The European Commission has extended its review of a joint venture of information technology services by the AIB and Bank of Ireland by two weeks.

It was due to rule on the joint venture yesterday but has sought further time to consider its impact on the level of competition within the Irish banking sector.

The new venture company, Sigma, aims to employ 700 staff and would assume the day-to-day management of the banks' internal computer networks and help desks, as well as providing back-up services for both banks. It is designed to cut costs and, ultimately, the banks hope that Sigma will undertake similar services for other Irish banks and possibly utility companies in Britain.

The European Commission has not stated why its review period is being extended. Under European Union antitrust rules, the Commission can only apply a two-week extension if the companies make concessions to offset antitrust concerns or if an EU member-state requests the right to rule on the case.

The Irish Bank Officials Association has expressed reservations about the proposed merger and has made representations to the Commission highlighting its concerns. Its primary concerns relate to staffing issues and whether this joint venture is a pre-cursor to a merger between the Republic's two biggest financial institutions.

A ruling is now expected on August 28th when the Commission can either approve the new joint venture or open a four-month investigation.

Brussels has requested documentation from the two banks in recent weeks to assist its deliberations. It was formally notified of the proposed venture on July 15th.

The joint venture will be established on a 50/50 basis and an independent management team will run the company.

- (Additional reporting by Bloomberg)