Bank of Ireland shareholders including the biggest, the Minister for Finance will not get a vote on its bid to buy KBC Ireland but the deal does need approval from the Competition and Consumer Protection Commission (CCPC).
The offer from Bank of Ireland has raised major competition concerns at a time when Ulster Bank is already being carved up by AIB and Permanent TSB, potentially leaving Ireland with just three mainstream banks, all to some extent state owned.
Experts warn the result will be the cost of debt and day-to-day banking become more expensive for consumers and businesses.
However, the deal is subject to clearance from the Competition and Consumer Protection Commission (CCPC), headed by Isolde Goggin.
The CCPC has wide powers to block or set tough conditions on any merger that risks competition in the market.
The fact that Bank of Ireland made the first approach to KBC is something that can weigh on that process, sources said yesterday, because the CCPC will assess so called counter-factuals what would happen if the takeover is blocked.
If it has concerns, the CCPC can order KBC to seek other offers from international banks, or reconsider a sale.
Bank of Ireland formally notified the CCPC yesterday that a deal could be in the works, kicking off that process.
Bank of Irelands first move makes the KBC bid different to Ulster Bank, whos parent NatWest was looking to exit the market before talks with AIB and Permanent TSB began. The counter factual to selling Ulster Bank includes that the would be gone anyway.
The Deputy Governor of the Central Bank, Ed Sibley, admitted yesterday that if the KBC deal goes ahead there will be concerns at the implications of reduced competition.
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.
But the Central Bank is understood to see its main role in weighing the proposed takeover being to assess whether Bank of Ireland has the capital to take on KBC, not how it will hit consumers.
Director of financial services of Brokers Ireland Rachel McGovern said KBC Bank has been a force for competition in the Irish banking market, particularly with their mortgage products.
This diminution in competition is happening in a market that is already lacking in competition, although the recent entry of Avant Money is welcome, she said.
Daragh Cassidy of price comparison site Bonkers.ie said the loss of both Ulster and KBC has the potential to lead to huge upward pressure on interest rates and banking fees for personal loan customers, mortgage customers and SMEs.
He said Ireland is already under-banked compared to other countries of our size, even with eight current account providers including credit unions, An Post and the fintechs, as well as several credit card providers and niche mortgage lenders.
If KBC does exit, it will also increase the dominance of AIB and BoI even further. A few years ago, Mario Draghi, the former head of the European Central Bank (ECB) referred to the Irish market as a quasi-monopoly. Who knows how he would refer to it now.
The loss of KBC will mean just three banks are left, all with substantial state ownership. The big two of AIB and Bank of Ireland are also currently at different stages in buying Goodbody Stockbrokers and Davy, respectively, further consolidating their market dominance.
KBC and Bank of Ireland said on Friday they have entered into a memorandum of understanding, with Bank of Ireland potentially buying KBCs performing loan assets and liabilities.
KBCs Irish bad loans would be sold separately, with vulture funds the only likely buyers.
While these discussions are ongoing, KBC Bank Ireland said remains committed to offering its retail banking and insurance services for its existing and new customers.
There is no impact on KBC Bank Ireland customers’ products or services and they do not need to take any action as a result of the announcement, the bank said.
Irish Independent
