A banking crisis involving the loss of hundreds of jobs and the prospects of even less competition in Irish banking is looming, as Ulster Bank appears set to pull out of the market.
It is widely feared by TDs and unions that the bank's owner, Britain's NatWest, will announce on Friday plans to sell off Ulster's €20.5bn worth of mortgage and corporate loans in the Republic, after doing little to dampen speculation after setting up a review into the lender's future around five months ago.
The review has raised substantial fears about the future of 2,800 staff in the Republic and 600 jobs in Belfast, and put the spotlight again on the high cost of borrowing amid the dominance AIB and Bank of Ireland have enjoyed since the costly rescue by taxpayers in the financial crash just over 10 years ago.
The Oireachtas Finance Committee said that in the absence of Ulster engaging, it may consider recommending legislation against the bank selling loans to vulture funds and to ensure only AIB, Bank of Ireland, or another mainstream lender would benefit "notwithstanding the competition issues that might arise as a result".
Committee chair John McGuinness told thethe potential winding down of Ulster Bank had put legislators and regulators between "a rock and a hard place" because selling loans to AIB and Bank of Ireland would only worsen concerns about the limited competition in banking in Ireland. However, he said it was important that any loans would not end up in the hands of vulture funds.
He said Ulster Bank had the chance to appear before the Finance Committee next week.
"There is quite a lot at stake here," he added.
A spokeswoman for NatWest in Edinburgh said it had no comment to make on the review.
Meanwhile, one of Ireland's leading competition lawyers has said that competition law and controls could likely be found wanting should NatWest decide to end Ulster Bank operations in the Republic.
Ronan Dunne, head of competition at law firm Philip Lee, said under all the options that any closure would only strengthen AIB and Bank of Ireland in SME lending, and likely in mortgage lending too.
Since the financial crisis, there has been a retrenchment by foreign banks from the Irish banking market and that "if Ulster Bank is not bought as a going concern, that will have the effect ultimately of strengthening market concentration and therefore strengthening each of AIB and Bank of Ireland in the market", Mr Dunne told the.
He said much would depend on the structure of any prospective deal about whether the Competition Commission would get involved.
Separately, Central Bank governor Gabriel Makhlouf told a business conference that the regulator had focused on protecting the financial system and consumers from the fallout of the Covid-19 pandemic.