There has been some "misunderstanding" about the issue of bank charges since the euro was introduced earlier this year, the Irish Bankers' Federation (IBF) has said.
The federation said the single commission which now applies is being "incorrectly compared with just one element of the price the consumer paid prior to the euro". The IBF was appearing before the Oireachtas Joint Committee on European Affairs which is examining bank charges for foreign exchange involving euro zone currencies. The Select Committee on Finance and General Affairs is also due to examine the issue.
Various members of the IBF delegation disagreed with the view that eliminating the "spread" - the difference between the buy and sell rates for currency - should mean the ending of commission charges.
Instead it quoted the European Central Bank which estimated that the elimination of the spread would account for no more than between 5 and 20 per cent of the cost of providing foreign exchange.
The IBF director general, Mr James Bardon, said that when the euro came in the only cost factor eliminated was the exchange rate risk. He added that other factors, like transport, insurance and staff costs, remained.
Mr Pat Ryan, chairman of the IBF, said the "underlying reality" was that it costs a lot of money for banks to keep foreign currency.
Mr Sean Barrett TD (Fine Gael) said he could not understand why banks charged customers when they returned from holidays and converted their foreign exchange back into pounds. The IBF told Mr Barrett the flat charge at most institutions was 2.25 per cent for euro zone transactions. But he contended there was a "huge gap" between this charge and what most banks were paying to depositors which was often below 1 per cent.
Mr Pat McArdle, a member of the delegation and head of EMU Planning at Ulster Bank, commented: "If you go for a haircut and the next day you go back to the same place, you do not expect to have your hair cut for free the second time."
Mr Ryan said a directive from the Director of Consumer Affairs, Ms Carmel Foley, that financial institutions had to publish their foreign exchange rates had created "competitive pressures on all of us".
Ms Foley, also appearing before the committee, said a report from the European Monetary Institute had supported the argument that eliminating exchange rate risk only removed 20 per cent of the cost of providing foreign exchange.
Ms Foley disagreed with Mr Barrett's suggestion that she "should come out and say what level of charges are unacceptable".
"If we said one charge was acceptable, the banks would all move to that ceiling and no more, and we would have a cartel and no competition," she said.
