BUSINESS OPINION: Normally, when one bank decides to takeover another, the customers are the last to know. They usually find out when the deal is done and that in turn comes after months of behind the scenes negotiations.
They in turn are preceded by overtures from advisers and all sorts of other clandestine nonsense. Michael Soden, the new chief executive of Bank of Ireland, has adopted a refreshingly novel approach. He is telling anybody who will listen about his plans to take over - sorry merge with - AIB. Anybody that is apart from the chief executive of AIB, Michael Buckley and his board. Mind you, they have had enough to be getting on with lately and perhaps he just doesn't want to bother them.
Mr Soden first declared his interest in AIB in a series of interviews given to coincide with his taking the helm at Bank of Ireland in February. He made it clear at that stage that he had already sounded out the Minister for Finance and other senior Government figures, with generally positive feedback. He has gone back over this ground on several occasions since then.
He was at it again last week in an interview with RTÉ's Shane Kenny on his Moneymakers programme. Mr Soden gave his fullest explanation yet as to why the State's two biggest banks should merge to create an entity that would control 80 per cent of the market.
His argument seems to be that if the two banks combine they would have a market capitalisation of approaching €30 billion, which would give the combined bank the scale to play on the European stage. This would be a good thing for two main reasons. The first seems to be simply that it would be a source of great national pride to have a medium-sized European bank that has Ireland or Irish somewhere in its name. The second argument is that the creation of this bank would ensure the long-term prosperity of the Irish financial services industry and its supporting infrastructure.
To quote Mr Soden: " This is an enormous opportunity to have a home-grown financial services industry that is a major player in the European market".
The first argument seems trite and a bit dated, while the second one does not make any sense. Speaking for myself, I would rather have two smaller Irish banks competing for my business in Ireland than have to deal with one large Irish bank in order to be able see the tricolour flying over an office block in downtown Milan.
This a rather round about way of saying that it not a runner to expect Irish customers to accept less competition at home merely to allow the two big banks further their European ambitions. What we need is more banks, not fewer , and the fact that they are owned by Dutch or American investors rather than Irish ones does not really matter. Foreign-owned banks have already shown themselves to be every bit as good as their Irish-owned counterparts when it comes to facilitating mass tax evasion, overcharging, losing money in America and general rudeness to customers.
As regards the second point. I always though that it was the arrival of foreign banks and other financial institutions in the IFSC that kick-started the financial services industry here. Mr Soden on the other hand seems to be saying that if some of these foreign banks took over either AIB or Bank of Ireland the financial services industry here would be dealt a mortal blow. The reality is there are probably more people in Ireland working in high value financial services - as against retail banking - for foreign banks than there are in Bank of Ireland.
Mr Soden is clearly embarked on a softening up exercise. The more he talks about the merger, the more reasonable it seems. He has flushed the Irish Bank Officials Association out and got them into a debate on the issue. Soon this debate will shift from whether the banks should merge to what sort of level of job losses is acceptable.
IT is also clear that he has got a number of other key constituencies onside. IBEC has quietly given the idea the thumbs up while the Minister for Finance, Mr McCreevy - speaking through his officials - has also supported it.
The only voice of dissent - apart from the IBOA - is the Tánaiste, Ms Harney who has opposed it.
The extent to which Mr Soden needs the Government's approval is unclear. Bank mergers are exempt from merger law, but the transfer of a bank licence requires the Minister for Finance's approval.
However, much of Bank of Ireland and AIB's business is not banking and the merger of their insurance arms for example would almost certainly require merger approval. Just to make the situation even more hazy, responsibility for regulating mergers is currently being transferred from the Tánaiste's Department of Enterprise and Employment to the Competition Authority.
There is also the issue of European Competition law which supersedes Irish law. The size of any proposed merger may require that it be referred to the European Commission which recently ruled against a similar merger between two Swedish banks.
Mr Soden has a lot of work to do if he is serious about his stated ambition and perhaps he is right to start laying the groundwork. But at the same time he is effectively booking a wedding reception and organising a cake before he has even asked his girlfriend to marry him. In fact he has not even asked the girl he plans to marry if she would like to go to the pictures with him.
I am sure he knows what he is doing, but I can't help feeling he should be getting his man in corporate finance to talk to Michael Buckley's man in corporate finance, rather than wrapping the tricolour around himself and going on the radio.
jmcmanus@irish-times.ie
