A New Era For Northern Ireland

As well as an historic power-sharing executive, Northern Ireland faces new rules to keep its banks in check.

Things are certainly looking up in Northern Ireland at present. The Democratic Unionist Party and Sinn Fein appear to have put aside their differences (for now, at least) by forming a power-sharing government. Hence, the Northern Ireland Assembly was restored to Stormont on 8 May.

However, as my field is personal finance, not politics, I'll stick to exploring the financial benefits of the peace process. One of the biggest 'peace dividends' has been an unprecedented explosion in house prices in the six counties of NI.

According to a report from the Northern Ireland Housing Executive and Bank of Ireland, the average house price rose by 37% in 2006 and 22% in 2005. Hence, the value of a typical Northern Irish home has risen by two-thirds (67%) in two years. Wow!

Although this new-found property wealth has been of great benefit to NI's homeowners, the 1.7 million people of the six counties have been stitched up by their banks for decades.

I believe that the clearing banks in Northern Ireland have made excessive profits by selling inferior financial products to local people, including poor-value current accounts, mortgages, personal loans and savings accounts.

Rather than going into too much detail, here are links to three previous articles from my ongoing campaign against the 'big four' Northern Irish banks:

March 2007:Watchdog Bashes Greedy Banks

October 2006:Naughty Banks In Northern Ireland

June 2006:Northern Ireland's Banking Scandal

The good news is that, following a lengthy enquiry by the Competition Commission that began in May 2005, personal-banking customers in Northern Ireland can look forward to receiving fairer treatment. On 18 May, the Commission concluded in its final report that there was a lack of effective competition in the NI banking market. Therefore, it has ordered new measures to improve the information provided to customers and to make switching between banks easier.

In theory, the following measures should mean the end of complex charging structures and practices in personal-banking services. In future, Northern Irish banks should:

Describe their banking services in plain English, using easy-to-understand terms.
Provide clear explanations of charges and interest rates and how and when they are applied. These details must be available before a customer chooses a current account, as well as on statements and when customers are pre-notified of charges and interest payments.
Provide more information on bank statements, including details of charges and interest rates.
Provide every customer with an annual summary of the charges they have incurred and of interest paid and received.
Give customers at least fourteen days' notice from the date of their statement before charges and debit interest are deducted.
Remind customers each year of their right to close their account or switch to another bank.
Improve the switching process, including offering a charge-free and interest-free overdraft facility to new customers for at least three months. Alternatively, banks must guarantee to refund any costs incurred from failures in the switching process, regardless of whether the charges and interest occurred as a result of an error by the new bank.

Alas, the bad news is that the regulatory wheels grind very slowly indeed, so these new measures will not take effect until next year. The measures relating to better and clearer information must be in place by April 2008, with the remainder being implemented no later than October 2008.

Accordingly, as some of these measures will not take effect for almost 1½ years, it's up to consumers in Northern Ireland to seize the initiative. Indeed, the Competition Commission has urged them to be "pro-active in seeking the best current account to match their own personal circumstances". There you have it: the official line is to vote with your feet by switching to a better current account today!

More: Current Accounts Crisis