DUBLIN: It’s five years since the plug was pulled on the Bank of Scotland (Ireland) operation by Lloyds Banking Group, having racked up £10.9 billion (€15.53m) in losses. In the years before the 2008 crash, Bank of Scotland (Ireland) had expanded its business here aggressively, throwing shapes at becoming a major player in Irish banking.
A 400-page report published yesterday details the folly of this strategic decision, the lapses in oversight, and the failure of its UK parent, HBOS plc, to heed various warning bells about its Irish subsidiary.
The report by the Prudential Regulation Authority and the Financial Conduct Authority details the failure of HBOS in October 2008, leading to it being merged with Lloyds. It mostly focuses on the period from January 2005 to late 2008 but also goes back to the merger of Halifax and Bank of Scotland in 2001 to form HBOS.
Bank of Scotland (Ireland) was a large contributor to this failure, recording the highest losses of all the group’s divisions. This was in spite of it being part of the international division set up in 2004, which was the smallest within HBOS in terms of assets.
HBOS considered the expansion of its international unit as a diversification but the report states that this was not the case in Ireland.
“Ireland retained close links to the performance of the UK economy and financial system, with Irish banks significant investors in UK commercial property markets, and UK banks big investors in Ireland. Expanding in Ireland did not reduce the significant exposure to a downturn in the UK market.”
The report details how the bank emerged from the purchase of Equity Bank in 1999 and its later merger with the larger ICC Bank in 2001.
ICC Bank had concentrated on hotels, venture capital, SMEs, pubs, restaurants and commercial property.
Bank of Scotland (Ireland) later took on Halifax’s Irish mortgage portfolio and from 2004 pursued the development of a full branch network, offering customer accounts.
It was set on “changing the traditional competitive landscape and providing more attractive products” for customers than local operators.
The aim was to rapidly expand its retail and corporate businesse
