Mr. Wim Verbraeken:

I thank the Chairman and the members of the committee for the opportunity to represent KBC Bank Ireland today. As this is our first time appearing before the committee, I would like to introduce our delegation. I am the CEO of KBC Bank Ireland and have been in this role since November 2013. I have been an employee of KBC Group since 1992 and joined the bank in Ireland in July 2013. I am accompanied by two senior members of the bank's management team: Ms Dara Deering, who joined the bank in 2012 as executive director retail banking; and Mr Des McCarthy, who took up the role of chief financial officer, CFO, in 2014. Both are also members of the bank's executive committee and board of directors.

As the committee will be aware, KBC Bank Ireland is a subsidiary of KBC Groep NV and, accordingly, is subject to the normal disclosure constraints of a publicly-quoted company. The committee will have received our written responses to the queries in its questionnaire. There are a number of matters which we feel are commercially sensitive and which, as a private entity, we would not disclose publicly. I would like to focus on the following key themes: the bank's history; the bank's strategy and business model; the bank's performance and customer offering; how the bank is helping customers experiencing financial difficulties; and the bank's progress in the tracker examination.

KBC Bank Ireland is part of the KBC Group, one of Europe's most recognisable financial institutions, which is headquartered in Brussels and listed on Euronext. KBC Group is present with substantive operations in six countries in Europe and primarily offers banking and insurance products and services to retail customers and small and medium-sized enterprises. KBC Group has been a majority shareholder of what was then called Irish Intercontinental Bank since 1978. In 1999, KBC Group increased its shareholding to 100%. Importantly, KBC Group has supported its Irish operation through the financial crisis, providing ongoing liquidity and funding, together with additional capital injections totalling €1.8 billion. The bank did not receive direct support from the Irish State, nor did it participate in the eligible liabilities guarantee scheme or National Asset Management Agency, NAMA. Since 2013, KBC has embarked on a journey to transform into a "digital first" challenger bank; launching a retail banking platform to consumers in the Irish market. In February of this year, KBC Group reaffirmed its commitment to Ireland, making the bank part of its strategy to focus on its core markets. This commitment implies enhanced competition in the Irish banking market and more choice for consumers.

As this is KBC's first time before this committee, I would like to use this opportunity to share our insights as to how we see banking evolve in Ireland. KBC Group's commitment to Ireland was based on a number of key considerations: Ireland's demographics, it has the youngest population in Europe with 40% under the age of 25 and, therefore, at an early stage in their banking life cycle; the population of Ireland is "digitally savvy" and open to new ways of banking; Ireland has a strong educational profile; and finally Ireland's economic recovery and the positive outlook for the country.

What do consumers expect from a bank in the future? Research that we have undertaken has very much influenced our strategic approach. Consumers have told us that they want the best in digital experience but they also want to be able to obtain professional advice, whether that be over the phone or in person at one of our hubs. So while we are digital first, we also believe in the value of an on-the-ground presence. This insight into consumer preferences has helped shape the bank's distribution model which is quite different from that of other Irish banks, as we strive for seamless integration of physical and digital channels.

KBC is Ireland's newest retail bank, with a full suite of competitive products and a clear focus on digital in respect of which we are supported by our hubs and our contact centre. Thus far we have gained significant traction and the response from consumers has been very positive. Our relevance is increasing across all channels and products, from current accounts and deposits to investments, from consumer finance and mortgages to insurance. Our network has grown to a total of 15 hubs throughout the country. A 16th hub in Blanchardstown is due to open next quarter. All of our hubs have later opening hours and are open through lunch and on Saturdays to meet consumers' needs. In addition, our customers can avail of a dedicated 24-7 contact centre. We currently employ over 1,100 staff, almost double the number we had in 2012, and we have been rated as the retail bank with the best reputation for the past six years. Innovation in banking is at our core. We were the first retail bank in Ireland to offer both Android Pay and Apple Pay. More recently, we launched a new mobile app that allows customers open a current account on their phone in five simple steps in five minutes - a first in Europe.

