It was a surprising announcement last Friday to hear that KBC Bank has entered into a memorandum of understanding (MOU) with Bank of Ireland and intends to leave the Irish market.
If this goes ahead, it will mean Bank of Ireland will take over all of KBC Bank’s performing loans, assets and liabilities.
KBC Bank has stated the reason is a "challenging operational context".
In other words, the bank is finding it difficult to make a profit in the Irish market.
This is due to lending demand and interest rates being low and the regulatory requirements of having to put aside high amounts of capital when issuing a mortgage.
KBC is a highly digital bank, one of the first banks to offer several digital features for retail banking.
In 2020, 34,000 people opened current accounts with KBC to take advantage of its digital wallet relationships with the likes of Apple Pay, Google Pay, Fitbit Pay and Garmin Pay, all available through the KBC Bank app.
How will this move affect me as a KBC Bank customer?
All customers of the bank are protected under the Central Bank rules. There will no immediate change for customers, with all bank services to continue in the short term.
Under Central Bank rules, KBC Bank is obliged to give two months' notice to all customers of any closure date.
Overall, it will mean there be will be less competition in the market place.
What happens to my tracker mortgage if KBC Bank leaves?
As KBC Bank holds circa 13% of the Irish mortgage market, customers will find their mortgages will be sold as part of the bank’s exit strategy.
If the loan book deal with Bank of Ireland goes ahead, your tracker mortgage will transfer to Bank of Ireland under the same terms and conditions as you currently hold.
It is important for anyone with a tracker rate mortgage not to switch banks, as you will lose your tracker rate.
If the mortgage loan book is sold (including your mortgage) to another lender, the tracker rate must be honoured by the new bank.
What happens to my mortgage if I am on a fixed rate?
If your mortgage is sold by KBC Bank to another lender, the fixed rate will continue until the term has expired.
At that point, you will be contacted to discuss the various options available to you.
What if my mortgage is on a variable rate?
If you are on a variable rate mortgage, the variable rate at KBC Bank may be different to the variable rate available at the other bank.
It might be wise to check that out in advance or discuss the various options available to you with KBC Bank currently.
I have a savings account and a current account with KBC, what should I do?
In the immediate term, you do not need to do anything. Business at KBC Bank is continuing as usual.
If KBC Bank progresses its MOU with Bank of Ireland, your accounts will transfer to Bank of Ireland, but KBC Bank will be obliged to give you two months' notice.
If you do not wish this to happen, you will have time to switch to another bank or Credit Union for your banking requirements
I have a KBC mortgage but it is in arrears - will my loan transfer to Bank of Ireland eventually?
No, this is unlikely to happen. Bank of Ireland is not interested in KBC Bank’s non-performing loan book.
KBC Bank will need to find another buyer for this loan book. This could be a vulture fund, but all consumer protection laws will still apply.
Overall, it is not good news to see another international bank leave the Irish market, especially as KBC Bank is a market leader in technology.
It won’t happen overnight, but it is no harm to be prepared.