KBC look to leave Irish banking market as talks with BOI begin

While these discussions are ongoing, KBC Bank Ireland said it would continue to offer its retail banking and insurance services.
KBC look to leave Irish banking market as talks with BOI begin

The move would reduce the number of retail banks in Ireland to three with the announcement coming just weeks after Ulster Bank announced its plans to wind down banking operations here. Picture: Leon Farrell/RollingNews.ie

KBC Bank said it will quit operations in Ireland planning to sell its performing loan book to Bank of Ireland.

The move would reduce the number of retail banks in Ireland to three with the announcement coming just weeks after Ulster Bank announced its plans to wind down banking operations here.

In a joint statement this morning, KBC Bank Ireland said it has entered into a Memorandum of Understanding (MoU) with Bank of Ireland to acquire substantially all of KBC Bank Ireland’s performing loan assets and liabilities.

KBC's remaining non-performing mortgage loan portfolio will be analysed for possible future divestment.

KBC said the execution of these two transactions would ultimately result in KBC Group’s withdrawal from the Irish market. 

While these discussions are ongoing, KBC Bank Ireland said it would continue to offer its retail banking and insurance services.

Minister for Finance, Paschal Donohoe, said the decision taken by KBC is "regrettable" and described it as a "very significant event" for the Irish banking sector, its customers and staff who will be largely impacted by this move.

“The news that discussions have commenced with Bank of Ireland regarding substantially all of the performing loan assets and liabilities is welcome. It is my hope that these negotiations are concluded quickly and prioritise the continuation of financial services for these customers and the preservation of jobs," he said.

“Neither the Government nor I have any role in decisions such as these which are a matter for the relevant banks and their independent boards.

“Robust consumer protections are in place in the event of a bank withdrawing from the Irish market, including the Central Bank’s Codes of Conduct and that the terms of any contract currently in place with KBC remains in place into the future," Mr Donohoe said.

Public Expenditure Minister Michael McGrath described the latest move by KBC as a "worrying development".

"This is a commercial decision by KBC but it is a deeply regrettable one, and it does have consequences.

"This may lead to a deal being concluded with Bank of Ireland, they have entered into a memorandum of understanding that provides the possibility of Bank of Ireland purchasing the performing loan portfolio of KBC and they're examining their options then for the remainder of their portfolio, the non-performing loans as such.

"If this does come to pass, it is a further blow to the banking sector, to competition in the sector, coming on the heels of the decision of Ulster Bank's parent company on their departure," said Mr McGrath.

He said the reasons that this is happening have to be looked at and cited the amount of capital that banks in Ireland have to hold in respect of the loans that they issue.

"If this comes to pass, it is undoubtedly a significant blow, it would mean that two of the five retail banks operating in Ireland are on a pathway to exit the country, and that has consequences. And of course, we have to consider the root causes of that," Mr McGrath told Newstalk Breakfast.

There are no changes to the services that either bank is providing today. The announced discussions will take a period of time to conclude and further information will be shared with customers as those talks progress.

KBC CEO Peter Roebben leaving the Department of Finance after a meeting with the Minister of Finance. Picture: RollingNews.ie
KBC CEO Peter Roebben leaving the Department of Finance after a meeting with the Minister of Finance. Picture: RollingNews.ie

In a statement, Ed Sibley, Deputy Governor, Prudential Regulation at the Central Bank said:

“First and foremost, customers 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.

“The Central Bank’s supervision of KBCI and BoI remains focused on ensuring that affected customers are protected and treated fairly and that the banks are operating safely and soundly.

“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. However, competitive pressures can clearly have an effect on the functioning of the financial system and the achievement of the Central Bank’s aim for it to sustainably serve the needs of the people and businesses of Ireland.

“This aim and consideration of the current and future financial services needs of businesses, households and individuals are at the forefront of our approach to regulating and supervising banks and other financial services providers (from payment institutions to credit unions) and our wider engagement with all relevant stakeholders.”

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