Muireann Duffy
News that KBC Bank intends to leave the Irish market has left approximately 320,000 customers and about 1,400 workers wondering what is coming down the line.
The KBC Group, which holds about €5 billion in deposits, accounts for 12.6 per cent of the Irish mortgage market, according to The Irish Times.
Here's how the news may impact KBC's Irish customers.
Is KBC definitely leaving Ireland?
No, the bank has not said it will leave the Irish market yet, however, a joint statement from KBC and Bank of Ireland on Friday confirmed they have entered into a 'Memorandum of Understanding' with Bank of Ireland.
The Memorandum of Understanding, which is not a final agreement, but a strong precursor, involves BOI purchasing KBC's "performing loan assets and liabilities".
Plans for their non-performing loans are not yet clear and will be maintained by KBC for now, however, the bank said they are reviewing their options to divest these loans.
The statement added: "Execution of these two transactions would ultimately result in KBC Group's withdrawal from the Irish market."
Until these deals are done, KBC will continue to operate in Ireland.
What do I do if I'm a KBC customer?
The group said the news will not impact their retail banking and insurance customers, adding they "do not need to take any action as a result of this announcement".
If KBC's loans are sold to another bank or group, the existing terms of the loan agreement will remain intact. Financial advisor Padraig Kissane told RTÉ News at One this protection extends to distressed mortgage holders also.
For ordinary banking customers, Mr Kissane said they will "have to find another bank to do their banking", while deposit holders with savings of up to €100,000 will be protected under the Deposit Guarantee Scheme.
What's the difference between performing and non-performing loans?
Performing loans are ones which are being paid back on time, representing a low risk of defaulting, while non-performing loans are those where the borrowers has, or is in danger of, falling behind on repayments.
The potential BOI deal only covers performing loans, while Mr Kissane predicts the non-performing ones could be sold to vulture funds, who will then "administer the fund on behalf of the owner".
Again, regardless of whether you are a performing or non-performing loan/mortgage holder, the terms of you loan, such as interest, repayments, etc. will be unchanged. The only difference will be the people on the receiving end of your repayments.
When will all of this happen?
Well, first the deal between KBC and BOI will need to be finalised, and then KBC will need to find a buyer for their remaining loans.
However, that's not the end of it. Any deal will have to secure the approval of the Central Bank and the Competition and Consumer Protection Commission (CCPC).
The whole process will likely take years, so customers need not worry for now.
