Irish banks will have to expand internationally if they are to consolidate in the domestic market, the incoming chief executive of Barclays Bank, Mr Matthew Barrett, said last night.

"As scale becomes steadily more important, both a consolidation strategy and specialisation strategy necessarily imply entering international markets," said Mr Barrett, who was reared in Co Meath and spent 37 years with Bank of Montreal.

"If countries like Ireland and Canada are to retain strong domestically-based industries with significant local control, governments must accept that this can only be achieved by allowing institutions to choose strategies they believe will make them internationally competitive," he added.

Addressing the annual members' dinner of the Financial Services Industry Association in Dublin, Mr Barrett said the IT revolution was producing "explosive" change in banking worldwide and no one could foresee where the change would lead.

The development of critical economies of scale and the fact that financial services were becoming commodities as opposed to relationship products were crucial challenges, which were being met by mergers and specialisation.

"Globalisation makes the need for scale even more imperative, and reinforces the trend to treat financial services as commodities," Mr Barrett said. IT development meant that bankers "can also analyse their information with far more depth and precision".

"Down in the trenches, these imperatives mean two things: intense competition, which not all banks will survive, and, perhaps even more, immense costs which not all banks can afford," he said.