With a decision on the future of Ulster Bank in Ireland imminent, what do customers need to know?
Last September Ulster Bank left many people stunned when it revealed that its owner NatWest (formerly RBS) was reviewing its operations in Ireland with a closure of the bank being actively considered.
The bank had previously reviewed its operations here in 2014 with an exit from Ireland also on the cards back then. However, after much speculation, it reconfirmed its commitment to the Irish market.
However after stumbling into yet another loss last year due to the Covid pandemic, and with the bank still struggling to repay the £15 billion bailout it needed following the collapse of the Celtic Tiger property boom, its operations in Ireland are once again under the spotlight.
However if the bank does confirm that it is exiting the market, what will happen and what would customers need to do?
Firstly, it should be pointed out that talk of Ulster Bank leaving is still speculation which NatWest has refused to confirm (though it hasn't denied the claims either). And if the bank were to exit Ireland, it would do so gradually over a number of years. So there is no need for anyone to panic or start looking to move accounts straight away.
However the fact that NatWest has let speculation go on for so long doesn't bode well and many experts now agree that it's almost a given Ulster Bank will exit Ireland after around 160 years here.
A long rumoured tie-up with a smaller lender like Permanent TSB is also now unlikely.
So, if you're an Ulster Bank customer here's what you need to know...
If you're an Ulster Bank current account customer there is little to no possibility of your account being moved over or sold to another bank. You will simply be given notice of when your account is due to close and be told to make the necessary arrangements.
The good news is that there are currently nine other current account providers in Ireland so there has never been more choice and opening a new account has never been easier. KBC, N26 and Revolut allow you to do it from the comfort of your home through their mobile apps while AIB and BOI have vastly streamlined their processes over the past few years too.
Think carefully about what it is you value in a current account. Do you simply want the one with the fewest fees, or are things like mobile payments, an app, access to a branch network and reward schemes also important?
There may also be some type of campaign among the existing providers for your business. This is what happened when Halifax exited the market in 2010 and when Dankse closed its retail operations in 2013 and PTSB tried to court their business.
There is a current account switching code of conduct in place from the Central Bank that all banks must follow to make switching accounts easier, which you could also use. While this usually means that switching is relatively straightforward and quick, it remains to be seen how it would hold up if tens of thousands of Ulster Bank customers all try to leave at the same time.
Account holders with an overdraft with Ulster Bank who are in debit will also have to make arrangements on how to pay that back before they close their account while you’ll also need to ensure that your new provider is happy to give you an overdraft too.
Use our free current account comparison tool to compare fees and features across all the main providers.
If you have a savings account with Ulster Bank it’s also likely that you will simply have to look elsewhere. Your account is likely to be closed with a cheque or bank draft issued for the amount you have in savings. You will then need to look for alternative options yourself.
With savings rates at an all-time low, you're unlikely to be tempted much by what else is on offer and this may be an opportune time for you to look at investment options instead, depending on your risk appetite. Paying down any debt you have and topping up your pension are other alternatives.
Indeed, as it’s now costing banks money to hold customer deposits, most banks are likely to run a mile from accepting any new savings so it’ll be interesting to see how the sector handles billions of euro in savings all looking for a new home.
Some banks already charge negative rates on larger corporate deposits and it's expected that Ulster Bank's exit will lead to negative rates becoming a widespread feature for retail customers too unfortunately.
German online bank N26 currently charges a 0.5% negative rate on new customer deposits in excess of €50,000 - don't be surprised if something similar is introduced by the remaining banks.
However it's important to highlight that any savings you have with Ulster Bank are safe. Ulster Bank is well capitalised - indeed one of the reasons why NatWest wants to close Ulster Bank is so that it can access some of this capital.
Here there is potential for your credit card to be sold to a new provider. This is what happened when MBNA exited the Irish market almost a decade ago and sold its credit card book to what is now Avant Card.
In this instance card holders should have little to do or worry about. However you should ensure you’re up-to-speed on the terms and conditions of your new credit card provider. Things like the minimum repayment amount, interest rate, and any reward schemes could all be different with a new provider.
Your credit card number may also change meaning any account or online store where you have the details saved will need to be updated.
There is of course the possibility that your account will simply close, meaning you'll have to find a new provider yourself, though this is more unlikely.
Personal loans / mortgages
If you're a mortgage or personal loan customer it's likely your loan will be sold on to a rival lender already operating in Ireland or perhaps a new brand lender.
For competition reasons, it’s unlikely that any of the larger players in the market like AIB and BOI will be able to compete for much of the business though. If they do, expect authorities both here and in Brussels to study any deal carefully.
Your repayment terms and interest rate will all remain the same and there is little for you to do or worry about. Although this might be an opportune time for mortgage holders to see whether there is better value to be had by switching to a new lender of their own choosing.
Those with a tracker mortgage will still be able to keep it and if you're lucky enough to have one, you won't find any better value elsewhere.
This is also the possibility that Ulster Bank might continue to own your mortgage and personal loan after it has closed up shop in Ireland but contract out the day-to-day servicing of your loan (statements, customer service, payment services, balance queries etc) to a specialist provider. This is what happened when the old Irish Nationwide (then Danske Bank) closed its retail operations in Ireland in 2013 and chose Pepper to manage the bulk of its loans (though it also outright sold some of its loans to Pepper too).
Some so-called 'vulture funds' might also come in and buy some of the loans. These funds have a bad reputation in Ireland partly due to the tabloid media and politicians hyping things up and not understanding what they actually do.
A vulture fund is simply a company that primarily invests in debt considered to be very weak or in default. Your consumer rights and obligations as a mortgage holder with a vulture fund are no different to what they are with any other Irish bank or lender and you will have the same protections as everyone else under the Central Bank's Consumer Protection Code. In fact, research has shown that customers who are in financial distress have a far better chance of having some of their debt written off with a vulture fund as opposed to a bank. So don't get worried if you see talk of loans being sold to one of these funds.
What will this mean for customers in the longer term?
If Ulster Bank takes the nuclear option of leaving Ireland it will be a body blow for consumers and competition in the banking sector and lead to huge upward pressure on interest rates and banking fees in the short to medium term at least.
Ireland is already under banked compared to other countries of our size so the last thing we need is for the third biggest player to exit the market and reduce competition even further.
Ulster Bank’s exit will be most keenly felt in the SME loans sector where it provides the only real competition to BOI and AIB. However mortgage holders and personal current account and loan customers will also be impacted.