Business Irish

Monday 20 November 2017

Britain's proximity was the real clincher for keeping bank

THE decision to retain Ulster Bank is a huge relief for Finance Minister Michael Noonan and other policy-makers here who are presiding over a rapidly shrinking banking sector just as an economic lift is increasing demand for investment capital.

It is a boon to consumers and businesses too, because the loss of the country's third main bank would have been a massive blow to an economy only barely off its knees.

Scale and proximity probably helped swing Mr Noonan's UK counterpart, George Osborne, in favour of keeping a slimmed down but recognisable Ulster Bank open, even after it has cost British taxpayers around €12bn because of its lax boom-era lending.

Banks owned by shareholders farther afield pulled out of Ireland this week, but Britain's proximity was probably the clincher for keeping Ulster Bank.

The UK and Irish economies are inextricably entwined. Each is the other's most important trading partner. The fact that the final decision on Ulster Bank was a political one taken by Mr Osborne means such considerations were a real factor, even if the vagaries of politics also made it harder for market watchers to call.

Some of the same reasoning behind the UK's rapid move to provide no-strings bilateral loans to Ireland three years ago during the bailout must have informed the decision to retain Ulster Bank. Cutting and running would have been a big blow to the Irish economy that Britain relies on in many ways.

Another big political factor is Northern Ireland. Ulster Bank is a state-owned player in the North.

Even the decision to slim-down the bank prompted some adverse reaction among political leaders. Actually withdrawing from the market there would have provoked a lot of hurt.

Shutting a bank of the size of Ulster would be a huge task at a time when costly undertakings are the last thing on the British chancellor's mind.

But scale also matters because the future viability of Ulster should be bolstered by its presence in every facet of Irish lending. Ulster is too big to close, or close cheaply, and big enough to benefit from an economic recovery.

Irish Independent

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business