James McCann, a native of Cabra West in north Dublin and customer of two decades at Ulster Bank's branch in nearby Phibsborough, has known for over a year his custom is no longer wanted.
Ulster Bank will start writing in the coming weeks to customers to give them six months to move their banking elsewhere – after its UK parent decided early last year that it was withdrawing from the Republic.
Eager to get ahead of the rush, McCann walked into his local EBS branch – practically across the road from the Ulster Bank location – last week.
“I want a new basic current account to handle direct debits for my mortgage payments, gas and electricity and rubbish bin collections,” he said. “But I was told that the next available slot to have a conversation would be the first week in June.”
Unfortunately for McCann, EBS is an outlier among the current account providers in the Republic in not facilitating the opening of personal current accounts online. It hasn't helped that a number of customers of the former Phibsborough Bank of Ireland branch, which closed late last year, have also been chasing EBS appointments.
A spokesman for the lender insisted the waiting time in question “is not reflected across the rest of the EBS network” and that it has “put in place measures to ensure a smoother and shorter path for customer account openings in this branch”.
Still, the case is just a taster of the potential chaos facing the financial system as more than one million Ulster Bank and KBC Bank Ireland current and deposit accounts – covering millions of direct debits, standing orders and card payments a month – are forced to find new homes for their money.
The biggest movement of current and deposit accounts in the history of the State comes after the two last standing overseas-owned banks from the financial crisis announced last year that they were quitting the market.
It's only part of a seismic shift that also involves, subject to competition approval, Ulster Bank selling much of its loans to Permanent TSB (PTSB) and AIB, and finding buyers for its tracker and non-performing loans, while KBC looks to dispose of its performing loans and deposits to Bank of Ireland. Each project is competing for the special attention of the banks' boards and management, finance, compliance, customer care teams and supervisors.
The Central Bank's director of consumer protection, Colm Kincaid, told the Oireachtas finance committee last week that exiting and remaining banks "are not where they need to be at this stage" in terms of managing the process. KBC Bank Ireland said that it will start contacting its 130,000 active current account customers towards the end of June to give them 90 days to close accounts.
“The timeframes envisaged across the board are really being pushed to the limit,” said one person close to the Ulster Bank process.
"I'm really concerned that banks aren't ready," said Ged Nash TD, the Labour Party's finance spokesman. "The evidence I'm getting from constituents is that they are facing waiting times getting new accounts properly up and running. Things are difficult enough for families and businesses at the moment, without having to worry about missing direct debit payments on mortgages or insurance. This has the potential to be catastrophic if not handled properly. The Central Bank really needs to stand up for consumers."
Bank customers in the Republic essentially have two options when it comes to moving current accounts – and all their attending direct debits, standing orders and regular payments.
They can open an account directly with a new provider – either in person, online, or via a mobile app – and provide the necessary proofs of identification and address. Then they can go about setting up their new payment orders, providing the new international bank account numbers (IBAN) to various utility companies and service providers it uses.
Alternatively, they can use the Central Bank’s switching code that is supposed to make the job much easier. Under this, once a new bank or payment services provider is selected, a switching date is agreed (usually at a quiet period of the month when there are no scheduled payments). The new bank then sends a completed switching form to the old bank, which must provide relevant direct debit providers in the Republic with the customer’s new bank details for updating.
There are major caveats. Customers with direct debits outside the State must notify providers themselves. The same goes for any recurring payments on a debit card, such as refuse services, music streaming or gym membership.
The Competition and Consumer Protection Commission (CCPC) warns on its website page on account switching that one of the most important parts of the process is for individuals to notify their employer or anyone else who lodges money into their account, such as social welfare, of the new account details.
However, the big problem, according to the banking industry, is that the switching code was set up about two decade ago to address inertia in the market regarding the movement of accounts. The number of accounts that moved under the code in 2018 and 2017 was just over 2,000 and about 5,200, respectively, according to Central Bank data.
"The code was not designed to deal with major market disruption and the withdrawal of market participants impacting hundreds of thousands of current accounts," according to Olivia Buckley, director of public affairs at Banking and Payments Federation Ireland (BPFI).
There have been claims that some customers of the departing banks are being encouraged by their prospective new banks to set up new accounts, in order to avoid the cumbersome switching process. Banks, on the other hand, say that the main problem is that direct debit originators and receivers of recurring payments are not included in the code.
“Direct debit originators are regularly looking for the customer themselves to verify their new bank details. They will not always take instruction from the bank,” said a spokeswoman for PTSB. “This is why we encourage customers to proactively contact all direct debit originators to ensure that their bank details are up to date and that they have no missed payments as a result of moving banks.”
Banks say that the vast majority of new customers who are signing on are doing so directly, using digital apps. However, some banks – such as AIB and PTSB – require people setting up joint accounts do so in person in physical branches.
“The departure of Ulster Bank and KBC from the Irish banking sector is unprecedented in Irish banking and we anticipate the volume of both queries and actual account openings will be on a scale never seen before,” said a Bank of Ireland spokesman, adding that the bank has “significantly increased” staffing in contact centres since late last year and has been “streamlining the on-boarding process for customers” by implementing more digital solutions.
