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On September 2 the Irish Competition Authority announced plans to conduct a study of competition in banking services in Ireland. The Authority has the power to study and analyze any practice or method of competition affecting the supply of goods or the provision of services or any other matter relating to competition pursuant to the Competition Act 2002. The Authority has previously investigated sectors such as bus and rail passenger transport and licensed publicans. It is now investigating the professions.

The study is expected to be detailed, high-profile and perhaps controversial, bearing in mind the Authority's apparent interest in the sector, and given the recent investigation by the European Commission into an alleged price-fixing arrangement in the exchange of euro-zone currencies before the introduction of the euro notes and coins, and the request by the Irish government to the European Commission to refer back to the Authority the proposed AIB and Bank of Ireland IT joint venture. The Authority also recently expressed concern over the proposed bill to establish a single financial services regulator, citing that the proposed industry panel could give rise to "regulatory capture" by the industry. It does not advocate a regulatory regime which would encourage firms to "form a common view". The Authority earlier this year also blocked the proposed agreement by certain banks to migrate their over-the-counter bill payment services to An Post.

The Authority stated that it decided to undertake the study having regard to the economic importance of the banking sector, indicators of the level of competition in that sector, the existence of public or private barriers to entry to the sector and the extent of public interest in the banking sector. The Authority's study of the banking sector follows recent examinations by the Director of Consumer Affairs and the Strategic Banking Review conducted jointly by the Department of Finance and the Central Bank, which highlighted potential competition issues. The Authority stated that it was also informed by complaints received from the general public in relation to the banking sector.

On September 13 the Authority launched the first phase of its banking study when it published a preliminary consultation on the terms of reference for that study. It intends to exclude investment banking from the scope of its study and focus on any of the markets in which the clearing banks operate. The study will examine market structure and will analyze markets both from the perspective of barriers to entry including private, public and exogenous barriers and the degree of rivalry between banks.

The Authority's aims in conducting the study are to do the following:

  • advise the government concerning the implications for competition of existing legislation and identify and make recommendations for change;
  • make recommendations for change to any enactment or administrative practice that is limiting competition;
  • identify issues relating to consumer inertia and make recommendations to ensure that consumers can exercise their full rights; and
  • bring to the attention of the cartel or monopoly divisions of the Authority any practice or arrangement that appears to be in breach of the Competition Act.

Following receipt of the responses (requested by October 4), the Authority will then adopt its formal terms of reference and launch the study proper.

Helen Kelly and Karen Gibbons

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