The so-called two pillars of Irish banking - Bank of Ireland and Allied Irish Banks - will be under "close surveillance" from European Union authorities because they will control the sector, the EU’s antitrust chief Joaquin Almunia warned today.
"As European Commissioner for Competition, let me say that this prospect will require close surveillance, because duopoly may hamper competition in Ireland's banking market," he said in Dublin today.
"As a result of the Irish authorities' strategy to build the new banking system on two pillar banks, the Bank of Ireland and Allied Irish Banks will work in a de facto duopoly in the Irish market," he said.
The two main banks have not been fully taken into State control since the banking crisis as have most other institutions .
Meanwhile, he added that EU regulators will clear billions of state aid granted to the nationalised Anglo Irish Bank and Irish Nationwide by the end of the month.
"I will be proposing a decision approving the aid for the resolution of Anglo and INBS by the end of this month," Mr Almunia told the Federation of International Banks.
He added that Bank of Ireland, Allied Irish Banks, Irish Life and Permanent, and EBS building Society will have to present restructuring plans to the regulator by the end of July.
Mr Almunia also highlighted that Irish banks have received significant State recapitalisations – €46.3bn have been granted so far – and around €75bn of commercial land and development loans will be transferred to NAMA.
He added that the total amount Ireland spent to recapitalise its banks over the course of the crisis is equivalent to about one third of its GDP in 2010.
“No other EU country comes even close to this proportion,” he said.
“The rescue has left deep marks in Ireland and has strained its public finances.
“Most importantly, we should not forget the social implications. The people of Ireland are bearing the brunt of the crisis and are enduring the effects of tough austerity measures.”
He also paid tribute to the late Brian Lenihan, finance minister in the last government.
“Brian has always struck me as being unusually bright, brave and energetic – he was a man of great personal courage,” he said.
“My heart goes out to his wife and his two children. He will be greatly missed both in Ireland and in Europe.”
Meanwhile, the International Monetary Fund (IMF) has pressed the EU to resolve its sovereign debt problems as quickly as possible amid rising concerns among markets and the public.
“Policymakers must act now to make the financial system more robust,” the IMF said in a report issued in Sao Paulo.
'The current window of opportunity to prepare the financial and economic system against potential systemic shocks, importantly by providing clarity on euro area-wide solutions to strains in the periphery, could close unexpectedly,' the fund said.
It noted that concerns about debt sustainability and support for adjustment efforts in the euro zone periphery had intensified, in an update of its April Global Financial Stability Report.