An exit by Ulster Bank from Ireland could lead to a concerning reduction in competition in the SME lending market, the deputy governor of the Central Bank has said.
Addressing the Oireachtas Joint Committee on Finance, Public Expenditure and Reform and Taoiseach, Ed Sibley said that, for reasons of confidentiality, he could not comment on the interactions between the Central Bank and Ulster Bank on the issue.
But he said, in general terms, if a larger bank were to exit the Irish market it could have significant implications.
He said he completely empathised in terms of the concerns and uncertainty that people working for an organisation with this kind of ongoing uncertainty experience.
However, Mr Sibley reminded the committee that a similar strategic review was undertaken by KBC Bank a few years ago and at the end of that the bank decided to stay.
"I can't comment or speculate on what will happen with Ulster Bank," he said,
"But it is not a total given that they will leave. But I do appreciate that there is uncertainty for the people who are working for Ulster and that must be challenging."
In response to questions from Sinn Féin's Mairéad Farrell, Mr Sibley said that when it comes to the impact on competition of a potential Ulster Bank departure from the Republic of Ireland, he would be most concerned about the SME sector.
He said there is currently a degree more competition in mortgages and the trend with regard to interest rates is downward, with signs of other competitors coming into the market.
But he said SME lending is more concentrated, as there are only three banks lending to the sector at any kind of scale.
"So I think in terms of potential implications, were Ulster to decide to leave that would be the area I think that would be most concerning in terms of the functioning of the market," he stated.
He acknowledged that there are options out there for SMEs through other banks and credit unions.
"But none of that is approaching the scale of Ulster Bank's lending to SMEs, so clearly that potentially is an area where both provision of service and lack of price competition might well be a factor," he said.
Also at the committee, Mr Sibley and Director of Consumer Protection, Grainne McEvoy, defended the Central Bank's record in relation to pursuing banks over their involvement in the tracker mortgage examination.
Sinn Féin's Pearse Doherty questioned why thousands of tracker holders at AIB and its subsidiaries had received large compensation payments following a ruling from the Financial Services and Pensions Ombudsman (FSPO), after the Central Bank had published its final report into the tracker examination.
Mr Sibley said the report was never presented as the end of the regulator's work, but just the end of that part of the investigation and the bank had committed to continue to monitor the situation.
Ms McEvoy said the AIB tracker mortgage customers in question had been included in the Central Bank's examination process, but were entitled after they had been through that to seek further redress from the FSPO and the courts, which had separate legal powers.