The banks will mostly want to forget 2000. It was a year when financial institutions had to write huge cheques to regularise their positions with the Revenue Commissioners, their share prices were mostly under pressure, and merger and takeover plans didn't always work out.

The Dail Public Accounts Committee (PAC) inquiry into DIRT evasion in the 1980s and 1990s finally concluded, yielding £173 million (€220 million) for the Exchequer in back tax, interest and relatively small penalties.

The banks lined up to announce the scale of their full and final settlements with the Revenue and, in all cases, that amounted to far more than the public estimates the companies had offered. The PAC called the chairmen and chief executives to appear before them one more time, even after they had paid their dues. Few doubted that this was really an exercise in further public humiliation.

Next year, all the financial institutions will be anxious to improve their image and have offered assurances that widescale tax evasion is a crime they will not be convicted of again.

With the economy continuing to perform strongly, the financial sector enjoyed further growth in profits but Irish investment institutions were selling their shares and driving the price lower.

Fund managers reduced their holdings of Irish stocks as they sought to build a broader portfolio to embrace European stocks. This was a severe blow to the sector and prompted speculation that a takeover of one of the bigger banks might be imminent. .

As the markets became less enamoured with dot.coms, the banks began to find favour with the investment community once again. Their shares rallied, with some gaining 20 and 30 per cent over a week and most will end the year ahead.

For some time, consolidation has been the buzzword in the sector, with analysts predicting which institutions would link up to form a stronger base for shareholders.

After months of rumours and denials, it emerged that Anglo Irish Bank was preparing to take over First Active. The news was music to the ears of First Active's shareholders and offered them the first sign of optimism in a long time.

The rationale from Anglo Irish Bank's perspective was less clear and was never fully explained as the deal fell apart.

Problems over who would be chairman and who would sit at the boardroom table could not be resolved.

Anglo has since brought in strong profits and has expanded its business with an acquisition in Switzerland.

First Active, meanwhile, has been completely restructured. Branches were closed, more than 100 staff left the organisation and its head office was put up for sale in a bid to trim costs. Finance director Mr Cormac McCarthy succeeded Mr John Smyth, with the markets expecting it will eventually be bought.

The Minister for Finance, Mr McCreevy, managed to sell two of the three State-owned banks after a few false dawns. On December 5th, he announced that he secured £614 million for ICC and TSB Bank. Bank of Scotland emerged as the new owner of ICC, in a deal that will also be lucrative for its employees, netting them shares worth around £100,000 each.

The deal signals the determination of Bank of Scotland to become a significant player in the Irish banking market and further deals are expected.

The sale of TSB finally allowed Irish Permanent to become a fully fledged bank, able to offer its customers access to the clearing system with facilities such as current accounts. The combined TSB and Irish Permanent operations will trade as Permanent TSB and offers huge potential for sales of Irish Life & Permanent group products.

It will also mean branch closures and possibly some voluntary redundancies. This became a common theme in the sector, with Bank of Ireland and Ulster Bank aiming to reduce staff costs.

Ulster Bank employees also had to get used to a new owner, with Royal Bank of Scotland buying UK parent NatWest. Royal Bank and Bank of Scotland are arch-rivals and tend to follow each other. Ireland is their newest battleground and neither will be content to stand still. Both banks are bigger than Bank of Ireland and AIB, and they may well have one of them in their sights as a potential acquisition. Decisions are also likely to be made in 2001 on the future of National Irish Bank (NIB) and Northern Bank. Their parent, National Australia Bank, is keen to expand its presence in the UK and is reviewing all of its operations on this side of the world. It has clearly signalled its intention to join with one of the major UK banks and, if it is successful, this could have major repercussions for the Irish market.

NIB and Northern Bank will be sold or may provide an entry point for an institution such as Abbey National, bringing another new player in to the market.

AIB and Bank of Ireland are both preparing for new chief executives. AIB has announced its managing director in Poland, Mr Michael Buckley, will succeed Mr Tom Mulcahy next June. At around the same time, Bank of Ireland will be close to announcing a successor for Mr Maurice Keane.

Mr Buckley has indicated that AIB's future focus will be on developing its international business. The bank may seek to forge an alliance with a major banking group in a defensive move. Bank of Ireland, meanwhile, is concentrating on building its business in the UK and generating greater profits in Ireland. It is seen as being more vulnerable to a takeover and will also be keen to fend off any unwelcome advances.

The pace of consolidation is almost certain to speed up rapidly next year. The deals will be bigger and will transform the face of Irish banking.