Somers warns Ireland's image is hit by bank exit; Ulster boss says she aims to minimise job losses

'The fact that a major bank like National Westminster with a significant subsidiary here for 160 years can’t make money sends out a strange question about the country.' said former NTMA chief Michael Somers. Picture: Denis Minihane

A former National Treasury Management Agency head Michael Somers, who helped set up the agency during the debt crisis of the late 1980s, said the decision of Britain’s NatWest to pull Ulster Bank from the market sends a negative message around the world about the costs of doing business in Ireland.

In an interview, Mr Somers — who is also a director at financial services firm Fexco, chairman of Goodbody, and a former non-executive director to the AIB board appointed by the government after the 2010 financial crash — said the image of Ireland as a location for international businesses to thrive has been badly harmed.

The chances of the Government attracting a new significant foreign lender were limited because potential investors will be asking, “if NatWest can’t make money why should I come in here and do business”, Mr Somers told the Irish Examiner. 

In terms of the image of Ireland, the fact that a major bank like National Westminster with a significant subsidiary here for 160 years can’t make money sends out a strange question about the country. Why is that the case? And would a foreign bank want to come over to set up?   

NatWest confirmed last week that, over a number of years, it will close Ulster Bank and its 88 branches in the Republic, sell its €20bn of loans, including €15bn in mortgages, putting at risk 2,800 jobs. 

Bank of Ireland CEO Francesca McDonagh and Ulster Bank CEO Jane Howard following the meeting of the big five banks with Paschal Donohoe at the Department of Finance in March last year. Picture: Gareth Chaney/Collins

The decision to shut the third-largest lender, which has  1m customers, will have severe consequences for customers of all banks in a market dominated by AIB and Bank of Ireland, and where lenders already charge among the most in Europe for mortgages and small business loans, many experts have warned. 

The Government has helped coordinate State-owned lenders AIB and Permanent TSB to potentially buy parts of the €20bn loan books. 

NatWest has insisted it only reached a final decision last week, following a review it formally started last summer, but concluded it couldn’t generate sufficient returns from the Republic.

Minimising job losses

At an Oireachtas finance committee, Jane Howard, the chief executive of Ulster Bank in the Republic, said the lender was constrained from communicating with staff. 

"I accept that this situation, the ongoing media speculation and some of the communications issued to colleagues have added to the stress of the situation," she said. The bank wanted to minimise job losses, she said. 

Financial Services Union head John O'Connell told the committee staff had been treated shabbily and again urged for the saving of jobs. 

Union criticism of Ulster Bank

“They deliberately decided that the mental wellbeing of their staff was to play second fiddle to the secrecy of the bank,” Mr O’Connell said. He said the union favoured plans by AIB and Permanent TSB to buy loans as the best way to save jobs. 

Fianna Fáil committee chair, John McGuinness said the Government needs to do more over "an appalling" departure. Asked by Sinn Féin finance spokesperson Pearse Doherty whether she had fought the decision, Ms Howard, who has held the top job for two and a half years, said she recognised the reason in that NatWest was not able to generate returns on its capital in the Republic.