What the closure means for the economy
Why is Lloyds pulling out of Ireland?
As a Johnny-come-lately to the credit-fuelled Irish economic boom, it is now clear that BoS(I)'s loan book is stuffed with even more rubbish than those of the more established banks. Parent company Lloyds earlier revealed that 90pc of the €6bn it had lent against development land was impaired. Faced with such a disaster, Lloyds couldn't get out of Ireland fast enough.
What does this decision mean for BoS(I) borrowers?
If you are a business with a term loan from BoS(I) or a homeowner with a mortgage from Halifax, yesterday's decision will have virtually no impact. If, however, you are a business customer depending on BoS(I) for an overdraft or working capital finance, then you are in serious trouble as Lloyds has announced it will not be providing this type of finance beyond the end of the year. This will force business customers to seek working capital finance and overdrafts from other hard-pressed banks. Expect to hear a lot more on this issue between now and December 31.
What does this decision mean for BoS(I) staff?
According to yesterday's announcement, the majority of BoS(I)'s staff would transfer to an independent service company, which will administer its loans until they are repaid. I'm not sure staff should set too much store by that. After all, when the Halifax closure was announced Lloyds promised "to maintain a strong presence in the corporate and commercial banking markets in Ireland". Seven months later, that business has been axed also.
What does yesterday's announcement mean for BoS(I) depositors?
According to the announcement, "the Group will work with depositors at BoS(I) to ensure a smooth transition of their banking arrangements".
This means depositors will have to find a new home for the money, which shouldn't be too difficult with all of the remaining banks desperate for retail deposits to replace wholesale funding.
What does the closure of BoS(I) mean for the customers of the other foreign-owned banks?
While BoS(I) is the first foreign-owned bank to pull out of the Irish market, it won't be the last.
This means that individuals and businesses who switched from one of the Irish-owned banks to one of the foreign interlopers now face the prospect of having to go back to one of the Irish-owned banks with their tails firmly between their legs.
What does yesterday's announcement mean for the customers of the Irish-owned banks?
With most of their foreign-owned competitors having either disappeared or drastically scaled back, the Irish-owned banks face far less competition.
This means they will be able to raise interest rates without fear of losing their customers to other banks.