Declan O'Brien

Declan O'Brien

The ICMSA has called for the Government to lay down unilateral ground rules for the banks in terms of the charges they can levy on small businesses and farms.

The call follows the decision by ACC Bank and Danske Bank to dramatically scale back their Irish operations.

This move has sparked fears of a significant increase in banking charges now that competition in the banking sector has been severely eroded.

Sources in the financial services industry warned that Ireland was returning to a banking environment much like the early 2000s when the traditional domestic operators dominated the lending scene.

"Banking charges have tumbled since the early 2000s when competition in the banking sector took off but they are now only likely to go one way and that is up," a senior official in the financial services industry said.

Owners of small and medium-sized enterprises (SMEs) and farms will be most exposed to a return to the old status quo and a possible surge in charges.

IFA President John Bryan said the decision by Danske Bank to end its operations here was another blow for competition in the banking sector.

Mr Bryan said the changes in the sector placed an onus on the Government to "keep the remaining banks honest".

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"The Government and Financial Regulator have a responsibility to increase the oversight of the banks remaining in the market and, if necessary, introduce price controls on the interest and credit charges they impose on their customers so they do not exploit this situation by increasing the cost of loans and banking facilities," Mr Bryan said.


ICMSA president John Comer said the financial regulators would have to take a very close look at any adjustments the remaining banks proposed making to their charges.

He said competitiveness in terms of credit costs would be essential for the farm sector to meet the expansion targets set down in Food Harvest 2020.

"Farm families will need access to credit to expand their production and invest in the plant and buildings required," Mr Comer said.

"If the remaining banks are tempted to look on our farmers as 'a goose to be plucked' then all the increased targets contained in the Food Harvest 2020 report will remain just that: paper targets," he added.

"The laying down of some unalterable ground rules for the banks in terms of the charges they can levy on farmers and SMEs will have to become a priority for the Government," Mr Comer said.

The ICMSA leader pointed out that the cessation of current accounts and overdraft facilities by Danske and ACC would force farmers to move all their banking to a new institution. He said this could result in increased charges and legal fees.

Sources in the financial sector said farmers with high overdraft facilities will be most exposed by having to change banks.

"Farmers might have a €50,000 overdraft facility with Danske or ACC but there is no saying they will get the same level of credit from any bank that takes them on," one financial services official said.

"Where a farmer is using such an overdraft facility for working capital, its loss or reduction will seriously affect their ability to trade," he added.

Irish Independent