Is Ulster Bank gearing up to leave the Republic?
THERE are growing fears that Ulster Bank is positioning itself to eventually exit the Republic of Ireland market after admitting it may seek to be regulated in the UK and is planning to shut some branches here.
Ulster Bank has strongly denied that the developments are part of a move out of the Republic, but the news comes at a time when the operations here are under unprecedented pressure.
In May, the chairman of RBS, the UK state-owned bank that owns Ulster Bank, said the Irish unit was the group's "single biggest headache".
RBS has had to sink £13bn (€16.5bn) of UK taxpayers' money into the Irish unit since the start of the crisis to cope with losses on Irish loans. That is not far short of the €20.7bn cost of the Irish bailout of AIB, even though Ulster Bank is less significant to the UK authorities that AIB is to Ireland.
The news also comes as Ulster Bank's Irish customers have been left to grapple with the fallout from its massive computer meltdown, long after customers in the home market of its UK parent have seen their services restored. Ulster Bank is facing a grilling from Irish regulators over the debacle that might have been avoided if the bank was not regulated as a standalone subsidiary in this country.
Ulster Bank chief executive Jim Brown denied the bank had any plans to exit Ireland, despite the fact that it is has submitted plans to government officials and regulators to shut up to 40 branches and seeks to be regulated in Britain rather than here.
"RBS and Ulster Bank are absolutely committed to this market. The £13bn (€16.5bn) put into the bank by its parent is evidence of that. We have been here 176 years supporting customers and businesses," he told the Irish Independent this week.
He said the catastrophic computer failures had not damaged the bank's reputation.
The proposal to seek UK regulation is because the operations in the Republic and in the North had now been set up as one legal entity, he said. In the past, Ulster Bank had two separate legal set-ups.
Even if Ulster Bank is not planning to cut its ties here, there will be some concerns about the impact of such a large bank being regulated by banking authorities in London.
The head of the Irish bank workers' union said that banks that were regulated by authorities abroad find it easier to scale back their operations here.
The Irish Bank Officials Association's Larry Broderick said a good example was National Irish Bank's plans to close all its 27 branches here.
National Irish Bank is owned by Danske Bank and is regulated by The Danish Financial Services Authority in Denmark.
This made it easier for the bank to shut down its branch network, Mr Broderick said.
The Central Bank said it had no objection in principle to any foreign-owned bank seeking to be regulated in its home market.
Banking rules do give the authorities here some scope to block a foreign bank from operating branches here if it is not subject to the Irish regulator.
If it is to be regulated from the UK, Ulster Bank's operations here would be considered a "branch" rather than a bank.
If a "branch" is deemed significant, which would be the case for Ulster Bank, the Irish regulator would still have some ability to carry out on-the-spot inspections, even if it was no longer the bank's core regulator.
For customers, the potential changes would be far more limited.
Customers of Ulster Bank are currently covered by the Irish Deposit Guarantees Scheme, which protects eligible deposits of up to €100,000 per person.
If Ulster Bank changes to become a branch of a UK licenced bank, deposits will still be covered in the same way and to the same amount, but by the UK deposit guarantee scheme.
Whatever the future of Ulster Bank there is no chance of the bank pulling out of its traditional stronghold of Northern Ireland.
That's because parent RBS is owned by the UK government, which would find it impossible to oversee a pull-back from what authorities there have to consider a core part of the domestic market.