Bank of Scotland Ireland (BOSI) has strongly rejected any suggestions of a bad debt problem with its hotel loan book in the Republic, as alleged in reports in the British media.

An item in the Times's stock market column suggested that concerns over the health of the loan book at ICC - which BOSI purchased from the State two years ago - was behind the slump in the Scottish bank's share price on Wednesday.

Some stockbrokers in the Republic have pointed out that given the relatively small size of ICC's balance sheet it was unlikely to have been the main reason why Halifax Bank of Scotland shares fell by 2.8 per cent.

Goodbody Stockbrokers suggested that ICC's loan book was equivalent to 0.7 per cent of that of its parent.

Bank of Scotland Ireland (BOSI) does have a significant exposure to the leisure and hotel sector, which has been particularly badly hit by the economic downturn.

Chief executive Mr Mark Duffy has indicated that the bank will report a very strong set of figures in the first quarter of 2003 and said he was "bemused" by the report. That said, all of the banks will be keeping a close eye on their loan books as economic conditions deteriorate.

Financial institutions have all been feeding the huge demand for credit in the rapidly growing economy over the past few years and industry sources are suggesting that some banks may have stretched themselves to a greater extent than others to secure new business.

It is those institutions that will bear the brunt of the slowdown.