Potential for a New Bank?

Sleepy

Given the state of the balance sheets of the existing banks in Ireland I'm surprised we've not seen any new banks created yet.

Surely there's an opportunity for anyone who can get the capital together (no small task I'm sure) and fulfill the necessary criteria to obtain a banking license to make a fortune here?

When the existing banks have to charge certain levels of fees/interest in order to fill holes in their balance sheets wouldn't it make logical sense that a bank without this burden could charge lower fees and interest and / or provide higher levels of service via better quality of staff etc. whilst still making better profits than their competition?

ardmacha

There is surely scope for a well run bank with adequate capital from someplace like Canada to come and do good business.

Zubeneschamali

ardmacha wrote: »

There is surely scope for a well run bank with adequate capital from someplace like Canada to come and do good business.

Very hard to compete with the existing Irish banks when they can lose money hand over fist year after year and then get bailed out by the taxpayer when they need it.

user23

yeah would be a great opportunity for a foreign bank to come here.They could offer free banking would attract alot of customers that might be looking to reduce there fees through banking

Godge

user23 wrote: »

yeah would be a great opportunity for a foreign bank to come here.They could offer free banking would attract alot of customers that might be looking to reduce there fees through banking

something like this?:

http://en.wikipedia.org/wiki/Halifax_(Ireland)

user23

Not exactly like RBS but some bank that is run properly and efficiently...not sure if that is possible if you were going on Ireland's record

Godge

user23 wrote: »

Not exactly like RBS but some bank that is run properly and efficiently...not sure if that is possible if you were going on Ireland's record

RBS actually own this bank, not Halifax which was owned by Bank of Scotland:

http://en.wikipedia.org/wiki/Ulster_Bank

That is the one that set aside €28m to compensate customers for computer failure. Halifax was the one that offered free current accounts with interest.

user23

Godge wrote: »

RBS actually own this bank, not Halifax which was owned by Bank of Scotland:

http://en.wikipedia.org/wiki/Ulster_Bank

That is the one that set aside €28m to compensate customers for computer failure. Halifax was the one that offered free current accounts with interest.

Yes just what Halifax offering,There is a market for a foreign bank to come in and offer this. No Irish bank cant seem to do this at present without some pre-conditions.Personally I would welcome this if it did happen

gaius c

Zubeneschamali wrote: »

Very hard to compete with the existing Irish banks when they can lose money hand over fist year after year and then get bailed out by the taxpayer when they need it.

This. Any new bank would be at a huge disadvantage to the pillar banks who are "too big to fail".

[Jackass]

There's absolutely no incentive for a foreign bank to come into the Irish market at present, for a number of reasons.

1/ The Marginal Propensity to Consume in Ireland is rock bottom, there is no consumer confidence and thus very small aggregate demand - also linked to the tightened money supply, which basically means there is little or no economic activity. So marginal costs would be high, there's only so much you can invest and make money and that operation would be so small that it would be negligible. (although some major banks already have a small foothold in the Irish Market, such as Danske Bank, but these aren't high street banks and basically only compete on deposit rates, aren't even lending banks per se, just looking to attract little chunks of liquidity from around foreign markets).

2/ We now have insolvent, state owned banks, and although it is in defiance of EU regulations (see the rather comical EU Commissions Trade Regulation page on subsidies here), it is anti-competitive to have a state sponsored bank with virtually limitless propping up that private banks could easily be forced out of the market.

3/ Competition isn't always a good thing, we might not even want them. One of the major players in the Irish banking collapse was RBS / Bank of Scotland. They saw the cash cow that was the Irish banking sector and the lending and rates and the turnover of Irish Banks, so came into the market extremely aggressively and competitively, and so began the race to the bottom. Lending criteria was stretched beyond snapping point, main stream lending took on sub-prime lending criteria (hence the reason a sub-prime market never took hold here, because no one was getting refused to begin with - again, amazing no one has seen jail time), interest only lending for up to 5 years, massive new business interest rate deductions (but completely unaffordable once discounts expired) and up to 100 - 120% mortgages. - Madness.

