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Sasko Lazarov

Banks 'ill-prepared for the biggest logistical challenge in Irish banking since the euro'

Concerns have been raised that the exits of Ulster Bank and KBC Bank could be “the perfect storm” for the remaining banks.

EXITING IRISH BANKS should not write to their customers about switching service providers until all stakeholders are “satisfied” that there is a “robust” plan in place to manage disruption, the Financial Services Union has said.

Both Ulster Bank and KBC Bank are currently in the process of winding down their operations in the Irish market.  

Last week, Ulster Bank announced that over the coming weeks, it plans to start writing to its over 900,000 personal account customers, giving them six months’ notice to choose a new provider, switch over and close their old accounts.

Letters and emails will be sent out to the bank’s roughly one million personal banking customers “on a phased, rolling basis, to give them six months’ notice”, the bank said in a statement on Wednesday.

Bank of Ireland, AIB and Permanent TSB are all anticipating a very rapid uptick in the volume of former Ulster Bank and KBC customers looking to change providers over the coming months. 

But across the market, customers are already noting longer-than-usual waiting times for appointments with their local institutions.

Recent cutbacks, branch closures and ensuing “poor service levels” in bank branches across the country could create “the perfect storm” for Irish banks and their customers, said John O’Connell, General Secretary of the Financial Services Union (FSU).

“Since the introduction of the euro, I think this is the biggest logistical change in the history of Irish banking,” he told The Journal.

“You have 960,000 Ulster Bank accounts and you have over 300,000 accounts in KBC Bank. It has the makings of a perfect storm.”

Among other things, customers switching banks may need to transfer over all of their existing direct debits to their new account provider for data protection reasons, O’Connell said. In a worst-case scenario, customers could be left “unbanked”, O’Connell added, if they close their existing accounts with one of the outgoing banks, only to be left waiting to open an account with a new provider due to delays.

It comes in the same week as the Financial Services Ombudsman published its 2021 Overview of Complaints. It revealed that a quarter of all complaints — and 28% of complaints received about the banking sector specifically —  related to customer service last year.

Banks currently operate a “lean staffing model”, O’Connell said, which could leave branches vulnerable over the coming months.

“What Covid exposed was that when anything happens in a branch [like an outbreak of the virus], they have to close the branch, move the branch staff to another branch and so forth.”

Bank of Ireland has significantly reduced its physical network over the past couple of years in a bid to cut costs, closing down 100 branches and shaving 1,700 jobs with a voluntary redundancy scheme.

AIB closed just 15 branches but is in the process of cutting 1,500 jobs through voluntary redundancies.

Against this backdrop, O’Connell said there is huge potential for disruption and expressed concern about the strain being put on staff.

“Our feedback from our members on the ground is that customers are already extremely frustrated and that they’re feeling the brunt.”

If you put yourself in the shoes of somebody working in a bank — in a call centre, for example — and I’m a customer waiting two hours and I have to have a conversation to resolve some issue, after two hours I’m not going to be a pleasant person when I get on to talk to that employee. It’s just human nature. 

O’Connell added, “The Irish Banking Culture Board have done two surveys, that show staff working in banking suffered significant stress levels. That is now going to be exacerbated.

“We’re very concerned.”

In response to questions from The Journal, a spokesperson for Bank of Ireland said the lender is “delighted to welcome new customers”.

They added, “We’re committed to making the process as easy as possible for customers moving to Bank of Ireland or opening an account for the first time.  We are also providing targeted support for customers who require it at this time through our Vulnerable Customer Unit.

The departure of Ulster Bank and KBC from the Irish banking sector is unprecedented in Irish banking.  In addition to the strong and supportive role that we will play over the coming period, minimising disruption for customers who will be changing banks will also require the collaboration of multiple stakeholders across the economy including utility companies, Government Departments and agencies, and employers.

In a statement, a spokesperson for AIB said, “AIB is keen to welcome customers of KBC and Ulster Bank who are looking for a new banking home.”

On the issue of wait times for appointments, the spokesperson said, “Depending on the branch location selected, wait times for account opening appointments can vary. 

“In support of customers in those locations where particularly high demand is being experienced, we have increased the number of account opening appointments available by offering weekend appointment times.  We are also in the process of allocating substantial additional resources and staff to accommodate the increase in customers looking to open an account with us.”

Central Bank

Questions around how prepared banks are for the changes were also raised in the Joint Oireachtas Committee on Finance last week, following recent comments by Colm Kincaid, Director of Consumer Protection at the Central Bank of Ireland.

Speaking on RTÉ News in March, he said the banks “are not yet where they need to be” in preparing for the surge in customers as Ulster Bank and KBC head for the exit.

“It is a very significant exercise that they need to put resources into and do well, and I think they are not yet where they need to be, but I do know there is a lot of work going on in the institutions to get to that,” he said.

At the time, the Banking and Payments Federation of Ireland (BPFI) — the main lobbying group for the Irish banking sector — described the challenge as “an unprecedented event” in Irish banking history.

BPFI Chief Executive Brian Hayes said, “It will require the participation and support of multiple stakeholders across the economy, including the banking industry, the regulator, utility companies, Government Departments and agencies, and employers working together.” 

“BPFI and its member banks are already working intensively together as an industry as well as with stakeholders across the economy, to assess and plan the unprecedented task of transferring millions of accounts and direct debits of personal and business customers across the economy.

Asked about preparedness levels, Central Bank governor Gabriel Makhlouf told the Oireachtas finance committee last week: “Everybody in the Central Bank but also in the other institutions is fully aware of the importance of getting this right.

“I wouldn’t say that everybody’s ready by any stretch… but what I can also say is that we are fully engaged with the institutions on this. And to be fair, I think they are fully aware of the scale of the challenge that they have, and they know their obligations as well.” 

The FSU’s O’Connell told The Journal that the union would like the Central Bank to step in and tell exiting banks that they should not proceed until all stakeholders are satisfied.

“Everything at the moment is pointing to there being significant difficulties,” he said.

“We don’t want any letters issued to customers until such time as the Central Bank and the other stakeholders — including ourselves, the consumer bodies and so forth — are satisfied that there’s a robust plan in place to manage it in a way that isn’t disruptive to consumers.”

For information about how to switch your bank account, you can follow this link to the Competition and Consumer Protection Commission’s website.

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