THE COMPETITION AND consumer watchdog (CCPC) has cleared the sale of KBC Bank Ireland’s €9 billion loan portfolio to Bank of Ireland subject to a number of conditions to ensure that competition in the mortgage market is maintained.

The sale would see Bank of Ireland acquire KBC’s performing loan assets, including performing mortgages, and commercial and consumer loans, and a small number of non-performing mortgages.

The watchdog launched a full investigation into the proposed purchase in October 2021 after an extended preliminary investigation had concluded.

The CCPC said its full investigation identified “significant competition concerns” arising from KBC’s exit from the mortgage market in Ireland. 

It said a key issue it identified is the strength of competition that non-bank lenders will provide in the medium term, given expectations of a rising interest rate environment.

“In light of these concerns, the CCPC considered it important that non-bank lenders operating in the Irish mortgage market be supported in their continued growth and role as emerging competitors in the sector,” the CCPC said in a statement.

In response to the concerns, Bank of Ireland has committed to making €1 billion in total funding available to certain non-bank lenders through the purchasing of securities issued by them, to increase their funding capacity and reduce their cost of funding.

The bank has also committed to making €1 million in funding available for distribution to companies involved in developing innovations relevant to the market for the provision of mortgages in the State.

To address the effects of the transaction on KBC mortgage customers, Bank of Ireland will honour the fixed rate included in the existing terms and conditions of KBC fixed rate mortgages for the remainder of the fixed term.

Bank of Ireland will honour the fixed rate included in the existing terms and conditions of KBC fixed rate mortgages for the remainder of the fixed term.

It will also honour the 0.2% discount in mortgage rate of every KBC customer eligible for that discount at the date of mortgage transfer to Bank of Ireland for as long as their transferred mortgage is held with the bank and without being required to hold a Bank of Ireland current account.

The bank has also committed to offering the variable rate equivalent to that of KBC migrated variable rate customers, as well as Bank of Ireland fixed rate options, to fixed rate KBC mortgage customers on their first roll-over post-migration.

“Following detailed consideration and further analysis and having taken into account the above commitments given by Bank of Ireland, the CCPC has determined that the proposed acquisition will not substantially lessen competition and, therefore, the proposed acquisition can be put into effect,” the CCPC statement continued.

Francesca McDonagh, Group Chief Executive of Bank of Ireland, has welcomed the announcement, deeming it an “important step towards the completion of this acquisition”.

“Bank of Ireland has been part of Ireland’s commercial, economic, and social fabric for almost 240 years, and we look forward to providing an excellent long-term home for KBC Bank Ireland customers,” she said.

We are committed to delivering a smooth and seamless migration for KBC customers, ensuring strong customer protections and financial stability within the Irish banking sector and broader economy.

In a statement, KBC Bank Ireland said that customers do not need to take any immediate action as a result of the announcement as the agreement remains subject to ministerial approval.

The bank said that all customers will shortly receive a booklet “which will clearly outline what is happening to all KBC products”.

“Following a full approval of this agreement, customers will then receive individual communications on each of their products providing them with notice of future changes and outlining what actions or steps (if any) they need to take,” the statement continued.

KBC said it will ensure customers are provided with plenty of notice of any impact and/or changes to their account in line with all legal and regulatory protections.