Money mentor: what happens to my loan if Ulster Bank exits Ireland?

Last September, it was revealed that Ulster Bank’s parent company NatWest (formally Royal Bank of Scotland) was considering its operations in the Republic of Ireland, with a possible strategy to exit the Irish market.

To date, this has neither been confirmed or denied by the bank.

The matter is under constant review with the Minister of Finance Paschal Donohoe who has met the NatWest management.

Ulster Bank is the third-biggest bank in this country, with 88 branches, circa 2,300 staff and over one million customers.

It has a loan book of about €21bn.

The bank made a €276m operating loss for the first six months of 2020, compared with a €26m profit for the same period in 2019.

The bank set aside €278m to cover likely loan losses resulting from COVID-19. Its new lending has fallen sharply.

What happens if Ulster Bank exits the market?

If Ulster Bank make the decision to exit, a winding down of the bank would take place gradually, possibly over a number of years.

It would involve a number of loan portfolio sales, either to other banks or non-bank lenders.

Ulster Bank customers would need to make alternative arrangements for day-to-day banking requirements.

The bank's deposits of €20bn would need to be rehoused with other financial services.

What will happen if I hold an Ulster Bank current account with an overdraft?

You will simply be given notice to make alternative arrangements by a certain date.

There are many other providers in Ireland of current accounts and the process has become much simpler since the Central Bank code of conduct for switching came into being.

If you hold an overdraft, you will need to repay any monies owing to Ulster Bank before closing the account.

You will need to ensure your new bank is willing to provide the same overdraft facility to you in advance of this.

What will happen my savings account?

As deposits exceed loans at all the main banks currently, interest rates for deposits are at an all-time low.

Your deposit account will be closed and you will likely be given a bank draft for your balance to lodge with your new provider or invest elsewhere.

What about my credit card?

If Ulster Bank exits the market, your credit card could be sold to a new provider. If this happens, you will be informed by Ulster Bank.

You will also need to become familiar with the terms and conditions of the new provider, such as interest rate or minimum repayment amount.

What will happen if I have a loan or mortgage with Ulster Bank?

In the event of Ulster Bank leaving the market, customers with loans or mortgages will likely see their loans sold on to a new lender.

This will have little effect for you, as the terms and conditions of your loan will stay the same, such as interest rate and repayment terms.

Alternatively, Ulster Bank could decide to hold on to these loans and mortgages and outsource the servicing of them to a specialist company to provide the day-to-day management.

Ulster Bank could also decide to sell on these loan book(s) to a vulture fund (which invests in debt considered weak or in default).

In either case, your rights and obligations will remain the same and you will be protected under the Central Bank’s consumer protection code.

What should I do if my loan is in arrears and sold to a vulture fund?

Loans sold to vulture funds can be packaged as performing loans or non-performing loans.

If you are in financial difficulty and aware your loan is in arrears, it is important you seek professional advice to ensure you can engage with these vulture funds.

Professional advice from a personal insolvency practitioner (PIP) with your accountant, adviser and solicitor will ensure you are fully aware of the best course of action and the various debt solutions available to you.

It is imperative you get your advice early, as vulture funds tend to have short-term strategies with regard to repayment of loans.

Financial Services Union (FSU)

The FSU (a trade union representing staff in the financial sector) met with the Minister of State for Financial Services Sean Fleming early in 2021 to look for support to prevent Ulster Bank exiting the Irish market.

With circa 2,500 staff across the country, this uncertainty is a cause of huge anxiety.

Both staff and customers need clarity, more sooner than later.

Ulster Bank is relevant, is needed and competition is very important in the market place.

Read more

Money Mentor: the benefits of early succession planning on farms

Tips for farming money matters in 2021