Ireland – Digital Finance Analytics (DFA) Blog

Bank of Ireland caves in to public pressure waters down cash limit rules

Bank of Ireland has caved in to public pressure following a public outcry over its plans to heavily restrict cash transactions in its branches, via Irish Independent.

The bank came in for sustained criticism after the Irish Independent revealed yesterday that it plans to restrict over-the-counter cash withdrawals to a minimum of €700 and cash lodgements to a minimum of €3,000 in an effort to push customers towards using ATMs and self-service machines.

However, after criticism from Finance Minister Michael Noonan, as well as groups representing consumers, farmers, older people, rural dwellers and bank workers, the bank conceded that what it called “vulnerable” customers could continue to get cash and make withdrawals of smaller amounts of money at branch counters.

The changes prompted fears of a renewed bout of bank branch closures and staff lay-offs in the wake of the bank’s move to severely restrict counter-based cash transactions.

Mr Noonan described the changes as “surprising and unnecessary”, adding that he expects the bank to “fully honour” its commitment to “vulnerable customers”.

Bank of Ireland said it would continue to allow older customers and those unfamiliar with technology to make cash transactions over the counter.

“Bank of Ireland would like to confirm that vulnerable customers, together with those elderly customers who are not comfortable using self-service channels or other technology solutions, will be assisted by branch staff to use the available in-branch services.”

However, other banks are now expected to follow the lead of Bank of Ireland by moving to set strict limits on over-the-counter cash handling.

It comes after around 200 bank branches were closed, mainly in rural areas, during the financial collapse, with at least 10,000 retail bank staff laid-off.

Banks including Bank of Scotland, Danske, ACC and Irish Nationwide have already closed, limiting banking options for customers.

Now there are concerns that the move by Bank of Ireland to effectively become a cashless bank will prompt more branch shut-downs and redundancies.

Deputy chairman of the Consumers Association Michael Kilcoyne said other banks were set to mirror Bank of Ireland and discourage customers from withdrawing and lodging cash over the counter.

This would make branches in rural areas less viable, he warned.

“The implications of the Bank of Ireland move are very severe. If it gets away with this it will get rid of more staff and close branches.

“This will be a further blow for rural Ireland,” he said.

Mr Kilcoyne predicted that AIB, Ulster Bank and Permanent TSB would make similar moves to curtail cash handling.

And banking union IBOA said it is seeking a meeting with Bank of Ireland boss Richie Boucher over concerns the changes would mean more job losses.

The Irish Farmers’ Association said the changes would cause great difficulty for some farmers who are not familiar with the bank’s online system.

Age Action accused the bank of ignoring the needs of older people by setting high limits on over-the-counter transactions.

The Irish Are Convinced That The Australian Economy Will Systematically Collapse!

Economist John Adams, Irish writer and Financial Advisor Eddie Hobbs and DFA’s Analyst Martin North compare the Australian and Irish economies ahead of their crisis point. Which is worst placed?

The answer may surprise you.

Eddie’s recent article.

Bank of Ireland Securitises Nonperforming Loans

According to Moody’s, on 10 April, Bank of Ireland Group plc, the holding company of Bank of Ireland, announced that it had entered a securitization agreement involving €370 million of legacy nonperforming buy-to-let mortgages. The transaction, which is scheduled to close on 18 April, is credit positive because it will reduce the bank’s problem loans ratio and modestly
improve asset risk, which remains a constraint on the bank’s standalone credit strength.

They estimate that following the transaction, the bank’s ratio of problem loans to gross loans will improve to 5.4% from 5.9% as of year end 2018, a step closer to European Central Bank guidance of 5%. The bank is on track to achieve the 5% nonperforming exposure target by end of this year. As of year-end 2018, the bank’s domestic peers reported problem loan ratios of 5.9%-11.9%, with BOI having the strongest ratio.

The transaction will boost BOI’s ratio of tangible common equity (TCE) to risk-weighted assets (RWAs) by 30 basis points from the 18.3% it reported for 2018 owing to the reduction in RWAs. The transaction will also improve the bank’s Texas ratio, the ratio of problem loans to loan-loss reserves and TCE, to 40% from 44% in 2018, which is one of the strongest among its peers.

Overall, these improvements strengthen BOI’s solvency and provide an improved base to support new lending. Moody’s expecst Ireland’s operating environment to remain supportive over the next 12-18 months, and that new lending will outweigh bad loan sales, leading to modest growth in the bank’s overall loan book this year.

The securitization of the impaired loans is an alternative to a direct sale, and allows BOI to maintain the customer relationship as the mortgage servicer. So far, in other impaired-loan securitizations, the originator has not stayed on as mortgage servicer. The BOI assets are notionally impaired performing loans which generate good predictable cashflows, and will typically not require active management, making them suitable for securitization.

In Ireland, banks must give borrowers at least 60 days’ notice before a change of servicer can can take place, and the transaction cannot close until this period has elapsed. During this period, the bank retains the assets on its balance sheet. However, since BOI is continuing to service the securitized loans, this notice period is not required, and NPL reduction is recognized the day the deal closes.

The sale of owner-occupied nonperforming mortgage loans has attracted close political scrutiny in Ireland amid claims that debt purchasers have taken a more aggressive approach to borrowers in arrears, including repossessing properties, than traditional banks.

However, Permanent tsb p.l.c. and Ulster Bank Ireland DAC last year each successfully completed sales of NPL portfolios backed by residential mortgages that helped reduce their legacy impairments. Allied Irish Banks,
p.l.c. recently announced an agreement to sell a pool of nonperforming mortgages that are primarily investment properties. Irish banks have been taking solid steps to reduce their impaired assets we expect this to continue, resulting in improving asset risk for the sector.

Adams/North: The Document That Will Shock You

Economist John Adams and I have released another show on “In The Interests Of The People” where we discuss the parallels between Ireland and Australia. History appears at least to be rhyming!

A First Hand View From Ireland – Eddie Hobbs

I discuss the Irish financial crisis a decade ago with financial writer, adviser and broadcaster Eddie Hobbs, who lived through the crash and commented on the events in Ireland. He wrote and presented a programme on state broadcaster RTE entitled Rip-Off Republic in 2005.

There are strong parallels to the current situation in Australia and important lessons to be learnt. But as he says, it may already be too late to avoid a crash. He also talks about the post crash environment and how high debt and falling home prices have haunted a generation. In particular there are social consequences which are often ignored and insolvency rules may well protect the banks over individuals.

Adams/North – Will ONE Phone Call Drop Home Prices By 80%

A number of our followers have asked about the parallels we might draw between Ireland a decade ago and Australia now.

In this edition Economist John Adams and I discuss what happened in the Irish crash, together with Sean Quinn who was there at the time. Specifically we look at how the banks were bailed out, and consider what would happen here in a similar scenario. There are lessons to be learnt, and questions to be asked.