Report Suggests Banking Mergers Could Be A Possibility In Ireland

by Amanda Banks, Tax-News.com, London

03 May 2002

There was much scepticism when the new Chief Executive of the Bank of Ireland, Michael Soden suggested in March that Irish banks would do well to consider domestic consolidation in the face of a foreign takeover threat to the banking sector. However, a report in the Irish Independent on Thursday suggested that the great and the good within the banking sector are now considering the matter.

'Quite apart from what he was saying, the very fact of saying it in public seemed evidence of an unsound mind,' Brendan Keenan wrote yesterday. 'But he kept at it, and his sheer persistence has started some people thinking the unthinkable along with him.'

The article revealed that Finance Minister, Charlie McCreevy has expressed his support for the possibility of banking mergers at some point in the future, should the threat of a spate of foreign takeovers occur. Apparently, Mr McCreevy is very much in the minority within government on this issue, although there are said to be others, both within politics and at Allied Irish Bank, one of the ROI's 'Big Two', who are prepared to consider the idea.

As Mr Soden, who stepped in for a six month stint as CEO Designate at the end of February, explained at the time, the idea of a merger between Bank of Ireland and Allied Irish Bank would create a whole host of competition issues, and it is thought that - at the moment at any rate - the Irish Competition Authority would be unlikely to agree to the creation of one major bank with such a large market share. (It has been suggested that were BoI and AIB to merge, they would control around 80% of the consumer market in the Republic).

However, the Independent article concluded that: 'just because something is not allowed does not mean it is a bad idea,' and stressed that Mr Soden's assertions - namely that it would bad for the banking sector if the 'Big Two' were taken over by foreign banks, and that it would be good for the country to have one large bank which could play more of a part on the international stage - should be examined on their merits.

The report then cited the joining of Lloyds and TSB in the United Kingdom, and of Chase Manhattan and Chemical Bank in the US as successful big-bank mergers.

''Mr Soden has a valid point when he says that a great deal of expertise would be lost in a foreign takeover and that many key functions would move to the foreign headquarters,' Mr Keenan, Business Editor at the Irish Independent, observed.

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