Bank of Ireland facing Brexit

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BANK OF IRELAND FACING BREXIT

INTERNATIONAL ECONOMY

Jean-Pierre Marcillac

Contents

Introduction:        2

Context        3

Scenario 1        4

Scenario 2        6

Bibliography        8

References        8

On June 23rd 2016, an earthquake takes place in Europe, the Brexit. The members of the European Union see the possible loss of a major political, commercial and financial actor.

This is a big blow for Ireland, which is exporting 40pc of its products to the UK. But it's also a great opportunity. Ireland, the only English-speaking country remaining in the European Union, can strengthen itself as an international player and perhaps also become the new Financial Hub within the European Union.

Bank of Ireland is the country's second-largest bank by capital and the largest in terms of assets. Knowing that 40pc of its assets are in the United Kingdom, one could ask the question of how they will manage Brexit. Will they leave the United Kingdom or not?

But the most relevant question at this time of uncertainty is: what is their strategy to secure a dominant position in the Irish and European financial sector, and face the arrival of international banks in Ireland, even if that implies their exit from the UK?

To answer this question we have identified two possible scenarios.

The first one would be a national focused scenario. Investing in what they already have in order to keep their dominant position in the Irish mortgage and banking services market, strengthen their corporate relationships and open new partnerships for innovation and entrepreneurship.

The second scenario for the Bank of Ireland would be to become even more involved in the pull of new foreign companies to Ireland, facilitating and attracting FDI and to focus on their international presence.

Context:

Before elaborating on the two scenarios, let us go through some Brexit news headlines to assess the stakes for the Bank of Ireland.

2016:

• June 23rd: Brexit
• “Ireland is 'ideal home' for European banking regulator after Brexit” (Jill Treanor, Oct 2016)

2017:

• “Brexit drives registration of 100,000 UK firms in Ireland” (Mc Greevy, Feb 2017)
• “Dublin to gain 13,000 UK financial services jobs from Brexit” (Ronald Quinlan, Feb

2017)

• “A fifth of EU banking may shift to Ireland after Brexit” (Colm Kelpie, Feb 2017)
• “Brexit: Dublin is set to gain big time as banks relocate from UK” (Henry Joseph-Grant, March 2017)
• “Brexit: A dozen London firms, banks moving to Dublin, IDA says” (The Irish Times,

June 2017)

• “Bank of America Chooses Dublin as Post-‘Brexit’ European Hub” (Chad Bray, Jul 2017)
• “Ireland's Deputy PM: Brexit means we can become Europe's go-to business

destination” (Stacey Yuen, Sept 2017)

2018:

• “The Economic Pulse started the new year on a positive note, with consumer confidence at a two-year high and business sentiment up on the month.” (Dr Loretta O'Sullivan, Jan 2018)
• “After Brexit, expected influx of banks is not even a trickle” (Fiona Reddan, Feb 2018)

Scenario 1: Invest in what they already have, in order to keep their dominant position in the Irish mortgage and banking services market, strengthen their corporate relationships and open new partnerships for innovation and entrepreneurship.

Due to the entrance of new big players in the Irish financial sector, Bank of Ireland will have to strengthen its presence in the Irish market.

The Bank of Ireland Economic Pulse, which is a newsletter based on a series of surveys, reported a positive start for 2018. Indeed, “consumer confidence at two year high and business sentiment up on last month”. “Consumers are more upbeat about the buying climate”, “48% of workers expect a pay rise and a similar amount of businesses plan on increasing basic wages”, “firms in all sectors upgrade near-term expectations for business activity” (About Bank of Ireland, Positive start to 2018 for Bank of Ireland Economic Pulse, 2018).

BOI (Bank of Ireland), being the first lender in the country, has to follow this increase of optimism, put in confidence its clients in order to keep their place as leaders. In 2016 they have decided to invest $558 million in upgrades to its IT infrastructures, “changing the core banking system for a truly customer-centric model” (Bank of Ireland, leading the way to the future of banking, 2017). They want to provide a customer friendly, reliable, secure and efficient bank platform. According to them, “customers expect a single view of the bank, and employees need to have a single view of their customer” (Bank of Ireland, leading the way to the future of banking, 2017).

The investments on its digital platforms will pursue until 2020.

Bank of Ireland is a big player in the Irish economy, 40pc of Irish economy transactions go through its systems. By adapting, modernising and securing its systems they will give some confidence to a growing country and to a nation that is optimistic about the future. Therefore, they will restructure its systems in order to provide a better service, keep their customers and attract new ones.

Since the crash, competition in the banking sector was decimated. But the mortgage lending area is the one where there still is some level of competition. “Rating agency Fitch recently noted that the country's biggest banks will come under increased competition as the economy recovers.” (Curran,2017). The increasing supply of new houses will cause an uplift in mortgage loans. The Bank currently has 25pc share of new mortgage lending. With the arrival of new competitors such as Bank of America, Bank of Ireland has to put extra effort to keep its position as leader.

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