Bank’s decision to quit market will have implications for years to come

WHILE most people’s attention is, very understandably, focussed on Covid, vaccines and the seemingly endless lock- down, a story that will affect the lives of thousands of people has been quietly unfolding in the wings. For the last few weeks many in the Government and the upper echelons of the civil service have been grappling with the departure of Ulster Bank from the Irish market.

While their colleagues have been dealing with the ongoing Covid crisis – and the myriad of problems it has created for every aspect of society – a team has been working to prevent a very different but potentially huge problem in the banking sector.

When, last Friday, Ulster Bank’s owner NatWest finally confirmed that the bank would be leaving the Republic’s banking market, it had already been widely leaked and won’t have come as a shock to most in the media and the financial industry.

Though the news didn’t necessarily come as a massive surprise that doesn’t mean it isn’t hugely significant news – with potentially enormous implications – for the country.

The one silver lining in the situation is the fact that there is some time before Ulster Bank actually departs the market in the Republic. The bank’s operations here will be wound down over several years which gives its customers; its almost 3,000 staff and the Government a little breathing room.

Ulster Bank customers have been told they have time to shop around and there is no need for them to move their banking business overnight to the first alternative provider they find.

Even so, many are understandably very wary of any uncertainty and already thousands of Ulster Bank’s personal and business customers have begun the process of moving their accounts.

It would be good to see the State take the same approach. When it comes to dealing with a crisis, Irish Governments have a disturbing tendency to try and kick the can as far down the road as possible in the hopes that the issue will go away – it rarely does – or drag on long enough to become someone else’s problem.

That can’t be allowed to happen here for two reasons. First, the country must have a third major bank and ensuring the market remains as open and competitive as possible is an absolute necessity. Quite how that can be achieved remains to be seen but the Government and the smaller lenders must get to work immediately to get it done.

Second, and most important, are Ulster Bank’s mortgage holders whose interests must be protected.

In the Republic, Ulster Bank has a loan book worth about €20 billion of which €15 billion is made up of mortgages.

Various ‘vulture funds’ are already circling and while a putative arrangement has been agreed with AIB and Permanent TSB, this is by no means a done deal.

We are assured that, whatever happens, mortgage holders will maintain all existing rights and protection. That’s well and good but past experience shows that when it comes to vulture funds those protections can mean little in practice.

In finance, certainty is key and there is no time to waste.