A little over a decade ago, when Ireland’s main banks were recovering from an effective run on the system, lenders would have fallen all over themselves to attract the customer savings of any bank exiting the market.
Today the opposite is the problem. Following years of subdued lending and strong household saving, exacerbated by the pandemic, Irish banks have billions of euros of excess deposits. All of this surplus cash is attracting negative rates of minus 0.5 per cent at the European Central Bank (ECB).
And while KBC Bank Ireland, which decided last year that it had enough of the market, has agreed to sell its €5 billion deposit book along with its €9 billion of performing loans to Bank of Ireland, its current account customers will ultimately have to find a new home.
The departure of Ulster Bank is a more involved affair.
The bank has agreed the piecemeal sale of much of its loans to Permanent TSB and AIB, and is currently trying to find a buyer for its €6.5 billion tracker loan book.
Batches
Its almost 1 million current account and deposit holders can expect to be written to in batches from the end of this month, giving them six months to clear off. The big concerns among remaining banks is not the avalanche of new customers they face having to sign on but, rather, what the big switch will do to standing orders, direct debits and the like.
Of the 900,000 or so Ulster Bank personal accounts, about 360,000 are customers’ primary current accounts, while some 300,000 are deposit accounts. The remainder are secondary accounts with little or no activity. On the commercial side, as many as 40,000 of the 70,000 current accounts are businesses’ main accounts.
The Central Bank’s switching code seeks to make the process as easy as possible, allowing your old bank – for those that go through the proper process – to notify any company in the Republic that you have a direct debit with to update their payment files. But with so much switching going on, it opens the risk of backlog problems if utility companies and other service providers are not prepared.
Meanwhile, it will be up to individuals to notify their employers, or anyone else who lodges money into their accounts, of their new bank details. If you have direct debits outside the State, you will have to notify these providers yourself. The same goes for any recurring payments on debit cards such as for music streaming or gym membership. It has the makings of one massive headache.
