Shotgun wedding killed off our love affair with this foreign lender
THE writing has been on the wall for the clumsily named Bank of Scotland (Ireland) since September 2008 when the British government orchestrated the shotgun wedding between Lloyds and the Irish bank's parent as the 316-year-old Bank of Scotland teetered on the verge of collapse.
That merger, announced the same month that Lehman Brothers imploded, was consummated a few months later, creating Britain's largest bank with about 145,000 staff and 3,000 branches. The behemoth was 43.4pc owned by the British taxpayer after the government there pumped nearly £17bn (€19.3bn) into the banks under a part-nationalisation scheme. That left the Irish unit as a small but worryingly expensive problem that needed to be solved sooner rather than later.
British taxpayers were never going to be happy with a situation where they were being forced to pump money into Ireland to prop up banks here, but the scale of the problem only became apparent over time as UK bank officials dug deeper into the Irish loan book and developers here began to run into very public problems that revealed just how valueless Irish property had become.
It is probably fair to say the UK parent underestimated the extent of its liabilities in Ireland until it began an exam-ination of the bank's books, dubbed Project Primrose.
The examination revealed that Lloyds would have to pump billions of euro into the Irish unit to offset impairments on its €32bn Irish loan book. That spurred it to begin talks with US private equity firms last spring to try to sell the Irish assets at a massive discount.
One private equity house from the US was believed to have completed due diligence on Bank of Scotland's Irish assets soon after, but then pulled out at the last moment.
Hopes that a deal with a venture capital firm would save Bank of Scotland (Ireland) led executives to postpone a much-feared announcement last August. Union official Brian Gallagher welcomed the fact that no cuts were announced, saying: "The longer it goes on, the more employees are beginning to feel -- maybe naively -- more confident."
It was only to be a temporary reprieve.
Once the prospect of a buyout receded, Bank of Scotland (Ireland) and Lloyds were forced to examine other options. Lloyds hired British corporate advisers Hawkpoint to look at the entire Irish operation and consider a complete pull-out, according to unconfirmed media reports.
Today, we know that the bank has stopped short of a complete retreat from Ireland, although it will begin a significant scaling back of operations.
It was all a long way from 2001 when bank customers everywhere welcomed Bank of Scotland's arrival on these shores and hoped that it would shake up the uncompetitive personal banking market.
While Bank of Scotland had been lending to Irish businesses since the 1980s, it was only in the past decade that it began chasing retail customers and homebuyers.
One coup was the creation of a significant branch network almost overnight when Bank of Scotland (Ireland) snapped up the Electricity Supply Board's chain of shops in 2005.
What was not known was that the bank was also about to begin lending vast sums to developers such as Liam Carroll and Bernard McNamara -- loans that were to come back and haunt the bank just a few years later when the property bubble, inflated in part by Bank of Scotland's reckless lending, burst.