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Siobhan Creaton: Face of banking to change for the better as foreign firms circle the 'For Sale' signs

Banking as we have known it will change utterly this year. In the months ahead, familiar and infamous names will disappear forever from our main streets to be replaced by foreign-owned banks.

It will be traumatic for customers and bank staff but may mark the beginning of a new banking regime that will be positive for the Irish economy.

Central Bank Governor Patrick Honohan formally put the 'for sale' sign over the Irish banks and AIB is the bank the Government will want to sell as quickly as it can.

Professor Honohan believes that small countries should have a foreign-owned banking sector rather than relying on the big local brands and has been forthright in encouraging potential bidders to step forward to take them off the Government's books.

Perhaps because of his experience with Ireland's rotten and incompetent bankers he doesn't particularly care where our new banking elite come from. The Chinese, Spanish, British, Americans and other nations' banks would all be warmly welcomed to our shores.

It was an open secret that when Irish banks were making billions, senior bankers from all corners of the globe had a look at what they were doing and wondered whether they should get a slice of the action.

Some have gotten burned themselves in the global financial meltdown since then and aren't flush with cash, so they would want some serious incentives to set up shop in Ireland by taking over AIB or Bank of Ireland.

Europe's biggest and most profitable bank, Santander, is familiar with AIB's distress having already snapped up its best assets, Bank Zachodni WBK in Poland and its 22pc stake in the US bank M&T.

The Spanish bank has shown an appetite for taking over troubled banks in the UK where it has taken over Abbey National, Alliance & Leicester and the Bradford and Bingley savings business in recent years.

It is now gearing up to raise £3bn through a stock market flotation of those assets later this year.

And while it will have access to more cash when this is completed, Santander is viewed by analysts as more of a seller than a buyer of UK and Irish banking assets but it probably will take a look at AIB.

Barclays Bank may be a more likely contender to acquire the bank. It already has an Irish operation that deals with corporate clients and employs 120 people in Dublin and has been mentioned as having ambitions to expand its business here.

Much will depend on its new chief executive, Bob Diamond's plans for the bank and the deal it might be able to cut with the Government.

Royal Bank of Scotland has first-hand experience of Ireland's property market crash with its Ulster Bank subsidiary nursing billions of losses on loans to developers.

It has said it will be winding down its operations rather than expanding in the near term and is more likely to sell Ulster Bank than acquire AIB.

Bank of Ireland, which is in marginally better shape, will also be eyed up and bankers will run the rule over it.

That bank, which is doing everything it can to stand on its own feet and avoid a takeover or being nationalised, may survive in the near term but a sale could not be ruled out.

Beyond the banks themselves, private equity firms were quick to circle our banks' carcasses and are continuing to loiter with intent. J Christopher Flowers has said his New York based firm is continuing to look for Irish banking assets.

"If we can find the right opportunity to invest in Ireland we would like to do that," he said in December.

J C Flowers & Co has been bidding for the EBS Building Society but has also signalled that a stake in AIB or Bank of Ireland might be attractive, depending on government guarantees on the potential losses from toxic assets.

It is also interested in buying portfolios of bank assets if they are packaged attractively.

Another bottom feeder, billionaire investor Wilbur Ross, is also bidding for the EBS or other Irish banks if he thinks there is money to be made from the transaction.

The Irish economy will turn around, he believes, and come back with less of a roar than the Celtic Tiger. Ross could also join with Sir Richard Branson's Virgin Money to offer financial services in Ireland.

The Government's first priority is to clean up the banks. The transfer of billions of toxic loans to Nama has helped in this regard but left AIB insolvent and Bank of Ireland fighting for its survival.

It will have to use some of the €85bn bailout money to guarantee huge losses and create attractive propositions for prospective buyers.

Already many of their most valuable assets have been disposed of, and with weak economic growth prospects it's not the easiest sell and is unlikely to get a decent return for the taxpayer. But it might put them on a sound footing for the future.

Irish Independent