CCPC approves takeover by BoI of KBC mortgages with no meaningful conditions

Brendan Burgess

Brendan Burgess

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From the CCPC press release:

The Competition and Consumer Protection Commission (CCPC) has cleared, subject to a number of legally binding commitments, the proposed acquisition by The Governor and Company of the Bank of Ireland (Bank of Ireland) of certain assets and liabilities of KBC Bank Ireland plc (KBC) (M/21/021).

The CCPC’s clearance of the proposed acquisition 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.

Following notification to the CCPC in April 2021, the CCPC carried out a preliminary investigation of the proposed acquisition and concluded that a full investigation was required to establish if the proposed transaction could lead to a substantial lessening of competition in the State.

The CCPC’s full investigation identified significant competition concerns arising from KBC’s exit from the mortgage market in Ireland. A key issue identified by the CCPC 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.



In response to these concerns, Bank of Ireland committed to the following remedies:
  1. in support of the growth of non-bank lenders in the Irish mortgage market, make €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; and,
  2. to assist innovation in the Irish mortgage market, make €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; and,
  3. to address the effects of the transaction on KBC mortgage customers, Bank of Ireland will adopt measures, including:
    • honouring the fixed rate included in the existing terms and conditions of KBC fixed rate mortgages for the remainder of the fixed term,
    • honouring the 0.2% discount in mortgage rate of every KBC customer eligible for that discount at the date of mortgage transfer to BOI, for as long as their transferred mortgage is held with BOI, without being required to hold a BOI current account, and,
    • offering the variable rate equivalent to that of KBC migrated variable rate customers, as well as BOI 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.
 
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This is really shocking.

Contractually BoI was obliged to honour the fixed rate agreement and the .2% discount.

Brendan Burgess said:
offering the variable rate equivalent to that of KBC migrated variable rate customers, as well as BOI fixed rate options, to fixed rate KBC mortgage customers on their first roll-over post-migration.
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this is nonsense. Both KBC variable rates and BoI fixed rates are very high.

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@Brendan Burgess or anyone else: Is there anything in the CCPC determination about whether or not KBC customers will be allowed to overpay on their fixed-rate mortgages without penalty?

(Is the overpayment facility part of KBC mortgage contracts and therefore unchangeable by BOI, or is it just a nicety that KBC offers and that BOI can withdraw?)
 
It just shows you how useless the CCPC is.

One of the conditions was that BoI provides funding of €500m to ICS.

Yet within a few months, ICS stops lending.

Brendan
 
Brendan Burgess said:
One of the conditions was that BoI provides funding of €500m to ICS.
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Yeah, I was wondering about that €500M for ICS and Finance Ireland. Any idea when it was to become available to them? Back in May or only when the KBC–BOI deal goes through?

You could estimate that €500M amounts to about 2,000 mortgages. Any idea how that compares to ICS's current loan book?
 
Is it possible that they will be able to unwind their recent lending restrictions once they get the €500M from BOI?

Maybe their statement (quoted in the Indo article) gives a hint in that direction:
As soon as markets normalise, it is our intention to reverse all of these temporary changes.
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Or maybe that is just spin.
 
www.independent.ie

Non-banks use just 20pc of Bank of Ireland’s €1bn mortgage competition funding

Regulators’ key remedy to ensure competition in the mortgage market as foreign banks exit is having limited if any real impact as non-bank lenders rein in lending.
www.independent.ie www.independent.ie

The Competition and Consumer Protection Commission (CCPC) required Bank of Ireland to make €1bn in new funding available to rival lenders Finance Ireland and Dilosk as a condition of its acquisition of KBC Ireland’s mortgage portfolio last May in order to protect consumers by maintaining competition in the market.

But less than 20pc of the money made available has been drawn from the bank since then, despite strong demand for lending.

Finance Ireland has drawn down €177.6m, while Dilosk has yet to tap the funding line at all, Bank of Ireland confirmed.
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As the funding is done at a market rate, the cost is still high for the non-banks. By contrast, Irish banks are largely funded by excess, and cheap, customer deposits.
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What is the point of offering the funding at market rate if the cost of funding is one of ICS's and Finance Ireland's main difficulties?? :mad:
 
Good spot!

And this was supposed to increase competition. In fact, both lenders have effectively pulled out of the mortgage market.

Brendan
 
I'd be interested to see what happens to my repayments now my fixed rate mortgage has transferred over to BOI. I have already overpaid well beyond the 10% agreed in the mortgage contract at no charge (lending rate difference was always negative especially now interest rates have risen).

I have also been overpaying my monthly repayment by 20% every month at no extra charge . I hope I can continue to do this with BOI. Are they obliged to tell me if they plan to charge me now for this overpayment, which I believe would not be allowed with their own fixed rate mortgages?
 
Stitcher said:
Are they obliged to tell me if they plan to charge me now for this overpayment, which I believe would not be allowed with their own fixed rate mortgages?
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From another thread:
KBC: 10% of the initial balance can be repaid early at any stage during the term without incurring a break fee. This is a cumulative limit of the fixed term, so if for example you have fixed for 5 years, and you overpay by 10% of the balance in year 1, that's your limit used up for the 5 years.
  • Bank of Ireland will maintain this feature for KBC customers whose fixed-rate mortgages transfer to BOI, but only until the end of their KBC fixed-rate period (see page 13 of this booklet)
  • After the end of your KBC fixed rate, Bank of Ireland will withdraw this overpayment feature from you
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So you will lose the "10% of balance" overpayment feature when your KBC fixed rate ends.

But, as you already realise, in your case it is very unlikely that there will be a penalty regardless of how much you overpay by – for the foreseeable future at least.
 
Paul F said:
But, as you already realise, in your case it is very unlikely that there will be a penalty regardless of how much you overpay by – for the foreseeable future at least.
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I've asked about that in a separate thread .

Are you sure that BOI will use the cost of funds from the time that the fixed rate was entered into with KBC? Or might they use a more recent cost?
 
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