Analysis: There could hardly be a sharper contrast in the reception given to the announcements by, on one hand, Danske Bank and Bank of Scotland (Ireland) and, on the other hand, Bank of Ireland with regard to their future strategies for development within the Irish market.

Danske Bank's acquisition of the National Irish Bank/Northern Bank has been widely welcomed, not least by staff of National Australia Bank's former subsidiaries. Equally, the acquisition by Bank of Scotland (Ireland) of the ESB branch network has been widely perceived as an enormously positive development.

In sharp contrast, the response to the strategy set out by Bank of Ireland in its trading update was widely perceived as being wholly negative.

The key question is this: Is there a real and substantive difference in the "business model" being promoted by the Bank of Ireland, as compared with new entrants and large domestic rivals or is it simply the case that Bank of Ireland's underlying strategy is not sufficiently transparent to the public?

The bank's stated objective is to enhance its competitiveness and the scope for capitalising on growth opportunities. It is not clear from its eagerly awaited trading update precisely how the bank sees - and measures - competitiveness.

Equally, there is a shortage of detail in regard to the kinds of "growth opportunities" the bank intends to pursue.

What is clear, however, is its strategy for pursuing this objective. It entails specific actions to reduce its annual costs by €120 million.

Control over its cost base is a necessary condition for efficiency for any financial service provider. In the case of the Bank of Ireland, the logic of streamlining its operations makes eminent good sense.

But the headline which sets the bank apart from its competitors is the planned reduction of more than 2,000 of its staff as the core driver of its cost-reduction programme.

Three key points can be made in relation to what appears to be the "business model" on which the bank's medium-term strategy is based.

The first relates to a focus on the cost/income ratio. The projected reduction in this ratio is one of a number of elements that go to make up this strategy. Cost/income ratio is a very imperfect proxy for efficiency and competitiveness in banking. It is not something that a strategy of any substance should be built around.

There is no evidence in 2003 figures for a number of leading European banks of a robust relationship between the cost/income ratio and capital strength or pretax profits.

Certainly, cost/income ratios in the high 50s or above may be indicative of structural problems that need to be addressed. However, those banks which might be regarded as major retail banks within their domestic markets have ratios in excess of 50 per cent. Crédit Agricole, RBS, Paribas, Barclays, ABN and Santander are just some examples.

More generally, the cost/income ratio reflects the cost of doing business in specific segments of the market. A "mass market bank" will focus more on achieving a higher aggregate level of sales while generating lower average customer revenue and profitability.

A second issue is the value attached to people. For far too long the cliché "our people are our greatest asset" has not been challenged. In many cases, it is simply devoid of any substance.

It is staff who generate economic value. A failure by management to acknowledge and respect the contribution of individual staff members is wholly subversive of strategy. In a business that is dominated by "knowledge equity", and where relationships are central to trust building and reputation, the notion that cutting swathes of workers as a means of strengthening the bottom line is economic nonsense and morally reprehensible.

Finally, beyond a certain point, cutting costs must compromise the ability of a bank, operating across a spectrum of segments, to deliver a competitive service and to retain its customer base.

In the case of Bank of Ireland - and indeed all banks operating in the domestic market - this will be reinforced by the recent major initiative on the part of the Irish Bankers' Federation to facilitate switching by customers between banks.

A major reappraisal of the banks' business model in the future would seem to be indicated - and there may be lessons for banks about respecting staff not just because it's right but because it makes compelling business sense.

Prof Ray Kinsella is on the faculty of the Management Institute of Paris and is a visiting professor at the Institute of European Finance.