OPINION
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ANALYSIS
Dan’s Digest
With Dan White VieWs on the latest eConomiC & politiCal neWs
Banking onproblems it Importing as likelihood Following the departure announcements last year by both Ulster Bank and KBC, Dan White reflects on the of hard Brexit current state of affairs in Ireland’s banking sectoradvances and the impact on bank customers Withoaring thebank deadline for Britain’s departure from the EU looming on 29 March, Dan White examines the profits are at least partially the resultconsequences of the virtual disappearance of potential of a no-deal Brexit for Irish imports
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banking competition in the Irish market, something that is very bad news for all bank customers, both businesses s the countdown to and individuals. Bank of first out of the traps on 29Ireland March was continues, 28 February when it unveiled pre-tax profits of the likelihood of a “hard”, increases €1.22bn,no-deal Bank ofBrexit Ireland’s highest since 2008 – exponentially. Britain doesfigure was later the marginallyIfhigher 2015 crash out of the EU without a revised downwards. deal in less than two Next to report on 2months’ March was Permanent time, life will become much TSB, which announced pre-tax losses of €21m. more complicated for Irish AIB released its results the following day retailers. revealing pre-tax profi ts of €629m. With the Cabinet split and the
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House of Commons deadlocked, Back to the good old days? the unthinkable is rapidly With the two banks becoming the biggest probable. Bothearning combined pre-tax of profi of £1.85bn in 2021 and houses thetsUK Parliament, the House of Commons and into the the black, is it Permanent TSB almost back House already back toof theLords, “goodhave old days” for the Irish banks? passed legislation triggering For the two main domestic banks maybe, Article 50 and setting 29for March but it’s a different story the general public. as the country’s departure date from This means that Exitthe of EU. foreign banks a hard Brexit is the default The big Irish banking story of 2021 wasn’t the position, i.e. if nothing happens strong profi tability the indigenous banks Britain will leave theofEU, deal but the departure of the foreign banks. or no deal, in less than two On 19 February 2021, UK bank NatWest months. finally confirmed that it was pulling the plug Confronted with Ulster Bank. Prior to on its Irish subsidiary concrete reality the withdrawal announcement, Ulster was the And the current thirdgiven largest bank in the Republic with a composition bothofCabinet customer loanofbook €20bn atand theParliament, end of 2020. “nothing” is almost certainly what weBank, are going As if this wasn’t bad enough KBC the to get. Even postponing the Brexit date would other major foreign-owned bank operating in involve marshalling a majority in both Houses the Irish market, which had a customer loan of Parliament to either amend or repeal the book of Article almost 50 €10bn at the end of 2020, existing legislation. Good luck with announced on 16 April that it too was bailing that! out of the heard Irish market. Ulster Having so muchUnlike about the a hard Brexit Bank departure in the announcement, two-and-a-half KBC years Bank’s since the UK electorate voted to leave the of EUthe in blue. the June came as a complete bolt out 2016 will almost certainly be Thereferendum, departure ofweUlster and KBC removes confronted with the reality before in the whatever vestiges of concrete competition remained end of next month. While it is exporters who have been most ShelfLife March 2022 | www.shelflife.ie vocal about the possible impact of Brexit, the effects will be felt throughout the ShelfLife February 2019 | www.shelflife.ie
falling into the customs net growing up to six-fold. At present, approximately 17,000 companies trade with third countries. This could rise to over 100,000 companies if the UK goes solo on 29 March. If the UK does leave the EU without a deal at the end of next month, not alone will Irish exporters to the UK have to pay British tariffs, Irish importers from the UK (of whom there will be up to 84,000 if the Revenue Prior to its withdrawal announcement last year, Ulster Bank was the third largest bankhave in the Commissioners got their Republic with a customer loan book of €20bn at the end of 2020 estimates right) will also have to pay Our EU tariffs. Retailers, the Irish market. We are now left with “two1.29% eurozone average. homeowners including grocery retailers, and-a-half” indigenous banks, the “big two” of were even paying higher interest rates than will almost certainly find Bank of Ireland and AIB, with the much countries such as Greece (2.55%) and more themselves in the firing line smaller Permanent TSB trotting behind. than twice the rate if, paid German or by more likely (1.33%) when, this Most of the KBC loan book has gone to and French (1.06%)happens. homeowners. Bank of Ireland while Permanent TSB has While comparative interest rate data for picked up the vast bulk of the Ulster scraps. business lending isn’t available, it seems Complexity of tariffs reasonable to assume that Ireland Irish businesses, While is on balance Result for Irish bank customers particularly smalleraones, are also paying over food-exporting country, And where does that leave Irish bank we import to large volumes of the odds for credit compared their customers? Where indeed? Even before the processed foods and other counterparts in other Eurozone countries. grocery products. Most of these departure announcements from Ulster and Although Ireland is a food-exporting country imports either come from or through the UK. Looking in the mirror KBC, there was clear evidence that Irish bank on balance, most of our imported foods come This would make them liable tariffs customers were paying interest waythem over However, before we rush to pile for all of the after a either from or through the UK,rates making no-deal Brexit. Imports of chocolate from the liable forcompared tariffs following no-deal Brexit the odds to thoseabeing paid by blame for this sorry situation on the banks, it UK will have to pay an 8.3% tariff, imported borrowers in otherAddressing eurozone countries – a very might be a good idea to look in the mirror. entire economy. the Oireachtas corn flakes will have to pay 3.8% while imports strong indicator of a lack of marketplace Sure, the banks are no but of Irish Finance Committee last month, Revenue of meat will have to saints, pay tariffs up society to 12.8% competition. whole has to shoulder itswill share Commissioners chairman Niall Cody told TDs as aand fish also imports from the UK be of hitthe with TheSenators most recent data frombecame the Central Bank and that if Britain a “third blame. swingeing tariffs of up to 26%. country”, i.e. left the EU without deal, the shows that Irish householders were apaying the At And the end of September 2021, there wereThere a it isn’t just the tariffs themselves. numberaverage of import and export is also themortgages incredible in complexity the tariff highest mortgage rates declarations in the total 71,000 arrears, ofofwhich would climb from about 1.7 55,400 regulations with over 200 - yes private 200, that’s not Eurozone at the endthe of current last year.total Theofaverage were secured on principal million a year to as many as 20 million. a typo -and separate tariff categories properties. for meat and Irish mortgage rate was 2.69% compared to a dwellings 15,700 on buy-to-let fish alone. Even where imports from the UK Captured by customs net aren’t liable for tariffs, importers will still have to go to the expense of ensuring that their This huge increase in customs paperwork imports are properly categorised. would result in the number of companies
