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Irish Independent
Irish Independent
Charlie Weston Twitter Email

Government told to get new banks in to avoid consumers ‘being exploited’

Finance Minister Paschal Donohoe. Photo: Gareth Chaney/Collins Photos

The Government has been urged to make a concerted effort to attract foreign banks to this country to prevent consumers being exploited.

It comes after AIB, the State’s largest mortgage lender, said it was in exclusive talks to buy 40,000 tracker mortgages from Ulster Bank in a €6bn deal.

The assets of Ulster Bank and KBC Bank Ireland are being snapped up by AIB, Bank of Ireland and Permanent TSB, creating fears of a huge concentration among the remaining three financial institutions.

Consumers’ Association of Ireland chairman Michael Kilcoyne said the Department of Finance and IDA Ireland need to do more to attract foreign banks to this market, especially as we have some of the most expensive mortgages in Europe.

He said there was now a major risk that the three enlarged banks would exploit consumers and limit their options for savings, loans and mortgages.

Earlier this week, the Competition and Consumer Protection Commission (CCPC) warned about the impact of the departures of Ulster Bank and KBC on wider competition in the banking market.

It was commenting after approving the purchase by AIB of Ulster Bank’s €4.2bn performing commercial loan book.

The move by AIB to acquire Ulster Bank’s tracker mortgage book is subject to a final agreement being reached with Ulster’s parent company, NatWest, and regulatory approval by the CCPC.

The carve-up of Ulster Bank’s assets is likely to see Permanent TSB acquire its €7.6bn non-tracker book, Ulster’s SME loans and 25 branches.

KBC is hoping to sell €8bn in mortgages to Bank of Ireland, €4bn in deposits and the credit card accounts.

If all the deals are approved, the three remaining banks will be too powerful and will exploit consumers, Mr Kilcoyne said.

“These deals have huge implications for competition in this market. We know the banks are supposed to be competing with each other, but there is no real competition as we still have some of the most expensive mortgages in Europe,” he said.

Ulster Bank tracker mortgage holders were advised not to switch lenders ahead of the deal with AIB to acquire them being approved.

This is because they will lose the valuable trackers if they switch to another provider, according to consumer advocate Brendan Burgess.

He said that even if European Central Bank mortgage rates were to rise three or four times, trackers would still be the best value home loans in the market.

Finance Minister Paschal Donohoe welcomed the announcement about AIB’s plans to take over the Ulster Bank trackers.

He said a successful conclusion of the transaction would provide Ulster Bank customers with certainty on the destination of their mortgages.

AIB, in which the State is a 71pc shareholder, was ordered by the Government in 2011 to take over then building society EBS.

A spokesperson for the Department of Finance said the banking review it is conducting will look at why the two banks are pulling out of Ireland and discuss ways to bring in others.

A “dialogue” event, or conference, as part of the review was due to take place this week, but has been postponed until May 16.

Mr Donohoe said recently it was necessary and timely that there is an assessment of how the banking system can best support social and economic activity for citizens and businesses.

Meanwhile, KBC Bank Ireland said it has decided to extend the notice period for the closure of current accounts from 90 days to six months.

The move brings it into line with Ulster Bank and comes days after the Central Bank threatened to stop Ulster and KBC pulling out of the market unless their customers were looked after.

KBC will start writing to its customers in June and will give them six months to transfer their business.

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