Central Bank could ‘take action’ to delay Ulster Bank and KBC Bank exits

Central Bank governor Gabriel Makhlouf has said the regulator could take “action” to delay the exit of Ulster Bank and KBC Bank from the Irish market if it feels it is appropriate to do so to ensure switching customers are not left stranded.

However, he said the solution was not necessarily to get more time but to “actually get everybody to be working towards the transition” and that more has to be done by all stakeholders.

Competition and Consumer Protection Commission (CCPC) research, published on Wednesday, suggested that some 60 per cent of customers who have switched their accounts from Ulster Bank or KBC Bank to a new service provider experienced difficulties with the process. Roughly 10 per cent of survey respondents said they had issues accessing in-person support with the process while 11 per cent said it took too much time.

Meanwhile, one in eight customers of the exiting banks has yet to decide on a new account provider.

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Asked whether he was satisfied with the handling of the process so far and the progress made in recent months by the banks, Mr Makhlouf said: “I certainly think some of the experiences that we are hearing – of both people trying to move or trying to switch and all the rest of it – leaves something to be desired.”

He said it would be “a mistake for all of us to feel that [the process] is moving at an appropriate pace”.

[ Ulster Bank deposits drop €9.1bn in first nine months of 2021 amid ‘big switch’ ]

[ How will we remember the age of cheap money? ]

“I think more needs to be done by everybody, actually, by the banks who are leaving; by the banks who are receiving [new customers]; by the CCPC itself – which I think has an important role to play in communicating messages – and by the BPFI, which is playing a bit of a galvanising role in getting all this going.”

Asked whether the Central Bank could look to delay the process, giving customers more time to work out new arrangements, he said: “We can certainly take that action. But let me just say, the answer to this is not just to say there is going to be loads more time.

“The answer is to actually get everybody to be working towards the transition. But certainly, at the end of the day, account holders are not going to be left stranded.”

The governor was speaking to reporters following his address to a Central Bank conference on the future of the financial system at the Aviva Stadium in Dublin on Wednesday. He told the conference that more regulation of the nonbank finance sector may be required to protect the broader Irish financial system from shocks.

Mr Makhlouf, who sits on the European Central Bank’s governing council, said Ireland may need to “rethink the regulation of the nonbank sector”, which includes property and investment funds as well as nonbank lenders and others.

“The sector is too big to ignore. That’s self-evident,” Mr Makhlouf said, noting recent stresses in the UK’s liability-driven investment funds market following the mini-budget there which roiled markets.

“The financial stability risks are self-evident. The risks to investors, consumers and the community as a whole are self-evident,” he said.

Also addressing the conference, François Villeroy de Galhau, governor of the Banque de France, said that with the “unprecedented succession of [economic and geopolitical] shocks we are living through”, questions around financial stability are “returning to the front stage”.

“It is high time that we move forward to enhance the regulatory framework for non-bank financial intermediaries that will ensure better liquidity management,” he said, “amid rising threats to financial stability”.