Trends and Transformations in Ireland’s Banking Sector

The retail banking landscape in Ireland has undergone significant consolidation, with the market contracting from five banks to three due to the exit of Ulster Bank and KBC. This reduction has dramatically altered the retail banking scene.

In contrast, the institutional banking sector is expanding, primarily driven by Ireland’s EU membership and Brexit. This expansion has unfolded in two phases. The first involved addressing immediate Brexit-related issues, using existing licenses to expand businesses. The second phase has seen a gradual expansion as firms leverage their established infrastructures.

Regulatory and market drivers vary between domestic and international spheres. Domestically, the focus has been on addressing the cost of living crisis and learning from the 2008 financial crisis. The Central Bank of Ireland has been proactive in reminding institutions to be prepared for customer affordability issues.

A significant regulatory development is the review of the Consumer Protection Code, which is a critical domestic code of conduct for financial services. This review is expected to influence practices in 2024.

Internationally, EU developments, including green initiatives and intermediate holding company requirements, are influential. Irish policy typically implements EU directives without additional “gold plating”, ensuring consistency and predictability for international firms operating in Ireland.

The Individual Accountability Framework, particularly the Senior Executive Accountability Regime, is a notable development. This framework, influenced by the UK’s senior manager regime, aims to codify regulatory expectations and improve banking culture. Initially viewed with concern, it is now seen as a manageable standardisation of best practices.

The EU’s new Instant Payments Regulation, driving faster payment processes, requires significant technological investment from banks and will enhance consumer banking experiences.

The integration of AI in banking is a topic of ongoing discussion. Upcoming EU laws are expected to shape AI use cases in banks, which are well-positioned to embed AI due to existing governance and risk management frameworks.

Open banking and open data in financial services are gaining attention. Proposed EU laws could significantly impact customer interactions with financial data, allowing better insights into money management and investment strategies.

Overall, the banking sector in Ireland is navigating a landscape shaped by consolidation in retail banking, expansion in institutional banking due to EU membership and Brexit, and upcoming regulatory changes that aim to modernise and improve banking practices and consumer experiences.