KBC Bank's shock decision to sell and leave the Irish market was taken after the bank felt it had been given a cold shoulder by authorities here, including seeing Government-owned rivals carve up Ulster Bank, the Irish Independent has established.
he Belgian bank's leadership is also understood to have been stung by the extent of their laceration last year by the Central Bank, when KBC was fined €18.3m over major consumer protection failings in relation to its part in the tracker mortgage scandal.
The loss of scale relative to rivals and perceived ostracisation are understood to have tipped the bank’s Brussels leadership away from sticking with their fast-growing and - until last year - profitable Irish operation.
That departure means that Irish customers will face even higher costs and less choice in one of the eurozone’s priciest lending markets.
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KBC Bank Ireland, which has been under Belgian ownership since 1978, signed a memorandum of understanding with Bank of Ireland (BOI) last month for the sale of its performing loans and deposits.
The move followed a blockbuster announcement by NatWest in February that Ulster Bank was withdrawing from the Irish market and negotiating the disposal of the profitable parts of its business to State-controlled banks AIB and Permanent TSB.
Faced with a market where the Government-backed competition would be gaining scale and competitive advantage against it, KBC – already the smallest retail bank in Ireland – decided to accept an approach from BOI.
KBC was facing many of the same challenges as Ulster Bank – low profitability, high capital requirements, limited return on investment for its parent, difficulty in processing repossessions – and was assessing its options already in late 2020.
A decisive moment in the negotiations with BOI came after Finance Minister Paschal Donohoe, welcomed the involvement of the majority State-owned AIB and PTSB in facilitating Ulster Bank’s exit.
“While this is positive news and indicates the potential further development of already well-established Irish banks, there is still much work to be done over the coming months,” he said.
Mr Donohoe has said on many occasions that he has no role in the commercial decisions of the banks.
A spokesperson said the minister was disappointed by KBC’s decision and that it was an important player in the Irish banking market.
The bank’s decision to exit was also made easier by KBC’s fraught relationship with the Central Bank over the protracted and tense tracker mortgage investigation.
In September 2020, KBC was harshly reprimanded by the regulator and was hit with a major financial penalty.
This was a year after CEO Johan Thijs complained to analysts about the “annoying...tracker mortgage stuff”.
"Honestly, I would recommend the Central Bank of Ireland, come on guys, turn the page, focus on doing business."
He apologised within a day, but the breakdown in the relationship was clear.