DUBLIN (Reuters) -Belgian financial group KBC is set to become the latest lender to leave the Irish market after it entered an agreement with Bank of Ireland on Friday to explore the sale of most of its Irish unit's assets and liabilities.
The surprise move comes just weeks after NatWest announced that it was winding down its under-performing Ulster Bank business in the Irish Republic, a move that had already left the country with just four high street banks.
Irish Finance Minister Paschal Donohoe said in a statement that KBC's decision to leave was regrettable, particularly as it comes so soon after NatWest's decision.
The transaction, which would see Ireland's largest lender by assets acquire most of KBC Ireland's performing loan assets and liabilities, remains subject to due diligence, further negotiation and agreement of final terms, the two banks said.
Exits by KBC and NatWest look set to further strengthen Bank of Ireland and main rival Allied Irish Banks' grip on their home market. AIB entered an agreement with NatWest to buy around 4 billion euros of corporate and commercial loans.
KBC is also reviewing its options to divest its non-performing mortgage loan portfolio, which is not part of the agreement with Bank of Ireland, it said.
Ireland's central bank said it understands that there will be concerns that the KBC transaction, if it goes ahead, will reduce competition and choice in the market.
"Competitive pressures can clearly have an effect on the functioning of the financial system and the achievement of the central bank's aim for it to sustainably serve the needs of the people and businesses of Ireland," Ed Sibley, deputy central bank governor with responsibility for prudential regulation, said in a statement.
(Reporting by Padraic Halpin; editing by David Goodman and Jason Neely)