Cantillon: Death of a zombie as Rabobank pulls the plug on ACC

There will be complaints that this closure diminishes competition, but it will do nothing of the sort

ACC has focused aggressively on the issue of debt recovery, as developers, as musician Jim Corr would testify

ACC has focused aggressively on the issue of debt recovery, as developers, as musician Jim Corr would testify

 

The Irish Free State was just five years in existence when the Agricultural Credit Corporation was founded by the State to assist the development of the agri sector here. This model was later replicated for industry with the setting up of the Industrial Credit Corporation, later known just as ICC.

Both banks were tasked with helping to nurture the development of the fledgling economy by providing credit to farmers and business owners.

Now, five years on from the crash of the financial sector here, ACCBank’s Dutch owner, Rabobank, has thrown in the towel, deciding to close the doors of the venerable institution and hand back its banking licence.

ICC has gone the way of the flood, too, Acquired by Bank of Scotland (Ireland) in 2001, it has become a footnote in history following the withdrawal of the Scottish bank from this market.

How did it all come to this?

Rabo, a AAA-rated financial institution, has owned ACC since 2002. By that stage the bank had already expanded its focus to include SMEs, having been mandated in 1988 by the government to provide 25 per cent of its risk assets outside of agriculture.

In the boom years, it began competing aggressively for deposit and savings products, and by offering loans, made a major play in property which blew up its in face spectacularly when the crash came. Since 2008, more than €2.1 billion of the loan book has been written down; over the same period, Rabo has provided capital of €1.3 billion.

Unlike its domestically owned rivals, ACC has focused aggressively on the issue of debt recovery, as developers Liam Carroll and John Fleming, and musician Jim Corr would testify.

There will be a lot of huff and puff about how this closure diminishes competition in the marketplace but the reality is that it will do nothing of the sort. ACC has been a zombie bank for the past five years.

Ulster Bank is much more important in terms of competition in the Irish market. Ands considerably more attention will be paid to the British government decision, due in the next couple of weeks, on the future of its parent company Royal Bank of Scotland, which is majority owned by UK taxpayers.

Here’s hoping Ulster Bank doesn’t go the way of ACC.

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