Beyond the Big Three: A Broader View of Competition in the Irish Loan Market
A Central Bank of Ireland study reveals that competition in the Irish loan market is stronger than commonly perceived. By including non-bank lenders, credit unions, and foreign banks, aggregate market concentration is substantially lower and has declined since 2019.
Beyond traditional banking metrics
A Central Bank of Ireland study re-evaluates competition in the Irish loan market, moving beyond a sole focus on domestic retail banks.
Using comprehensive Central Credit Register data from 2019–2025, researchers found that aggregate market concentration is substantially lower and has declined when non-bank lenders (NBLs), credit unions, and foreign banks are included.
For example, the Herfindahl–Hirschman Index (HHI) for new business lending falls by roughly half, and for consumer credit by nearly 80 percent, once all lender types are considered.
This broader view shows that while domestic bank concentration may have been stable or risen, overall market concentration has decreased.
NBLs and foreign banks are crucial, particularly in SME lending, where they reduce concentration by about half.
Even in residential mortgages, non-bank lenders contribute to lower concentration, despite a temporary rise in 2023–2024.
Integrated markets, diverse pricing
The research further indicates the Irish loan market is functionally integrated, not fragmented.
Roughly a third of Irish firms, including 40 percent of SMEs, borrow from multiple lender types, often blending traditional banking with non-bank credit.
Non-bank relationships show similar duration and stability to bank relationships, suggesting a complementary role.
Loan pricing varies: in the standardized residential mortgage market, no significant difference exists between banks and non-banks.
However, consumer credit and firm lending incur a non-bank premium of 1.6 to 2.8 percentage points.
This premium reflects non-price competition, such as flexibility, speed, and specialization, offsetting non-banks' funding cost disadvantage.
Beyond the 'Big Three' narrative
This study critically re-evaluates competition, effectively challenging the simplistic 'Big Three' narrative in Irish lending.
It provides a data-driven, holistic view, underscoring the crucial role of non-bank lenders in fostering market depth and resilience.
Policymakers should leverage these insights to promote a truly integrated and diverse financial ecosystem, moving beyond a sole focus on traditional banking structures.