The takeover of KBC mortgages and deposits by Bank of Ireland should have conditions attached to it if it is approved by the competition authority, a consumer advocate has argued.
The Competition and Consumer Protection Commission (CCPC) has opened an early-stage examination of Bank of Ireland’s plan to buy KBC’s Irish mortgages and take on savings.
Consumer advocate Brendan Burgess says the CCPC must insist that existing mortgage customers of Bank of Ireland (BoI) are offered the same rates and incentives provided to new customers of BoI if the deal is to be approved.
He said that at the moment Bank of Ireland keeps its existing rates high and attracts new customers with cash-back incentives.
“The Central Bank should have stopped the discrimination between new and existing customers as it constitutes unfair treatment of customers which is prohibited by the Consumer Protection Code.
“However, the CCPC should now make it a condition of the takeover for all its business.”
He wants all existing Bank of Ireland customers, and those moving from KBC, to be offered the rates and incentives on offer to new BoI customers.
He said cash-back deals offered by Bank of Ireland should be discontinued, other than refunding the legal costs of switchers.
“If that is done, the normal competition would return to the mortgage market and the sale to Bank of Ireland should be approved.”
Mr Burgess, who founded the Askaboutmoney.com website, said the consideration of Bank of Ireland takeover of KBC loans and savings should not be done in isolation from the mooted sale of Ulster Bank's mortgage book to Permanent TSB, which he said was similar in nature.
Mr Burgess said it is important that the CCPC does not just assess competition based on the number of lenders in the market. The behaviour of the lenders and their treatment of customers are more important factors, he added.
He said KBC competes for new business on mortgage rate alone and does not use cash-back incentives to maintain high rates for existing customers.
He calculated that the difference between KBC rates and those of Bank of Ireland mean that a family borrowing €300,000 will pay more than €2,000 a year on a fixed rate with BoI than KBC.
But he warned that the CCPC should be very careful about any restrictions it places on KBC’s disposal of its mortgage book.
If it is difficult for KBC to exit the market, potential entrants might be reluctant to commit themselves to the Irish market in case they could not reverse their decision if it did not work out, he said.
This means KBC should be relatively free to dispose of its mortgage book to the highest bidder.
KBC is the smallest of what had been the five main banks and had €10bn of loans, €5bn of savings and a growing 12.6pc share of the mortgage market at the end of last year.
With experts already warning of the risk to competition, the Bank of Ireland deal is likely to face significant scrutiny from the competition regulator, which has wide powers to challenge and block deals, or impose conditions on parties where a takeover is allowed through.
As part of its work, the CCPC had called for submissions from third parties by May 4.