We believe it important that the committee supports innovation and competition, and encourages new entrants such as KBC, so that consumers benefit overall through a better choice of offering. We would encourage the committee to seek ways to improve the switching process for consumers, such as empowering the acquiring bank to manage the end-to-end process for consumers. To encourage further competition, we ask the committee to review the basis for the allocation of the bank levy. As it is currently constructed, it constitutes a strong disincentive to growing a retail deposit business or entering the retail banking market. We have written to the Minister for Finance outlining our concerns.

Our strong performance was reflected in our results for the first half of this year, with an operating profit of €61.3 million before tax and impairments. We recently reached a milestone with over 250,000 customers having chosen KBC as their bank. Overall, it is our objective to become the primary bank for our customers.

KBC has been a significant mortgage lender for many years, consistently holding about 10% of the outstanding stock of mortgage loans. Throughout 2016 and 2017, the bank has continued to enhance its mortgage offering for new and existing customers. Research indicates that long-term value through low monthly repayments is what matters most to customers. KBC announced rate reductions across a range of fixed and variable rates in 2016 and more recently introduced a new ten-year fixed rate product to provide longer term certainty over mortgage repayments with interest rates as low as 2.95% for customers who also become a current account customer. Our no gimmicks approach towards pricing is aligned with our strategy to provide lifetime value.

As announced during an investor visit held in Dublin on 21 June, KBC Group will invest €1.5 billion in group-wide digital transformation between 2017 and the end of 2020. This investment will also benefit customers in Ireland. From its innovation hub in Dublin, the bank will continue to lead the way in delivering innovative firsts, providing 24-7 banking solutions for customers.

The bank also plans to launch a complete offering to the micro-SME segment over coming months with an initial focus on the professional sector based on customer demand, to include medical, legal, accountancy and technical professions. Customers in that segment will gain access to a very compelling digital offering and a business relationship manager to assist them with their needs.

We have deep empathy for customers and in particular mortgage customers who have experienced mortgage difficulties during the recession and its aftermath. The bank has engaged with customers in financial difficulty to implement a range of forbearance and restructuring options. This work has resulted in a significant reduction in the number of customers in difficulty or awaiting a resolution. These residual cases are complex and require further time. From our experience customers who engage with us early have achieved better outcomes and we actively encourage any customer in financial distress who has not already engaged with us to contact our arrears support unit.

KBC has worked consistently with customers in financial difficulty to avoid the need for a loss of property ownership. However, for genuinely unsustainable cases, such outcome may be unavoidable. Many of these cases are settled on a voluntary basis. Regrettably, the bank is sometimes forced to take legal action. Repossessing a property is always a last resort after all other options have been explored.

KBC employs a substantial number of staff to support customers experiencing financial difficulty. We also provide financial support including rental income support, legal advice funding and relocation fees. The bank continues to engage with customers through established independent third parties such as the Money Advice & Budgeting Service, MABS, the Irish Mortgage Holders Organisation and the StepChange Debt Charity Ireland.

On the tracker examination programme directed by the Central Bank, KBC is working closely with the regulator to conclude the current phase of activities, namely, the identification of affected customers. Within the framework set by the Central Bank, this review process is taking longer than originally anticipated. We acknowledge that this is very difficult for customers who have been negatively impacted. KBC takes this review very seriously and is determined to conclude this process as soon as possible.

While we have not yet fully determined the final outcome, the examination programme has identified that customers were, in some circumstances, moved off their tracker rates. All customers who we identified as being on an incorrect rate have since been put on the correct rate. After the final determination of the Central Bank on the findings and our proposals, the bank will contact with the affected customers regarding redress and compensation. We wish to clarify to the committee that as a result of a prior, narrower review, the bank addressed a specific cohort of customers in 2010.

As we work through this examination, we believe that it is imperative that the bank is guided by what is fair and right and that it does the right thing in the cases where customers have suffered harm. As the bank is working through the process, and its board of directors still need to make its determination, we feel it is premature to be more specific about the current examination. However, once concluded, the bank will provide details on the outcome of the review.

To conclude, I reiterate that KBC Bank Ireland's ambition is to be the customer-centric challenger bank for Irish consumers. We are part of a well capitalised, resilient international financial group. We have access to support, innovations and learnings from within KBC Group.

My colleagues, Ms Deering and Mr. McCarthy, and I will now respond to any questions members may have.