Response to Northern Ireland Affairs Committee - Public Inquiry into the Banking Structure in Northern Ireland

This paper has been prepared by a team of academics based at the University of Ulster currently involved in a research project examining the property market bubble in Northern Ireland. A primary objective of the research is to examine the structure of the decision making processes adopted by banks in Northern Ireland in regard to lending. This submission describes a number of findings of relevance here, identified as part of the overall study - • The general structure of the banking system in Northern Ireland, with the mixture of domestic and international banks in the current climate, can be viewed as advantageous from a consumer viewpoint. • The structure of decision making in regard to lending has become more centralised post crisis. Centralised decision making increases the quality, standard and consistency of decision making in regard to lending decisions. It can however, also be problematic due to less negotiation at the local level, a lack of local knowledge and understanding and the lower speed at which decisions are often reached. • Lending policy post 2007 has become more stringent which impacts on the ability of firms and individuals to access finance. • There are consequences for the ownership structure of banks in Northern Ireland, including a lack of control over the behaviour of these institutions. This area warrants further research. • It is not only the sale of assets by NAMA that may be impacting on Northern Ireland property values. Other financial institutions are affecting recovery through their asset disposal strategies also. The submission also makes a number of suggestions in relation to the issues raised by the inquiry - • Immediate clarity over the future of Ulster Bank and NAMA is necessary to aid the recovery process. • Consider the potential role for NISRA in producing regional lending statistics for Northern Ireland in order to increase transparency and allow for a clearer understanding of the nature and scale of the problem in Northern Ireland. • Further analysis into the regulatory implications of the varying ownership structures adopted by the banks operating in Northern Ireland would enable a better understanding of the impact of the structure on Northern Ireland. • The implication of recent changes to the branch network in Northern Ireland is that new delivery channels may be necessary. Substitutes to the rural branch network include extending the services currently provided through the Post Office, increase the services that Credit Unions are permitted to engage in and the implementation of off-site banking kiosks. • Encourage further education initiatives and awareness raising activities surrounding the use of online and mobile banking facilities.