BANK of Scotland is set to provide working capital to Irish businesses well into the new year -- despite vowing to "cease" all working capital services by the end of 2010.
The departing bank has also agreed to give businesses until March to resolve outstanding overdrafts, while companies who have failed to withdraw their deposits will be given a further nudge in the coming weeks.
The news comes more than four months after Lloyds Banking Group announced it was shutting Bank of Scotland Ireland (BOSI), which served about 12,000 business customers, at the end of 2010. At the time, Lloyds said all working capital facilities would cease "by the end of the year"; while local sources said overdrafts would also be phased out by December 31. The announcement was greeted with dismay by businesses, most particularly the hotel sector that warned 150 hotels could be forced out of business if they were cut loose by BOSI.
Documents seen by the Irish Independent show BOSI ceased to exist at 23.59 on December 31, with all its business 'merged' into Edinburgh-based Bank of Scotland.
But a spokesman for the bank yesterday confirmed that even though all business current accounts were closed on December 15, limited working capital arrangements would now be available into the new year. The working capital facilities that continue to be available include invoice discounting, revolving credit arrangements and international trade service, which will all be provided by Bank of Scotland in the UK until the agreements term out.
The spokesman also confirmed that customers have been given until "the end of March 2011" to convert their overdrafts to term loans.
He declined to say how many customers had already converted their accounts.
Irish Hotels Federation president Paul Gallagher said hotels were finding it "incredibly difficult" to secure new banking partners in the current environment.
"We're trying to keep open lines of communication with Bank of Scotland and all banks," he said. "Our sector is in debt to the tune of €6.5bn, we have to find a mechanism that will address that."
A spokesman for the bank also confirmed that while the "vast majority" of BOSI's deposits had been withdrawn by year end, the bank has not succeeded in its goal of emptying its deposit book.
The development means that BOSI depositors were transferred to Bank of Scotland at the end of the year.
The remaining deposits "will be contacted again so that their funds can be returned and their accounts closed", the spokesman added.
BOSI's £26.7bn (€31.2bn) loan book will now be administered by Certus, a service company set up by former BOSI chief executive Joe Higgins.
"There has been no change in approach in dealing with corporate and commercial customers," a bank spokesman stressed.
"Bank of Scotland will continue to manage customers and apply workout strategies that are in the next interest of both the Bank and the customer."