However, he warned that “minimising disruption for customers who will be changing banks will also require the collaboration of multiple stakeholders across the economy including utility companies, government departments and agencies, and employers”.
The State's communications regulator, ComReg, said that it has engaged with companies it regulates, including the likes of Eir, Sky and Vodafone, on the need to have arrangements in place to deal with swathes of customer bank account changes.
ComReg will be looking for companies’ plans “to mitigate and manage risks in relation to customer service contacts and payment issues – including disconnection of telecommunications services – should affected subscribers fail to implement alternative banking payment facilities”, a spokesman said.
The Commission for Regulation of Utilities said it “intends to notify suppliers of a potential increase in calls” in relation to debt debits “through the normal industry forums”.
Electric Ireland, the largest electricity and gas supplier to Irish households, said it has identified customers who pay bills with Ulster Bank and KBC and "will shortly be communicating with our customers on how they can update their bank details online". It said that it will offer special assistance to vulnerable customers.
A spokesman for the Department of Social Protection, the biggest monthly payer into bank accounts across the State, said all payment change requests "are being monitored carefully to ensure that they are being processed as quickly as possible". He said it is important that customers impacted do not close their exiting accounts until they start to receive welfare payments into their new bank account.
The CCPC warns that direct debits can take up to 14 days to process. “Even after you’ve updated your details, some payments may still come from your old account. If a payment is returned unpaid, you may have to pay a late payment fee and it could impact your credit rating if this is a loan payment,” it said. “To ensure all payments go through, be sure to keep money in both your new and old accounts until you’ve verified all payments are going through into and out of your new current account.”
Angela (not her real name), a worker in the IT industry in Dublin, has learned this the hard way as she encountered numerous hurdles moving on from Ulster Bank, where she has been a customer since its 1980s Henri Hippo kids savings campaign.
Angela, who requested that her actual name not be published, decided late last year to move to N26, a German digital bank with operations in the Irish market.
She began by moving some smaller direct debits, encountering hurdles from the start.
When she went about entering her new account with the Revenue Commissioners to handle her local property tax direct debit, the tax authority’s website wouldn’t’ recognise her new German international bank account number (IBAN), so she had to contact Revenue directly to have it sorted manually.
Then Angela’s employer refused to use the German IBAN to handle salary payments, forcing her to remind the company that it was against the law not to accept an account number from the Single European Payments Area (SEPA).
When she recently went about buying a sofa through a hire purchase agreement, the retailer refused to facilitate her N26 account.
Angela decided this week to move the direct debit for payments on an Ulster Bank personal loan to her new bank. “The staff member on the phone was very helpful and said that he could cancel the direct debit now and I could just pay in from my new IBAN,” she said. “But now I see that they’ve taken the money from my almost empty Ulster Bank account and another direct debit has bounced.”
Revolut customers in the Republic have Lithuanian IBANs assigned to them, because it is carrying out business on a licence from the Baltic state.
Customers with overdrafts from the exiting banks will be expected to repay what they owe. While there is a chance that some Ulster Bank facilities could be turned into term loans, depending on a borrower’s circumstance, it’s not clear yet where such loans might end up as the bank exits the market.
Meanwhile, PTSB has agreed to set up a trustee company to manage unclaimed Ulster Bank deposit balances and handle its dormant accounts.
A little over a decade ago, when Ireland’s main banks were recovering from an effective run on the system, lenders would have fallen over themselves to attract the customer savings of any bank exiting the market.
Today the opposite is the problem. Following years of subdued lending and strong household saving, exacerbated by the pandemic, Irish banks have billions of euros of excess deposits.
However, Brendan Burgess, a consumer advocate and founder of askaboutmoney.com, says that banks need to take a long-term view. "They may not need the deposits and new account customers today. But there are really good customers leaving Ulster and KBC that banks should be delighted to have over the long term," he said.
People looking to set up new accounts also need to be aware of ongoing charges involved. Price comparison websites such as Bonkers.ie and Switcher.ie are a good place for consumers to start to check out their options.
AIB, An Post, Bank of Ireland and credit unions charge, for example, monthly maintenance fees of between €4 and €6 and varying overdraft arrangement and ATM withdrawal charges. While N26 and Revolut don't charge monthly on payment accounts, they have no physical branches.
PTSB is the only remaining bank that needs some of Ulster Bank’s deposits – which stood at €18.6 billion in December – to help fund its planned acquisition of an estimated €6.8 billion of the UK-owned bank’s mortgages and small business loans.
PTSB, which is currently recruiting over 200 staff across its branch, operations and anti-fraud teams to support the increase in customer demand, has signed up “thousands” of new accounts, the bank spokeswoman said.
“We do have concerns that many customers may leave it to the last minute to transfer their accounts, which may result in a sharp spike in demand and in turn delays in account opening and/or payment transfers,” she said. “We encourage all customers to take action when they receive communications from their current provider regarding account closures.”