Thursday, 31 March 2011

Bank of Ireland forced to dispose of UK Operations?

Update: 170511. With the FSA to investigate the claim that the Bank of Ireland's UK operation is a 'sham bank' this could do one of two things either accelerate the disposal of the UK operations or result in the value of the UK operations dropping like a stone if their UK banking licence is suspended.

Shares in Bank of Ireland and Allied Irish Bank have been suspended today (Thursday 310311), pending the publication of stress test results later today. The stress tests are expected to show that far more capital needs to be pumped into the two banks than was predicted at the end of last year. There are rumours that Bank of Ireland may need to be nationalised as a result.

Will one of the consequences of taking additional state funding be that Bank of Ireland will be forced to dispose of its non-Irish operations? Given that toward the end of last year the UK operations were put into a separate subsidiary this would be easier to bring about than it might have been. See which posed this question in November of last year.

Adding the Bank of Ireland UK operations to the 600 branches of Lloyds Banking Group, Northern Rock, Yorkshire Bank and Clydesdale Bank and a number of building societies potentially up for sale, the opportunities for new entrants into the UK banking market are plentiful. Bad news for the UK Government and for UK tax payers having such a large number of businesses up for sale is bound to drive prices down.

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