New BOI Chief Urges Banking Consolidation In Face Of Overseas Threat

by Philip Morton, Investors Offshore.com

04 March 2002

According to the new Chief Executive of the Bank of Ireland, the country's banking sector must soon consolidate domestically, or risk being paralysed by the international expansion of large foreign banks.

Speaking to the Irish Independent following rumours that Royal Bank of Scotland may bid for the wounded Allied Irish Bank, Michael Soden, who took office for a six month stint as CEO designate at BOI last week, observed that:

'My belief is we must have an independent financial services sector even if this means a unified approach.' he told the newspaper, although he did not elaborate further on exactly how unified he believed the approach would need to be.

Mr Soden warned that the bigger UK and overseas banks and financial services groups could soon begin looking to countries such as Ireland for potential mergers and acquisitions, having reached a size where domestic expansion opportunities are now limited. He pointed to New Zealand - which in the early 1990s ceded control of its five main banks to foreign organisations - as an example of the situation to be avoided.

'I'm not saying loss of control of the banking system is fully to blame for their slow economic growth, but it is definitely a contributing factor,' he observed. 'Imagine a situation arising that you, as a manager, do not have control (over) where the next dollar is to be invested - somebody in London or Sydney decides that for you. It's bound to have an affect on economic development.'

The new Bank of Ireland chief admitted that merging the country's larger banks would bring into play a whole host of competition issues, but told the Irish Independent that he didn't believe immediate action was called for. 'I don't consider it necessary at this point in time, but just something to be aware of,' he explained.

Recommended