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A robust banking system is crucial in any economy. As the Republic of Ireland's banks were left highly exposed to bad debts during the 2007-08 financial crisis, so the economy across the island was left to deal with the consequences. However, banks have an equally central role in securing an economic recovery. This Report examines how well equipped banks in Northern Ireland are to play this role and makes a number of recommendations to ensure they do so.
Customer Service—some of Northern Ireland's banks have shown relatively little concern for their customers by pursuing plans to close local branches. Some of these closures have been brought about by reduced customer activity at branch level, and a greater use of internet banking. This has, however, not always been appropriate for more rural areas. Whilst we would welcome any new entrants to the market, we consider the way forward is for existing banks to improve their services to their customers, without, however, a return to previous aggressive lending practices. It is also clear that many banks' IT systems are not fit for purpose, with some customers left unable to access their accounts on two occasions since 2012, and we recommend that banks use their increasing profits to make greater investment in their IT systems.
Access to Finance—we agree that banks have appeared to be reluctant to lend other than to the most financially robust customers. From the reckless high-risk attitude of many banks pre-financial crisis, the pendulum appears to have swung too far back in the opposite direction. Recent statistics show a slight improvement in borrowing by SMEs during 2014, but we believe that the more conservative lending criteria has dissuaded many businesses from pursuing opportunities that would require bank financing. Northern Ireland's Banks have, however, assured us that they are very much "open for business", so we regret that some banks, such as FTB and Danske, have chosen not to participate in HM Government's Funding for Lending Scheme, thereby potentially denying Northern Ireland a further capacity for growth.
Regional Lending Data—transparency in the banking sector is key to ensuring an economic recovery and it is important that banks provide lending data to public officials so that growth can be effectively monitored. Significant progress has been made in this area over recent years, but note that Santander has not provided data to the BBA and there continue to be differences between banks on the definition of key terms, such as what qualifies as "new" lending.
Recovery—although the situation in the property market, and the recent sale of NAMA and Ulster Bank property loan books, gives the Committee some cause for concern, we welcome the fact that, over the past year, the Northern Ireland economy has shown clear signs of recovery, with many new jobs recently being announced and the banks themselves showing a return to profitability.
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