Bank of Ireland shares climb 4.5% as watchdog rules on KBC mortgages deal    

Shares in Bank of Ireland climbed 4.5% as investors hailed a ruling from the competition watchdog which was seen as setting few new stringent conditions as the lender prepares to take €9bn in mortgage loans from KBC Bank. 

The decisions last year by KBC, along with Ulster Bank, to close their doors caused shockwaves and raised huge concerns that competition in Ireland's concentrated banking market would be further diminished after Bank of Ireland, AIB, and Permanent TSB scrambled to acquire the loans books of the departing banks. 

The Competition and Consumer Protection Commission (CCPC) last month gave the green light for AIB to acquire €3.7bn in business loans from Ulster Bank following a full investigation. 

And in a new ruling on Tuesday that involves €9bn performing mortgages at KBC, the watchdog said the "significant competition concerns" raised by its full investigation will be assuaged by Bank of Ireland adopting a number of conditions.

The conditions include Bank of Ireland helping to provide €1bn in funding to the so-called non-bank lenders, Dilosk-owned ICS Mortgages and to Finance Ireland, and for it set up a €1m "innovation fund" for distributors.  

For KBC customers, the watchdog has indicated that Bank of Ireland has agreed to honour existing contracts and discounts and will provide KBC customers with favourable standard variable rates when the they first come off their fixed rates. 

Bank of Ireland said it had committed to offering KBC customers favourable variable rates offered by KBC when their fixed-rate loans expire, but taking into account any interest rate changes by the ECB.

However, market observers said KBC customers have been given little protection beyond their existing contracts. 

Mortgage consumer advocate Brendan Burgess said the watchdog had also failed to address the consumer-unfriendly cash back mortgages. Leading mortgage broker Michael Dowling said he was "disappointed". 

"The message to KBC customers is to move, and move now. We have a large number of customers moving already," Mr Dowling said. 

Bank of Ireland shares closed almost 5% higher on Tuesday to value the lender at almost €6.9bn. They have now climbed 20% from a year ago.