As plans for a joint venture have been so forcefully rejected, a full merger between AIB and Bank of Ireland looks doubtful. Siobhán Creaton, Finance Correspondent, reports

Bank of Ireland chief executive, Mr Michael Soden, can be in no doubt about the strength of political opposition to his plans to create an Irish superbank through a merger with AIB.

Politicians of every hue have forcefully and successfully objected to an innovative joint venture which had failed to raise any hackles when it was first mooted just a couple of months ago.

The Republic's two biggest banks had sold this joint venture as a sensible commercial decision that was unrelated to any longer term link-up between the two financial institutions.

The politicians, however, did not believe them and decided to send a shot across Mr Soden's bows. Apart from the Minister for Finance, Mr McCreevy, politicians from all political parties do not seem to share Mr Soden's vision for Irish banking.

Soon after his arrival from the Antipodes at the start of the year, the Bank of Ireland chief began to champion the merits of bringing the two banks together, claiming this was a more viable option for the Irish economy than to let all of the financial institutions slip into foreign hands.

He argued this would transform Ireland into a "branch economy" with key decisions about how banking resources should be distributed being made in locations such as London or Frankfurt.

He said he wanted to spark a debate about the prospects for Irish financial institutions and appeared to have been bringing some influential individuals and groups around to his way of thinking.

The bank had obviously been discreetly lobbying politicians, both before Mr Soden first raised the spectre and more or less consistently since then. He would have been particularly heartened with the Minister for Finance's warm reception.

AIB for its part played down any association with Mr Soden's idea and stressed that it was focused on remaining an independent Irish bank. Some analysts, however, believed that if a foreign bidder approached AIB, the Irish bank would certainly hear Mr Soden out before making any final decision.

The Tánaiste, Ms Harney, did signal her opposition very early on and decided to invoke Article 9 of the Merger Regulation to have the matter fully examined in Ireland where its implication would be most acutely felt.

The Irish Bank Officials Association (IBOA) has been the most vocal critic of any plan to merge AIB and Bank of Ireland. Naturally, it fears this would result in the closure of up to 100 bank branches across the Republic and the loss of 5,000 jobs.

Yesterday, the IBOA's assistant general secretary, Mr John O'Connell, said now that the information technology joint venture had been called off, the prospect of a full merger was no longer a reality.

The Consumers Association of Ireland (CAI) is also relieved. While the banks had always claimed that the merger of its information technology divisions would have reduced costs, the CAI was sceptical that this would translate into cheaper bank charges and services for customers. But its primary concern was the preservation of the privacy of customer information.

Yesterday, the IBOA said there was still a need for a debate on the future of Irish financial institutions and urged the Government to facilitate such an exchange of views.

For now, it seems the politicians have fully accepted the IBOA's concerns about branch closures and job losses if the two banks were to merge.

They are also mindful that it has taken a long time to break the cosy cartel that existed between the big Irish banks to the cost of consumers.

It took the arrival of foreign institutions to inject some real competition and to offer a wider choice and cheaper products for Irish customers.

The politicians have emphatically signalled that Mr Soden should go back to the drawing board and map out another strategy for Bank of Ireland.