It is no surprise that Ulster Bank is finally winding down and exiting the Irish market. The Bank has shown great commitment to Ireland and to maintaining an active presence in the Irish banking market, especially over the last decade. It has invested serious capital in writing-off losses, in technology and in corporate restructuring. The challenge was always going to be whether, having taken that pain, it could make its continuing presence in Ireland worth while.

All of that investment, and billion euro write offs, are “sunk costs” done and dusted. What’s important to parent bank NatWest is the future: the costs, in a post-Brexit scenario, of continuing to commit scarce capital and management time to what is now a marginal market.

Whatever the political rhetoric, the short to medium term prospects for Ireland’s lopsided and vulnerable economy are strained. Interest income, a key determinant of future bank profitability, has been impacted by the ECB’s zero interest rate policy. Non- interest income in the form of all kinds of fees,  charges and commission cannot do all the heavy lifting, even with the ECB providing ‘free’ funding to banks. There is also the issue of ongoing uncertainty and risk which are  a factor in every boardroom discussion.

All of this bears down on the prospects of future bank profitability, including prospective loan losses, as the Covid-driven economy unfolds. It can’t have been a difficult decision for NatWest. The exit costs, direct and indirect, simply add to what the Bank has committed to the Irish economy over the years. The costs are significant: the loss of expertise and high quality jobs. Even with the contraction of the branch network over decades, the closure of a branch is a big deal for a town. With Ulster exiting, its difficult to see another big EU player entering the Irish market: the economy, technology and the regulatory burden these days are serious deterrents.

Ulster Bank’s exit leaves a large gap in the personal, business and mortgage markets. Competition is seriously diminished, even with smaller players like KBC still here. It’s not just about market share. From the consumers perspective, the fact that there was always the possibility of changing was an important factor in keeping anti- competitive dynamics in check and in encouraging innovation. An AIB/ Bank of Ireland duopoly is not a healthy market place for customers or for the economy.

The political rhetoric will be all about a “Third Banking Force”. Somewhere, deep in the bowels of Merrion Street, there is a dusty old file (hard copy only) bearing that same name. Its titled “For Emergency Use only”. Its wheeled out on occasions like this. It has a few pages on banking history, the most recent PQ’s for a Minister for Finance under pressure because of something or other to do with “The Banks”. It’s got a page of “Key Figures” and, of course, “Speaking Notes for Prime Time/Morning Ireland”. It’s dusted down every time a Minister is giving a Speech to the Credit Unions. Not much happens.

Don’t hold your breath this time round.There will be a Commission, an Expert Group, an inter-departmental Working Group. They will be asked to report “Urgently” to the Minister for Finance, the Taoiseach or “The Cabinet”. There will be high- level talks with the Banking Unions (as indeed there should well be employees livelihood are on the line). There will be a reference to “The (EU) Commission” advice on Competition policy. Just don’t expect too much.

Together with advocates from Consumer groups and the Credit Unions, I made the case for a “Third Banking Force” on a number of occasions over the years, built around Credit Unions, the Post Office banking capability and a “developmental” momentum. But there’s always a reason for Government not to change once the speech is given, the interview done, and the PQ answered.

Its not enough simply to push the ‘Big Two’ to absorb Ulster Banks business. There’s far more to it than that. The winding-down process will be handled by the Government aka Brussels with input from the ECB in its regulatory role. Even so, there should be ‘signals’  to the markets. Vulture Funds should have no hand, act or part in any Government mediated input on disposing of loan portfolios. Government should have a clear idea of the likely trajectory of the personal financial services market in Ireland over the next five years– the kind of exercise  NatWest will have worked through in arriving at its decision.

There is another pivotal point. There has been a root and branch revolution triggered by eg ‘Revolut’ as enablers of minimal cost, real-time transaction-based global banking. That’s where banking is now at. Mainstream retail banking is now an AI driven Utility. A Utility.  Experienced managers who had ‘relationship’ with customers that inputted into decision-making are largely “a shining artefact of the past”. Today, you have to see through the smoke and mirrors of Brand PR, of ‘happy-clappy’ faces and of soft music leveraging symbols of world that doesn’t reflect reality.

Once, Irish banks owned, controlled and regulated in Ireland had a shared agenda in the development and welfare of the nation. That’s gone. Its a different calculus today. Mainstream banking is a Utility. We need something different alongside that paradigm.

So, Ireland DOES need a ” Third Force”  in the banking market. Whether customers, businesses and the economy get what is so obviously needed is a very different question. It needs a totally different KIND of ” Third Force”.

Government have never stopped to ask the question: why on earth would one assume, after everything that’s happened, that the Business Model of a corporate  aimed at maximising shareholder value, is necessarily in the national interest?

Because to be clear, the national interest – ‘the Public Good’ – should be the absolute focus of a “Third Banking Force”. A non- profit, regionally rooted and personal /small business  structure with the same ethos as Credit Unions  and the Post Office.

One that draws on the German  ‘Universal Banking’ Model, whose proponents in Ireland have been advocating such a model for years. One that has a very different perspective on vital ‘niches’, such as Student Loans. Education is the generator of the Intellectual Capital that drives national wealth. The country needs a more transparent and a very different template for serving key niches in third level education. And, let’s be clear, such a ‘Third Force’ model should get the same funding that commercial profit-driven banks now receive.

Put the old dog-eared “Third Banking Force” file back in the Cabinet. For once, walk the walk. Its what the country needs. And, by the way,  thanks Ulster Bank for hanging in there.