RaboDirect urged to delay €3bn closure plan

By Eamon Quinn

Consumer and financial experts say regulators should urge RaboDirect to consider extending its notice period beyond May because of the unprecedented effects its decision to shut its €3bn savings operation will have on its 90,000 customers.

The online savings bank set up shop in Ireland in 2005. It was something of a thorn in the side of the mainstream lenders, offering attractive deposit rates.

With the worst of the debt crisis having cleared, a decision for a savings bank to close is an unusual development in the eurozone. That is because so many customers, more than 90,000, will be disrupted and will face many difficulties in opening new savings accounts with a small handful of lenders left standing, with which they may not wish to deal.

RaboDirect’s €3bn in savings looks small compared with the near-€94bn in household deposits held by banks in the Republic, but it represents a significant chunk of money nonetheless.

Dermott Jewell, policy adviser at the Consumers’ Association of Ireland, said that 90,000 is “a phenomenal number of customers” to move accounts at one time.

“We would be surprised at the short notice being given,” he said, adding that the Central Bank should approach RaboDirect’s parent to encourage it to extend its closure period.

“It is not acceptable given the short deadline. Now comes a big challenge for the customer in what is not a massively competitive market,” said Mr Jewell, adding that setting up any account with a bank takes time.

The Central Bank said it would not be commenting on the issues surrounding the closure.

Regulations set out in the Central Bank Consumer Code show that a bank may need only provide “at least two months’ notice to affected consumers to enable them to make alternative arrangements”.

Nikki Digby, director of impartial.ie, which provides financial advice for companies and individuals, said it was too short a period for people to get their affairs in order. She said it could cause panic for many customers, “particularly for older people”.

“They should try and make it as easy as possible. And then there is the question is where are those funds to go from a safety point of view” she said.

Ms Digby said the closure will reduce further the limited competition in the savings market when the ECB starts to raise deposit and interest rates. At €3bn, such a large amount of money being released at one go may mean impartial.ie will reopen its links for clients with savings banks on the continent, as happened during the crisis, she said.

In 2016, RaboDirect shut its investment savings products business, which affected 5,000 customers, but the latest decision to close up completely surprised financial advisers who deal with retail customers.

RaboDirect is an offshoot of its Dutch parent Rabobank, which bought ACC over 10 years ago, and which will continue to lend to Irish agri-food corporate customers.

“The decision follows moves by our parent, the Rabobank Group, to simplify its business model across the world and reduce costs,” said RaboDirect. It said the savings bank was set up to tap euro deposits for its lending operations “but as conditions have changed across Europe generally, including Ireland, this source of funding is no longer required by Rabobank”.

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