The biggest opportunity for a new bank in Ireland was the monumental moment when Brian Cowen sat down with his advisors and said "what are we going to do about this banking problem?" - now it's been done to death, he guaranteed the banks, he signed away Irish liquidity, he was lied to about the extent of the liquidity problems in the banks that he was guaranteeing (amazingly no one has seen jail time for this), yada yada yada, but all of that aside, had the Government then guaranteed deposits only, allowed the banks to become entirely insolvent, liquidate the banks, and use the IMF / EU / UK funding to establish a Government 100% owned, fiscally sound, non-indebted bank, we would have a very healthy bank today which the Government could look to split up at some point in the future and sell off / privatise, which in turn would cover all of our debt from IMF / EU etc and we might even make a profit out of it and have a brand new banking sector, during which time, we could have started banking regulation and best practice criteria from scratch and began a new private banking era in Ireland with a highly efficient and well regulated sector, which would be a massive advantage to the country for generations to come, not killing generations to come...but as we know, not only has that ship sailed, but we bombed the sh*t out of it before it could even make it to port.

Anyone

I recon it would be 15-20 years before another bank comes here. The level of personal debt, state owned banks, and high regulation will put off any bank coming here.

One thing that in my opinion is being attempted, is to force Credit Unions into becoming a banking entity.

Dannyboy83

KBC offering 90% loan-to-value mortgages again

http://www.rte.ie/news/business/2013/0613/456424-kbc-offering-90-loan-to-value-mortgages-again/
KBC Bank Ireland has re-introduced mortgages on properties based on a 90% loan to value ratio.
Up to now it had been offering an 80% maximum loan to value on loans of up to €750,000.
The bank says the decision was made in light of growing confidence in the housing market and increasing demand from buyers.

gaius c

Dannyboy83 wrote: »

KBC offering 90% loan-to-value mortgages again

Pillow banks were offering 92% all along.

carpejugulum

Dannyboy83 wrote: »

KBC offering 90% loan-to-value mortgages again

Anything above 80% should be banned because of collusion on banks' and politicians' side and stupidity on customers' side.

ardmacha

KBC offering 90% loan-to-value mortgages again

The government should place a tax on that part of a loan above 80%.

[Jackass]

If LTV rates were properly regulated, it would curb the ability of another bubble forming, as people simply couldn't afford to buy multiple properties or buy a house on a whim if they needed to pay 10 - 15% deposit, it would control price of housing as if houses are too expensive most people can't afford the 10-15% deposit and therefore demand will fall, bringing down price, it would also instill a requirement of sensible saving and by default stress test mortgages making irresponsible lending a lot more difficult in the future.

I mean this isn't rocket science, what have we done to prevent the exact same thing happening again? What significant legislation has been introduced? What significant financial market regulation has been introduced and strictly enforced? What additional powers and more importantly, responsibility has been put onto the shoulders of the regulator?

There may be many, but I am aware of none.

This isn't a swipe at KBC, I think 90% LTV should be the limit allowable, and I applaud the attempts to get the market moving again, at least it's one bank willing to lend, but my concern is for the future, the distant future, when another property bubble would be conceivable again.

gaius c

carpejugulum wrote: »

Anything above 80% should be banned because of collusion on banks' and politicians' side and stupidity on customers' side.

Why? KBC bank has nothing to do with the taxpayer. If they want to risk their own money, that's their issue.

Sleepy

http://www.howbankingworks.ie/index.php/banking-industry/how-to-start-a-bank-in-ireland
I've thought about this in the past and I don't see a new independent retail bank starting from scratch.

The costs of having a competitive, compliant system from day one would probably be too much.

Sleepy wrote: »

Surely there's an opportunity for anyone who can get the capital together (no small task I'm sure) and fulfill the necessary criteria to obtain a banking license to make a fortune here?

One of the restrictions on setting up a new bank is that no one person can dominate the shareholding or deposits - you would need to find at least twenty people with sufficient capital, skills and an appropriate desire to get into banking.

Something that I do think might have a chance is a new building society.

To start it would probably only offer savings products to members and once a savings history and sufficient members funds were built up it could start offering mortgages to those members.

I think it could draw in lots of first time buyers or those with a longer term intention to buy.

Depending on how it is setup mortgages could be restricted to owner occupied principal residences excluding buy to let, commercial or developer loans.

Scortho

I have toyed with the idea.
There is a serious opportunity for a good business bank being set up.
The two pillar banks can't provide the services that are required by businesses in Ireland.
However I think this area of banking will be facilitated by the likes of venture capitalist funds and takeovers of small companies by larger ones.
I don't know why the government, instead of bailing out Anglo, didn't let it go in the first place, buy the good assets and set up a new business bank.

Could Certus perhaps fill the gap in the near future.