Irish banking flaws highlighted by recent fiascos

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It’s not often that the public gets the better of financial institutions, but that’s what happened recently with Allied Irish Banks (AIB) and its plans to cut services at 70 of its city branches. from the country.

For once, the so-called Masters of the Universe were forced to eat humbly and reverse a decision that would have stopped cash services to tens, if not hundreds of thousands of their customers. It was an episode that exposed the greed of banks, the incompetence of the Ministry of Finance, the power of communities working together and, for once, Taoiseach Micheál Martin being on the right side of a controversy.

AIB has 170 branches across the country, and they proposed two weeks ago that over-the-counter cash, check and ATM services be cut from 70 rural locations. A statement on the bank’s website said: ‘Some of our branches will no longer offer cash and check services over the counter or through machines inside the branch. This means that we will have no notes, coins, checks, currencies, bank drafts and we will remove all safes and night safes.

The statement added that if there was an ATM outside the branch, that would also be removed. AIB’s solution to the change was to redirect customers to the local post office with its limited facilities.

Had the plans been implemented, they would have caused incalculable damage to rural economies where adoption of online banking services is less than in urban areas, with in some cases up to 70% of cash transactions. For individuals, especially the elderly, this would have meant long trips to major cities to queue to cash checks, withdraw cash and make accommodations.

For businesses, the effects would have been just as severe. Security issues related to money lying around overnight have weighed heavily on the minds of store owners and professional service providers in affected communities. A potential drop in customer numbers was also of concern, as the pull effect of major cities with fully serviced banks would inevitably affect local commerce.

The rationale given by the AIB was that there has been a 36% drop in cash withdrawals from ATMs, a 50% drop in the use of checks over the past five years and a drop of almost 50% of transactions at branch counters.

The last point frankly doesn’t cut the ice, as AIB’s workforce has been significantly reduced over the same period, with people employed specifically in branches to steer people away from the dwindling number of tellers. The five years also included two years of confinement during which we were all immobile and several banks closed or had restricted opening hours.

Politicians were quick to criticize the plans. But AIB had done their homework and the announcement came the week after the TDs flew out for their summer break.

Once the public took the cudgels, however, Minister of State at the Ministry of Finance Seán Fleming insisted that he, Finance Minister Paschal Donohoe and the government had been “blindsided” by the decision. It quickly turned out that this was not the case and the ministry was informed at least four days in advance of the planned announcement. If Donohoe was caught off guard, then it was by his own department, though frankly, that lame excuse has all the hallmarks of what Nixon once called “plausible deniability.”

Bad enough not to be aware of what the ministry knew, there was a double whammy for the hapless minister when the Taoiseach went over his head and called on AIB to reconsider, and went as far as invite officials for talks. By all accounts, this angered Donohoe who felt it was an encroachment on his area of ​​responsibility.

It’s been a bad month for the rather smug Donohoe, dating back to April when he foolishly boasted to all of Europe that he had met the widow of a well-known Portuguese writer so that he was pointed out that the individual in question had never been married. As they say in Ireland when something horribly embarrassing happens, “I was scarlet for you”.

But really, when it comes to AIB, there can be no excuse for its initial inaction. The bank is 70% owned by the Irish government, clear lines of communication are established and the state still has a role in nominating but not appointing potential directors. In addition, AIB has just acquired, with the agreement of the government, the mortgage portfolio of Ulster Bank which is withdrawing from the 26 counties.

While Martin read the tea leaves better than most when it comes to public opposition, what ignited the spark was a call from a small Gaelic football club in Leitrim for the GAA to drop sponsorship of the AIB. Ballinamore Sean O’Heslin released a statement calling on the GAA to “cease any partnership with an organization that clearly does not have the best interests of our communities at the forefront of its thinking”.

Club statement on the closure of AIB bank branches. @AIB_GAA #the hardest #AIB pic.twitter.com/4T0iLD990e

— Ballinamore SOH GAA (@BallinamoreSOH) July 20, 2022

The response and support from across the country was swift and overwhelming, with clubs and GAA individuals threatening to withdraw funds and change banks. AIB recognized that this was a battle he could not win and changed tactics.

What message does this hold for AIB? Well, a quick look at the bank’s website shows their commitment to diversity on their board of directors, which they define as including geographic and industry experience, background, nationality, ethnic origin, sex and age.

Given AIB’s complete failure to recognize the damage it was about to perpetuate in rural Ireland, a representative from this sector should be included at the highest decision-making level. This is something the AIB Group Board should put at the top of its agenda. Chairman James Neilson Pettigrew, who also sits on the Scottish Ballet’s board, might think it prudent to make such an appointment so that the company is not embroiled in countless political pirouettes and demi-pirouettes.

The message for consumers and government is more worrying. Ireland currently effectively has a duopoly in its banking sector with two major players, AIB and Bank of Ireland. A third bank, Permanent TSB, has a minor stake in the economy.

Over the past year, Ulster Bank announced it was closing its operations while KBC Ireland sold its loan portfolio and headed for exit. The cavalier attitude of AIB, which has engaged in no consultation with the communities and businesses it serves, is a sign of things to come.

A viable public bank is urgently needed, which would be regional and customer-focused rather than profit-driven. Irish politicians have already considered the German model of Sparkasse, which has 12,000 branches.

The Department of Finance is on board with the idea, but with our literature-loving Minister Donohoe set to go through a cabinet reshuffle at the end of the year, it’s definitely time to think of new ideas, d to have bold ideas and take action. Revisiting the German model and partnering with a foreign bank could solve many emerging problems. A pas de deux, so to speak.

*This column first appeared in the August 3 edition of the weekly Irish Voice, IrishCentral’s sister publication. Michael O’Dowd is brother of Niall O’Dowd, founder of Irish Voice and IrishCentral.

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