The Competition and Consumer Protection Commission (CCPC) has expressed concern that plans by Bank of Ireland to buy the performing mortgages of the exiting KBC Bank Ireland could substantially reduce competition in the mortgage market.
The views were set out in a preliminary assessment on its full investigation into the proposed purchase which was sent by the CCPC to the two parties today.
"The bank notes the CCPC's preliminary view, at this stage of the process, is that the proposed transaction is likely to give rise to a substantial lessening of competition in relation to the market for the provision of mortgages in the State and that this is not the final determination by the CCPC," Bank of Ireland said in a statement to the market.
"In line with normal practice, Bank of Ireland will prepare a detailed response to the assessment which will seek to address the concerns raised by the CCPC," Bank of Ireland said.
Under the proposed deal, Bank of Ireland would buy around €8.8 billion worth of performing mortgages, €100m worth of performing commercial and consumer loans, €4.4 billion of deposits and around €300m of non-performing loans from KBC Bank Ireland.
In October the CCPC announced that it was going to hold a full investigation into plan.
The CCPC had carried out a preliminary investigation of the proposed acquisition and concluded that a full investigation was needed to see if the proposed transaction could lead to a "substantial" lessening of competition in the State.
The CCPC said today that the assessment, which sets out its preliminary views, is not a final determination.
The two banks now have 15 working days to respond in writing to the CCPC's views and they may also ask to make an oral submission.
Based on the timelines as set out in the CCPC's Merger Review Process, it is expected that the investigation will conclude by May.
KBC has said the deal with Bank of Ireland, if coupled with a separate sale of its non-performing mortgage loan portfolio, would ultimately result in the bank's withdrawal from the Irish market.
Earlier this month, it finalised a deal for the sale of a non-performing mortgage loan portfolio of about €1.1 billion in a transaction financed by funds managed by CarVal Investors.
Stockbroker Davy, which itself was bought by Bank of Ireland last year, said its base case remains that the purchase by its parent of the KBC assets and liabilities will still be approved with commitments around market opening and perhaps new entrants likely.
"A range of commitments may potentially be required," wrote banking analyst, Diarmaid Sheridan, in a research note.
"We expect the CCPC to require market opening measures, which may require acquiring banks to open marketing databases to challenger lenders, and possibly the sale of a portfolio of mortgages to a new entrant to assist in its establishment in the market."
