‘Lack of com­pe­ti­tion’ help­ing banks’ prof­its re­bound

Belfast Telegraph - Business Telegraph - - News - BY CHAR­LIE WE­STON

BANKS in the Repub­lic have be­come more prof­itable since the fi­nan­cial crash.

At the same time, other EU banks have seen their level of prof­its de­cline, a new pa­per from an econ­o­mist based in the Repub­lic’s Cen­tral Bank has found.

Banks in Ire­land are gain­ing from the low cost of funds, and from the fact that they have very lit­tle com­pe­ti­tion for sav­ings, and so pay some of the low­est rates in the EU. Low lev­els of bank­ing com­pe­ti­tion mean banks in the Repub­lic do not have to com­pete for de­posits.

Sep­a­rate stud­ies have found that de­posit rates paid by banks in the Repub­lic are among the low­est in Europe. Mort­gage rates are so high the Cen­tral Bank has re­peat­edly found that home buy­ers are pay­ing mul­ti­ples of what is be­ing charged in other coun­tries in the euro area.

Ear­lier this month Euro­pean Cen­tral Bank pres­i­dent Mario Draghi blamed a “quasi-mo­nop­oly” among banks for the high mort­gage rates.

AIB and Bank of Ire­land dom­i­nate the mort­gage mar­ket, ac­count­ing for 60% of lend­ing.

AIB made prof­its of €762m in the first half of this year, with Bank of Ire­land mak­ing €500m. Cen­tral Bank econ­o­mist Ciaran Nevin has found that the banks are highly prof­itable due to what he calls “his­tor­i­cally low lev­els of com­pe­ti­tion” since the crash.

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