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BoSI looking at its options to lower funding reliance

Bank of Scotland (Ireland) (BoSI) is believed to be considering a number of options to lower its hefty reliance on volatile wholesale funding as it preens itself in an effort to take part in consolidation among the country's second-tier lenders.

The bank -- which, as the Irish Independent revealed yesterday, received a €2bn bailout from its UK parent Lloyds Banking Group last month -- made it known to both the Department of Finance and rivals that it was keen to elbow its way into a 'third force' in Irish banking.


Senior executives at BoSI engaged with a number of local brokers to tap their views over how the bank could position itself.

However, it is understood that the Joe Higgins-led bank has no intention of appointing a local adviser.

BoSI's loan-to-deposit (LTD) ratio, which stood at 486pc in December 2008, would make it an unattractive merger partner, particularly with banks globally under intense market pressure to bring this figure down to 100-125pc.

As things stand, a combined EBS, Irish Nationwide and Permanent TSB will have an LTD ratio, after the NAMA process, of over 180pc.

The two building societies are in formal talks and Permanent TSB, a unit of Irish Life & Permanent, is hoping to enter tie-up talks with the combined entity later this year.

One option for BoSI to lower this key ratio would be to park a certain portion of its total €32bn loan book with its parent, leaving deposits in the portion of the bank that would take part in a deal.


A solution whereby Lloyds provides the merged entity with a long-term funding is also being talked about as a possible option, according to sources.

Lloyds is said to be "very open" as to what solutions BoSI brings to the table as Mr Higgins continues a strategic review of the massively loss-making bank's future.

The bank reported over €1bn of bad loan losses for the first half of last year.

More recently, it has a 'business support unit' to manage loans that are in trouble.

Robin Fanner, a senior Lloyds figure, has been brought over to Dublin to manage the unit, reporting to Martin Akers, head of risk, who moved from Lloyds last year.

Irish Independent