Nervous wait for developers on how loans will be handled
While Anglo Irish is often described as the 'developer's bank', Bank of Scotland (Ireland) was also a key lender to Ireland's once prosperous developers. Some of these clients are now likely to be nervous about the bank's future intentions.
With about €13.5bn of loans advanced to property developers, Bank of Scotland (Ireland) was the fifth largest funder of property development in Ireland, lending almost as much as Bank of Ireland.
In fact, according to a report last year by Bloxham Stockbrokers, the largest loan book Bank of Scotland (Ireland) possessed was in the area of property development, commercial property and land purchase. This loan book is now under great pressure and write-downs are likely to be severe.
While that is something to worry shareholders of Lloyds Banking Group and the UK Treasury, which owns Bank of Scotland, of more immediate concern for customers of the bank is how their accounts will be handled.
Developers who are in difficulty are now being handled by a part of the bank called the Business Support Unit (BSU). This unit is "responsible for managing customers who are most affected by the tough economic times''.
A huge number of development clients are likely to fall into this category, with the Minister for Finance once famously describing some developers as "hopelessly insolvent''. The bank will now use the BSU to ascertain which customers have a viable future and which do not.
The objective of the BSU is to return customers to "good health'' where possible, but of course it may not always be possible to revive some of the bank's customers.
Already some developer customers have gone public and admitted to their financial distress. For example, Bernard McNamara, a key borrower for the bank, has already said he is "broke''.
McNamara formed a key banking relationship with Bank of Scotland (Ireland) on the Burlington Hotel site in Dublin 4. The bank has a loan to that project worth €242m currently outstanding, though its not clear whether it will agree to roll the loan over for another period.
Another major customer of Bank of Scotland (Ireland) was developer Liam Carroll. He was such a large borrower from the bank it was often said, jokingly, that he had his own office at the bank's headquarters on St Stephen's Green.
Last summer, when Carroll's Zoe Group of companies was seeking court protection after running up debts of €1.1bn, it was disclosed that, apart from AIB, Bank of Scotland (Ireland) had the largest exposure, reported at that time to be €324m.
Other developers and builders the bank has loaned to include the Fleming Group, which also got into financial difficulty in recent months.
Property developer Larry O'Mahony, and former IRA man and now developer Tom McFeely have also been involved with companies who've successfully borrowed from Bank of Scotland (Ireland), although there is no suggestion that either of them are not repaying any loans.