Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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191. To ask the Minister for Finance the measures taken to ensure a strong retail banking sector since July 2020; his assessment of the impact of these measures; and if he will make a statement on the matter. [29316/24]

Jack Chambers (Dublin West, Fianna Fail)
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The critical importance of a stable and viable retail banking sector for the Irish economy has been, and continues to be, a key priority for Government and for my Department.

It was for this reason that Minister Donohoe commissioned the Retail Banking Review in late 2021 following on from the widespread changes in the sector over the previous several years, culminating in the decisions by Ulster Bank and KBC to exit the Irish market. The Review, which was conducted by officials in the Department with assistance from other Government agencies and Departments and was published in November 2022, made a wide range of recommendations to improve the sector and customers' experiences. Each recommendation identified the body or bodies responsible for delivery of that recommendation and, where appropriate, contain timelines for delivery of the recommendations. The implementation of the recommendations that are directed at the Banking Division in my Department were embedded in the business plans in 2023/2024.

The recommendations addressed critical matters such as access to cash, ongoing support for SME lending, developing a financial literacy strategy and preparing a new national payments strategy. Work on all these is ongoing.

With regard to access to cash, the General Scheme of the Finance (Provision of Access to Cash Services) Bill 2024 was published in January 2024, and drafting of the Bill is nearly complete and I expect to be bringing it to Government shortly to seek approval to publish. The key objective of the Bill is to ensure that the future evolution of our cash infrastructure is managed in a fair, transparent and equitable manner that meets the needs of society.

This Bill will also address a number of other issues recommended in the Review including the supervision of ATM deployers and cash-in-transit providers and it will introduce a requirement that the Central Bank has to prepare cost benefit analyses, when making regulations under section 17A of the Central Bank Reform Act 2010 and Section 48 of the Central Bank (supervision and Enforcement) Act 2013, that consider the potential impacts on customers and fair competition in the financial markets in the State.

In line with the Review's recommendation, the Department is leading the development of a national financial literacy strategy to fulfil certain OECD obligations. The aim of the strategy is to develop a sustained, coordinated approach to financial literacy. On 19 April last, the Department published a mapping report on the development of the strategy and I hosted a stakeholder event on 5 July and approximately 91 public and private sector organisations participated in the stakeholder event representing industry, education, civil society and Government Departments and agencies. The event provided stakeholders with the opportunity to share their views on priorities for, and potential stakeholder contributions to, the national strategy. It is anticipated that the final National Financial Literacy Strategy will be published by the end of 2024.

In addition, the Strategic Banking Corporation of Ireland’s ongoing mission is to deliver financial supports to Irish SMEs that address failures in the Irish credit market, while driving competition in the lending market and it has done so through a variety of schemes since 2020. Through providing an 80% guarantee from the State, they partner with on-lenders from the financial services industry which are responsible for the final 20% liability, encouraging competition in the banking sector and lower-cost lending to SMEs to an extent and scale that would not have been possible without the SBCI’s intervention. Schemes currently open for applications are the Ukraine Credit Guarantee Scheme (UCGS), the Growth and Sustainability Loan Scheme (GSLS) and the Home Energy Upgrade Loan Scheme (HEULS).

In terms of work ongoing between my Department and the Central Bank of Ireland, the Retail Banking Review report contained a number of important recommendations and implementation of several of the recommendations requires close collaboration between the Department of Finance and the Central Bank. These include preparing a new payment strategy to ensure that consumers have access to the services they require in the future. The Central Bank is working with the Department of Finance and supporting this work by allocating resources and providing ongoing technical advice. The National Payment Strategy will be published this year.

The Review also made a number of recommendations concerning consumer protection which complement the Central Bank's review of the Consumer Protection Code, including those relating to branch closures and services. The Central Bank launched a review of the Consumer Protection Code (the Code) in October 2022, ensure that the Code remains fit for purpose as consumer needs change and new technology-driven products and services are brought to market. The review examines the role of consumer protection in supporting a well-functioning financial system and the importance of key aspects such as high-quality regulation, transparency, and appropriate levels of competition supported by innovation, a flow of new entrants and ease of switching between products and providers.

The Central Bank consulted on proposals to evolve their approach to helping innovation in late 2023. These proposals included:

• Enhancing an Innovation Hub to deliver deeper, clearer and more informed engagement with the innovation ecosystem.
• Establishing an Innovation Sandbox Program, which will involve informing the early stage development of selected innovative initiatives (which are consistent with public policy objectives) by providing regulatory advice and support within the program.

I am informed that the Central Bank will continue to drive the enhancement of the Innovation Hub as outlined above, to facilitate deeper engagement with innovators and that these enhancements have already begun with the launch of the updated structured engagement process with the Innovation Hub and a refreshed Innovation Hub website page now live. Additional website content will be added throughout 2024 and beyond.

Based on the feedback received, as part of the consultation process, the Central Bank will establish and deliver the Innovation Sandbox Programme in 2024, which aims to provide regulatory advice and support for innovative projects and firms. The programme will take a thematic approach and prioritise innovations that promote better outcomes for consumers and the financial system. I am informed that the Bank intend to issue a call for potential participants in Quarter 3 2024.

Looking to work ongoing in terms of the EU, Ireland is actively participating in the negotiations of several EU legislative proposals which will help ensure a strong retail banking sector in Ireland. The second Payments Services Directive is being strengthened by the third Payment Services Directive (PSD3) and a new Payment Services Regulation (PSR). Under these proposals a number of new measures will strengthen the retail banking sector both in Ireland and the wider EU by growing the open banking industry, fighting the rising incidents of authorised payment fraud, and increasing the harmonisation of payments regulation across the EU. Also under negotiation is the proposal for a regulation on the establishment of a digital euro, which will offer consumers an addition option when they go to pay.

In addition to the active EU legislative proposals outlined above, my officials are working on transposing several pieces of EU legislation that will strengthen the retail banking sector. The Instant Payments Regulation will require all banks/PSPs to offer instant payments to their users - this measure is especially beneficial for Ireland as currently no major Irish bank offers instant payments.

Another piece of EU legislation which is currently being transposed is the Digital Operational Resilience Act (DORA). DORA will strengthen the IT security of financial entities including Irish retail banks ensuring that Europe’s financial sector will be resilient against operational disruptions, the measures taken in DORA are of key importance given the increasing digital footprint of Ireland's retail banking sector. DORA will strengthen the Irish retail banking sector in the area digital operational resilience. DORA entered into force on 16 January 2023 and will apply as of 17 January 2025.

Finally, the Central Bank (Individual Accountability Framework) Act 2023 significantly enhances the powers of the Central Bank to ensure that regulated financial service providers and those working for them act in the best interests of consumers. The Individual Accountability Framework will drive positive changes in terms of wider banking culture, and enhanced accountability while simplifying the taking of sanctions against individuals who fail in their financial sector roles. It gives the Central Bank the regulatory tools necessary to ensure that consumers dealing with financial service providers in Ireland can be confident that their best interests will be protected. The success of the Framework will not be measured by more enforcement, but by less need for enforcement, as firms and individuals take greater responsibility for the running of organisations. The Act ultimately seeks to improve the culture of the financial sector and boost public trust in it.