Hearing may be vital for future of Ulster Bank

It is expected that Ulster Bank chief executive, Jim Brown, will be called before a UK House of Commons Select Committee on banking in Northern Ireland over the next few weeks.

Ulster Bank is one of the main banking forces in Northern Ireland, operating as an all-island entity.

Consequently, the Select Committee hearings which began yesterday and are scheduled to last weeks could have a significant outcome on the future of Ulster Bank in Ireland.

The committee will look at the level and quality of services offered by banks and how the sector supports the economy.

There are only two MPs from Northern Ireland on the committee with the rest made up of Conservative, Labour and Liberal Democrat MPs from Britain.

The future of Ulster Bank has come under intense scrutiny since the chancellor of the exchequer, George Osborne, announced in June that one of the possible strategies for dealing with Royal Bank of Scotland (RBS) was to split it into a good bank/bad bank, and with Ulster Bank potentially going into the bad bank.

RBS is 82% owned by the British government and is the parent of Ulster Bank. If Ulster Bank was put into the bad bank then it would most likely be wound down over the medium term.

The ratings agency Fitch issued a research paper on Aug 14 which concluded that the costs of splitting RBS into a good/bad bank would exceed the benefits.

Moreover, market sources say that if RBS took the decision to exit the Irish market then it would struggle to secure anything more than firesale prices for its assets. A number of financial institutions, including Bank of Scotland Ireland, have exited the Irish market and are still divesting their assets.

RBS has already shipped roughly €18bn in losses through Ulster Bank’s exposure to the Irish property market. It is now in a position to benefit from an Irish economic recovery.

Ulster Bank made a detailed submission to the UK Select Committee outlining its contribution to the Northern Ireland economy.