More branch closures: I need a new bank… again

Personal finance columnist, Jill Kerby, looks at the impact of withdrawal of the Ulster Bank from the Irish market. It was followed a week later by a shock announcement by Bank of Ireland that it is to close multiple branches nationwide from September...

There are 1.1 million Ulster Bank customers in these 26 counties and I am one of the lucky ones, in that I only have a current and saving account (and a credit card) that need to find a new home. And yet, because I was made a Danske Bank orphan five years ago, I know that the switching process can be more time-consuming and complicated than is claimed.

This is certainly going to be the case with the unprecedented closure of one of the largest and oldest banks in the state, one with a quarter of all bank customers.

It is also because most bank customers do all their business with the one institution: their day-to-day current account transactions, their personal loans, credit cards, overdrafts, homeloans and savings accounts.

For them, Ulster Bank’s departure is not going to be a ‘one stop’ event, but is far more likely to involve a number of different institutions that might not even be of their own choosing.

For example, it has already been agreed for commercial UB customers that their commercial loan book and the staff who deal with it will be taken over soon by the other majority state owned bank, AIB.

It is also reported that Permanent TSB looks likely to take over some or all of the UB’s mortgage and personal fixed-term loans (including the €7 billion worth of tracker mortgages).

Under the Consumer Protection Code, anyone who takes on those loans – whether an Irish bank or a foreign investment fund – will have to honour the contract terms and conditions. But this is not the case if you – mistakenly – decide to switch your variable, fixed rate or tracker mortgage yourself to a new provider as part of choosing a new bank to deal with.

A new bank may agree to match your outstanding mortgage balance, but they won’t be offering a tracker and the new loan will be at their rate and their terms and conditions. Your loans (and savings, credit cards) are all separate entities.

As far as we know, says mortgage expert Michael Dowling of Dowling Financial, the only Irish bank that has shown interest in UB’s existing mortgage loans, and personal loans is PTSB “and all or some of the €20 billion plus deposit book”, though it would have to honour all fixed rate, fixed-term deposit contracts.

Dowling isn’t convinced. Savings accounts are considered loss-makers for the banks, and especially the credit unions, many of which have deposit ceilings as low as €10,000, because of the negative interest institutions they have to pay the European Central Bank for keeping surplus funds.

It explains, he said, why the banks might start charging customers with large deposits negative interest, just like they do commercial ones.

“While a new bank may be happy to open a new current account for the former Ulster Bank customer – they can still make money on these accounts – that customer could end up having to search around for someone to take their savings.”

Meanwhile, anyone with a UB credit card balance will probably have to clear it, says another adviser, Karl Deeter of Irish Mortgage Brokers: “Credit card loans will not be sold on like mortgages will be. This is a variable rate credit facility. A new bank is under no obligation to give you a new credit card or even one at the same limit you had at Ulster Bank.”

According to the current terms of the bank Switching Code – laid out comprehensively in the Competition and Consumer Protection Commission website, www.ccpc.ie, Ulster Bank will be obliged to facilitate the transfer of your current account only to the new institution as they receive instructions from your new bank.

But, said Deeter: “If you don’t close your account by the date Ulster Bank says you must, they’ll just close it for you, demand you clear your overdraft or credit card [mortgages and other loans will have been sold off] and send you a cheque for whatever money you have left in a deposit account.”

Both Deeter and Dowling warn about leaving the switching process to the last minute – say, the end of 2022 – to find a new bank.

“This is something Irish people do all the time,” said Dowling. “They leave their tax returns to the last minute.”

Not only will Ulster Bank staff and IT resources be nearly wound down by then, he said, but it’s unlikely that the other high street banks and credit unions will want to see, potentially, tens of thousands of customers beating a path to their doors (or websites) all at once.

Should you move now… or do nothing until Ulster Bank is ready for you to leave?

Where should you go? Is there are better way to run your accounts? I’m on this journey too. Watch this space.