The Competition and Consumer Protection Commission (CCPC) has cleared AIB’s proposed acquisition of some of Ulster Bank’s assets – including a portfolio of performing loans to businesses.

It has, however, expressed concern about the competition implications of Ulster Bank’s intention to withdraw from the State’s banking market, which it announced last year.

The competition watchdog said that it had accepted the argument of the parties that Ulster Bank would no longer provide loans to businesses in the State with turnover greater than €2 million, irrespective of whether or not the sale to AIB went ahead.

‘Detrimental effect’

The CCPC found that the deal would not cause a substantial lessening of competition, when compared to the alternative scenario of an exit of Ulster Bank by winding down its business lending, or a sale of the loans to an alternative buyer.

It pointed out, however, that Ulster Bank’s exit from the market meant that only two full-service banks would remain in the State to serve the needs of businesses with turnover between €2 million and €250 million.

“International evidence shows that higher concentration in banking services is likely to have a detrimental effect on competition, leading to poorer outcomes for business borrowers in terms of pricing, innovation and service,” the watchdog said.

“This is substantiated by some of the business customers contacted by the CCPC, who indicated that they had concerns with the exit of Ulster Bank from the State,” it added.

Competition issues

The competition body stressed that, while it could not approve or reverse a company’s decision to exit the State, it had a duty to highlight competition issues that arose because of the departure.

The CCPC’s comments come as the Department of Finance is carrying out a review of retail banking that will look at the structure of the banking industry, competition in the market, and the availability of credit for SMEs.

The competition watchdog is also examining a separate deal involving the proposed acquisition of other Ulster Bank assets by Permanent TSB.

Separately, AIB has announced that it is in exclusive talks with NatWest Group on acquiring Ulster Bank’s tracker mortgage book.