Irish Times : "Why is Ireland so unattractive to foreign banks?"

[Brendan Burgess]

Why is Ireland so unattractive to foreign banks?

Why are big European lenders like NatWest and KBC so keen to get out of Ireland?

www.irishtimes.com

You might reasonably wonder why two of Europe’s largest lenders (Ulster Bank is owned by the UK’s second largest bank NatWest, KBC is Belgium’s second largest lender) are so keen to exit what is the fastest-growing economy in Europe. Banks typically thrive in such environs.

From a banking perspective there is something distinctly unattractive about the Irish market and it’s something that gets little airtime, largely because the dominant narrative here is that banks are bad and whatever befalls them their sins are infinitely worse. More than any other institution they dragged us down a financial wormhole in 2008. And after being bailed out by the taxpayer they repaid us by illegally overcharging more than 40,000 tracker mortgage holders, a scandal that went on under the nose of the regulator for several years.

 

[Purple]

The legal sector/profession/industry is cited as a major part of the problem but like any other business sector they are in it to make money and will do whatever it allowed or tolerated to achieve that goal. It’s unfair to expect them to do otherwise. It’s down to our legislators to set the rules of the game.

 

[Jim2007]

The article is behind a pay wall, but did anyone actually as the decision makers and any major European bank why they are not interested in getting involved in consumer lending in Ireland or for that matter cross border lending in other European markets?

 

[NoRegretsCoyote]

From a banking perspective there is something distinctly unattractive about the Irish market

Legacy banks provide more or less three things: deposit-taking, lending, and payment services.

Deposit-taking is unattractive but it's unattractive everywhere. Years of QE mean a lot of liquidity all over the system.

For lending there are concentration issues with SME lending in particular with the departure of Ulster Bank but mortgage lending is still easy enough to enter.

For payment services Revolut are wiping up in Ireland as they provide a much nicer product than legacy banks. They will move more and more into lending for sure.

The article misses the point that cross-border consolidation within Europe is effectively dead for the last decade for a few reasons. There is little value in a banking brand across markets. Lots of Irish people shopped in Tesco in the UK before it entered the Irish market in the mid-1990s so knew what the product was already. That just doesn't happen with a king.


With banking the regulatory overhead doesn't decrease with cross-border activity in fact it increases to some extent. Retail banks generally don't have any special process or technology either that gives them a competitive edge in a new market or after a takeover. FX lending is particularly penalised by supervisor too. Otherwise there is so much liquidity now that there is no advantage to being able to fund lending in one country from deposits in another.

None of these factors are particularly specific to Ireland. They apply right across the European banking landscape.

 

[Peanuts20]

Ulster is a complicated one. Harsh and cold reality is that part of the reason is a legacy of the First Active takeover and Fred the Shreds approach to management and lending. I know people who worked in UB who were appalled by some of the deals the bank got into after the FA takeover and the UK taxpayer, via RBS, pumped €15 billion into UB to keep it afloat. Reality is that Nat West can see no way to make it profitable. One of the ironies of this is that it's App is streets ahead of it's competitors in Ireland.

There is a pattern here, of arrogance from foreign bankers and not being prepared to adjust to the Irish way of doing things, BOSI is another case in point, they were going to transform Irish banking, that never happened

I also think the difficulties in evicting defaulting borrowers and selling their property in effect undermines and devalues the core asset being held as collateral

But the main reason is we are too small, too dependent on property and Foreign investment to make it worth the banks taking the risk.