CCPC gives its preliminary decision to BoI and KBC

[Brendan Burgess]

They have told BoI and KBC what their initial views are but are not telling the public.

Then BoI and KBC have 15 days to respond.

The CCPC will finalise its decision in May.

Brendan

 

[Brendan Burgess]

CCPC issues assessment to Bank of Ireland and KBC Bank in on-going merger review - CCPC Business

The Competition and Consumer Protection Commission is an independent statutory body that enforces competition and consumer protection law in Ireland

www.ccpc.ie

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CCPC issues assessment to Bank of Ireland and KBC Bank in on-going merger review​

FEBRUARY 18, 2022

As part of its merger review process into 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 (M/21/021), the Competition and Consumer Protection Commission (CCPC) has issued an assessment of the proposed transaction to both parties. This assessment, which sets out the preliminary views of the CCPC, is not a final determination. The parties can request access to the CCPC’s file. They have 15 working days to respond in writing to the CCPC’s assessment and they may also ask to make an oral submission.

This proposed acquisition was originally notified to CCPC in April 2021. As part of the proposed acquisition, Bank of Ireland would acquire KBC Bank Ireland’s performing loan assets (including performing mortgages, commercial and consumer loans), deposits and a small number of non-performing mortgages.

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.

Based on the timelines as set out in the CCPC’s Merger Review Process, it is expected that the investigation will conclude by May 2022. At that time, the outcome of the investigation will be published on ccpc.ie. A full decision, having considered confidential information, will subsequently be published.

As the merger control review is ongoing, no further information or comment can be provided at this time.

 

[Brendan Burgess]

Statement from Bank of Ireland

Bank of Ireland notes the statement made by the Competition and Consumer Protection Commission (“CCPC”) on 18 February 2022 and confirms that it has received an Assessment in relation to the proposed acquisition by Bank of Ireland of certain assets and liabilities of KBC Bank Ireland plc. This Assessment sets out the CCPC’s preliminary views in relation to the transaction. The Bank notes the CCPC’s preliminary view, at this stage of the process, is that the Proposed Transaction is likely to give rise to a substantial lessening of competition in relation to the market for the provision of mortgages in the State and that this is not the final determination by the CCPC. In line with normal practice, Bank of Ireland will prepare a detailed response to the Assessment which will seek to address the concerns raised by the CCPC. Bank of Ireland will continue to engage co-operatively with the CCPC in advance of the CCPC’s final determination which is expected to be issued during Q2 2022.



This announcement contains inside information.

 

[Brendan Burgess]

Davy's view

Likely commitments required​

A range of commitments may potentially be required. We expect the CCPC to require market opening measures, which may require acquiring banks to open marketing databases to challenger lenders, and possibly the sale of a portfolio of mortgages to a new entrant to assist in its establishment in the market.

 

[newirishman]

Good to see, and pretty much as one would hope. CCPC doing its job.

 

[Brendan Burgess]

I wonder what the procedure is?

Would the CCPC say something like:
1) We don't like this because it will result in a reduction in competition.
2) Sell half the loans to Avant or Finance Ireland
3) Give all customers cash-back to reflect the very high interest rates Bank of Ireland charges
4) Scrap break fees and pay the legal costs of switching to another lender.

The BoI comes back with a market analysis by some hired economist to say that there is plenty of competition and these constraints are not necessary. Then they have a few meetings and agree a compromise?

Brendan

 

[MrEarl]

I wonder what the procedure is?

Would the CCPC say something like:
1) We don't like this because it will result in a reduction in competition.
2) Sell half the loans to Avant or Finance Ireland
3) Give all customers cash-back to reflect the very high interest rates Bank of Ireland charges
4) Scrap break fees and pay the legal costs of switching to another lender.

The BoI comes back with a market analysis by some hired economist to say that there is plenty of competition and these constraints are not necessary. Then they have a few meetings and agree a compromise?

Brendan

I'd be surprised if there's any mention of giving existing customers, anything....

My bet is that they've been told to sell 20% of the mortgages to A-N-OTHER, and the deal will be rubber stamped. Good news, to help bring Avant, Dilosk, Finance Ireland further into the market (assuming they want to buy part of a portfolio), with KBC having to accept a slightly lower sale price, perhaps.

