KBC exit ‘raises fundamental questions’ for Irish banking

Industry group chief says regulatory environment driving banks away from Ireland

 

The departure of KBC Group from the Irish market, fresh on the heels of Ulster Bank, raises “fundamental questions” about the banking sector here and how it is regulated, Banking and Payments Federation Ireland (BPFI) chief executive Brian Hayes has said.

Mr Hayes is a former Fine Gael politician who has headed up the BPFI, which is the lobby group for Irish banks, since 2018. “Nobody wants to see a bank leave the country but the consolidation agenda is all heading in the one direction,” he said.

“That consolidation agenda is around fewer banks but bigger banks because of the enormous capital and regulatory requirements. We do have to start asking ourselves pretty fundamental questions about the model of banking in Ireland and the environment in which banks have to operate in Ireland, which is not like other countries.

“There are some pretty big issues as a sector to sort out as to what would make Ireland an attractive place for people to come.

“The fundamental issue is capital and the fact Irish banks have to hold three and a half times more capital than their European peers. Some of that is down to the risk profile of what happened here 10 years ago. That debate is based on a political narrative.”

Wind-down

Mr Hayes added that it was “not true” to suggest there is no competition in the market, despite the announcement of a wind-down of Ulster Bank’s operations in the Republic in recent months.

Central Bank deputy governor Ed Sibley reassured customers of KBC that they do not need to take any action. “There are no immediate changes to the services the banks are providing today, nor the regulatory protections in place for their customers,” he said.

“We do understand that there will be concerns that this transaction, if it goes ahead, will result in a further reduction in the level of competition in the Irish retail banking sector, and a reduction in choice for consumers.

“Competition issues are primarily a matter for the Competition and Consumer Protection Commission (CCPC).”

A spokeswoman for the CCPC confirmed that it had received a notification relating to the announcement and that a preliminary review was under way. “Once the review is complete, the CCPC will publish details of the notified transaction,” she said.

David Hall, chief executive of the Irish Mortgage Holders Organisation, said the news was a blow to the bank’s staff here. “This is terrible news for KBC staff,” he said. “For customers who are paying their mortgage there is little risk.

“Of greater concern are loans yet to be sold that are in arrears. This is especially concerning as KBC have a review clause in some of their restructures.”

‘Worrying’ announcement

John O’Connell, general secretary of the Financial Services Union (FSU), said the announcement was “deeply worrying for staff, customers and communities”.

“It is not good enough that once again staff are the last people to be informed about the future of their jobs,” he said. “This is not the way that change should be managed. The FSU will be writing to both BOI and KBC to express our dismay at the lack of consultation and to request an urgent meeting to discuss the protection of jobs, the timeframe, and the effects this announcement will have on staff and customers.”

The Irish Banking Culture Board said its focus will be to work closely the banks to ensure that any outcome of their negotiations is managed in an “open and transparent manner” and that staff and customers “are treated with fairness and respect throughout”.

Brokers Ireland said the news was “deeply disappointing” on the back of Ulster Bank’s plans to also leave.

“While it’s at an early stage and there is a process to be gone through, nonetheless, one has to think that in reality, given the nature of the announcement, it is a fait accompli,” said director of financial services Rachel McGovern.

“This diminution in competition is happening in a market that is already lacking in competition, although the recent entry of Avant Money is welcome,” she added.