ULSTER Bank and KBC Bank Ireland have been warned by the regulator they will be stopped exiting this market if replacement banking services for their customers are not put in place.

The Central Bank told the departing banks that it is to step up its oversight of the planned departures, which has been described as a massive upheaval in financial services.

And a new steering committee made up of the banks and the regulator is to be set up to handle the massive switching and account-closure operation.

The move comes after the Central Bank had been heavily criticised recently for what is seen a low-key approach to the impending departures.

It had been urged to “get its finger out” and do more to stop the closures turning into a “disaster” by the Consumers’ Association.

The Central Bank was told to set up a steering committee to co-ordinate the closure of current and deposit accounts and to help consumers set up new ones. One million accounts are impacted.

Now, director-general for financial conduct at the Central Bank, Derville Rowland, has insisted the regulator is “assertively supervising the banks” during what it says is profound structural changes taking place in the retail banking landscape.

She said good work had been done by the departing banks, but she insisted more needs to be done.

Her colleague, director of consumer protection at the Central Bank Colm Kincaid, has written to KBC and Ulster Bank, along with the three remaining banks, calling for a “roundtable” committee of the banks.

He warned the banks to put new banking arrangements for impacted customers in place in a timely manner.

This is to “ensure consumers retain continuity of banking services throughout”.

“The Central Bank will continue to track this matter as the migration of accounts progresses and will intervene to the full extent of our powers where this expectation is not being met.”

The reference to the regulator intervening is understood to mean it will block the full closure of KBC and Ulster Bank if their customers have been left without banking services once deadlines for account closures have passed.

The Central Bank also warned that there is a duty on the departing banks to ensure customers have new banking services in place before closing down.

The letter to the chief executives of the five retail banks warns that customers impacted by the closures must be given sufficient notification periods about plans to close their accounts.

Arrangements must be put in place for continuity of service for customers, and banks must assist vulnerable customers.

The closures represent the biggest bank-switching exercise in the history of the State.

The average customer has up to 10 direct debits and standing orders a month, which they will have to transfer individually to another bank.

Around seven million separate direct debits, recurring card payments and credit transfers could be impacted by the mass movement of customers to new providers.

It emerged last week that people seeking a new bank are being blocked from opening a credit card account and getting an overdraft facility.

Customers applying for an overdraft or a card with a new bank are encountering long delays as they have to undergo credit worthiness assessments. Many are likely to be refused.

In many cases, those wanting an in-person appointment are being given a date weeks and sometimes months away.

Michael Kilcoyne, the chairman of the Consumers’ Association of Ireland, had said the massive shutdown of accounts was turning into “chaos” and had urged the Central Bank to intervene.

“Obstacles are being put in the way of consumers opening new accounts and the regulator needs to step in,” he said.

Those seeking to transfer to a bank where they can avail of an overdraft need to have operated their new account for three months before they can even apply.