Irish consumers are continuing to pay over the odds for bank services, according to a new report by the Competition Authority. Siobhán Creaton, Finance Correspondent, reports.

It has called for further structural changes to make it easier for customers and businesses to move their bank accounts.

The authority's recommendations aim to make it cheaper for small businesses to access working capital and to make it easier for new banks to offer services to Irish customers.

The report says that a lack of competition has affected small firms in so far as they are losing out on interest rate reductions that are not being passed on fully by the banks. It estimates that between January 2001 and January 2004 small businesses lost out on interest rate reductions worth €255 million.

"This situation will continue unless there is more competition," the report warned.

Competition Authority chairman John Fingleton said there is a lot of support at a political level for reforming the financial services sector to the benefit of consumers and that it will continue to monitor how quickly competition will improve.

"We are not going to back off. We are setting an aggressive timetable for the implementation of our recommendations and we will be following up on all of them," he said.

The authority's about-face on its position on the abolition of the regulation of bank fees and charges until there is an improvement in competition was criticised by the Irish Bankers Federation, the industry body that represents most financial institutions here. It described this recommendation as anti-competitive.

Irish Bankers Federation (IBF) chief executive, Pat Farrell, said Ireland's banking market was already highly competitive and that the industry had made great strides in improving their customers' lot.

"We have been very proactive in terms of designing an account-switching code for current accounts and are confident that we will have a similar code in place for business customers by the Competition Authority's deadline of June 2006," he said.

But the IBF sees no need to delay the abolition of the regulation of bank fees and charges and wants it to be introduced sooner rather than later. "At worst this acts to restrict competition. There is already plenty of evidence to show that the market is competitive," Mr Farrell said.

The small business group ISME was also disappointed with the the report. "It patently fails to introduce adequate recommendations to ensure a comprehensive competitive banking environment to the benefit of all, including the small business community," said chief executive Mark Fielding.

The Small Firms Association (SFA) was sceptical about the extent to which the recommendations will be implemented. "There is a very strong argument for many of the recommendations in this report to be implemented but unfortunately the more likely outcome is that it will gather dust like so many before. Unless this report can be adopted as a blueprint for action the exercise has been futile," SFA director Pat Delaney said.

Fine Gael slammed the Government for its failure to alleviate the lack of competition. "Four years on and four reports later, all funded by the taxpayer, the only action the Government has taken is to introduce a new stamp duty regime on plastic cards and to further impede competition," the party's deputy leader and finance spokesman, Richard Bruton, said.