Watchdog escalates probe into banks with AIB and Ulster deal under full scrutiny

Mortgage brokers and consumer advocates have long warned about the dominance of a few lenders in banking in the Republic

The competition watchdog has escalated its investigations into the state of competition in Irish banking by announcing a full-scale probe of plans by AIB to take €4.2bn in loans from Ulster Bank, when the third-largest lender completes its retreat from the Republic.

It is the third major or so-called Phase 2 banking investigation to be announced by the Competition and Consumer Protection Commission (CCPC) and reflects widespread concerns that customers will be the big losers when the existing lenders carve out billions worth of loans from Ulster and KBC Bank, which also has plans to withdraw.

On the AIB plans, the regulator said that “following an extended preliminary investigation, the CCPC has determined that a full investigation is required in order to establish if the proposed transaction could lead to a substantial lessening of competition in the State”.

The watchdog has already launched a full Phase 2 investigation into plans by Bank of Ireland to get €8.8bn in home mortgages and €4.4bn in deposits from KBC, and separately, is scrutinising other plans involving major Irish banks to set up a banking payments app called Synch.

Plans by Permanent TSB (PTSB) to get €7.6bn in loans from Ulster and for Ulster-owner NatWest to take a stake of almost 17% in PTSB will also now likely to be fully investigated by the CCPC, said Ronan Dunne, partner and head of EU and competition at law firm Philip Lee.

Mr Dunne said the competition regulator does not embark on Phase 2 investigations lightly and “is sending a signal that competition concerns must be addressed before deal approvals” will be given.

“Big decisions will be taken by the CCPC in the coming months that will decide the landscape for Irish banking for the next 10 years,” Mr Dunne said.

He said that the key competition rulings over the Ulster and KBC loan books will likely determine whether any major new banking entrants will find it worthwhile launching banking services in the Republic.

Mortgage brokers and consumer advocates have long warned about the dominance of a few lenders in banking in the Republic.