 

[Wandering_Dazed]

may require acquiring banks to open marketing databases to challenger lenders, and possibly the sale of a portfolio of mortgages to a new entrant to assist in its establishment in the market.

How does opening marketing databases encourage competition? Would that not go against privacy and GDPR rules and need individual account holders to agree to such information sharing? Or are they talking about more high level stats such as demographics, LTV etc etc?

Regarding the sale of part of the portfolio to a new entrant, what consumer protections are in place around various rates and fees. For example if part of the portfolio is sold to Avant and the rest to BOI who maintain the current status quo, but offer different new fixed rates/LTVs/Cashback etc to both portfolios.

From an interested KBC mortgage holder.

 

[Brendan Burgess]

How does opening marketing databases encourage competition? Would that not go against privacy and GDPR rules and need individual account holders to agree to such information sharing? Or are they talking about more high level stats such as demographics, LTV etc etc?

I can't imagine that the high level stuff would help.

However, they could probably do something like allow Avant to identify the selection criteria they have e.g.
Mortgages > €200k
Currently on SVR >4%
Clean payment record
>10 years left on the mortgage
Living in major cities.

And BoI would send out a letter from Avant on their behalf. No need to give Avant the names and addresses. But the letter would include all the information Avant would need to give approval in principle to a switch.

Dear WD

As you know BoI proposes to take over your loan. The CCPC has made it a condition that BoI sends this letter to you on our behalf.

You are currently paying €1,500 a month.

If you switch to our rate of €1.95% fixed for 7 years, your repayment will fall to €1,200 a month.

We will also pay €1,500 towards your legal costs.

This is based on the following information.

Mortgage amount: €200k
Interest rate 3.7% variable
Term remaining 10 years.

We will make switching very easy for you. Just send us a copy of this letter together with evidence of your salary and we will approve you in principle.

Avant

 

[Wandering_Dazed]

Interesting thanks Brendan!

I'm still not sure that such an approach is legal in terms of sharing PII, unless there is a condition for data sharing in contracts.

To date personally the only contact I have from KBC was the usual reassurances around their continuing discussions.

Perhaps KBC would reach out with options for each account holder in terms of what BOI and for example Advant terms are on offer...

However if the CPCC decides the portfolio must be split, then both options for customers need to be comparable in general? To avoid for example me saying why did I get stuck with BOI unfavorable rates versus a more favourable option under Avant for example.

 

[Sconeandjam]

What about the those where their income has decreased since taking out the mortgage but can pay their repayments? If they are re applying they may not be able to get a new mortgage. They may be forced to accept their mortgage being moved to a particular purchaser?

 

[skrooge]

What about the those where their income has decreased since taking out the mortgage but can pay their repayments? If they are re applying they may not be able to get a new mortgage. They may be forced to accept their mortgage being moved to a particular purchaser?

Are you referring to the 3.5 income rule? It doesn't apply to switchers.

If they can demonstrate they can afford the repayments they may be able to switch regardless of reductions in their income.

After that yes some mortgage holders will have to accept that their mortgage will be sold in line with the T&C's in their mortgage contract.

There's no guarantee that staying put - even if it was an option - would be any way beneficial. KBC could withdraw it's range of fixed rates in the morning and jack up its variable rate. As people roll of their current fixed rates they might get an awful shock. While I don't think this would be the most likely outcome it remains a possibility.

 

[Sconeandjam]

Are you referring to the 3.5 income rule? It doesn't apply to switchers.

If they can demonstrate they can afford the repayments they may be able to switch regardless of reductions in their income.

After that yes some mortgage holders will have to accept that their mortgage will be sold in line with the T&C's in their mortgage contract.

There's no guarantee that staying put - even if it was an option - would be any way beneficial. KBC could withdraw it's range of fixed rates in the morning and jack up its variable rate. As people roll of their current fixed rates they might get an awful shock. While I don't think this would be the most likely outcome it remains a possibility.

Maybe it would be better to switch than transfer over then? The option to switch would obviously disappear once moved to the bank that is buying the business.