Bank of Scotland (Ireland) is to cease operating as a licensed bank in Ireland, with the immediate loss of 36 jobs, following a strategic review of its business here.
The company, which is owned by Lloyds Banking Group, will wind down its operations, ceasing to provide working capital and wealth management services by the end of the year, and transferring its existing Irish business to Bank of Scotland in the UK.
Any customers with current, deposit or treasury accounts will have to make alternative arrangements and close them by the end of the year, and the bank will not take on any new business.
"The review concluded that there was little opportunity for scalable growth in the future," the bank said in a statement today.
Thirty-six of the company's 840 employees will be made compulsorily redundant as a result of the move, with the remainder transferring to an independent service company that will carry out administrative functions relating to BoSI's local business, including maintaining the loan book.
Chief executive Joe Higgins said today the company may decide to sell its Irish loan book, following the group's decision to pull out of Ireland.
"I think there is the possibility that Lloyds may wish to dispose of the book," Mr Higgins told RTÉ Radio.
BoSI said the announcement would not affect its loan customers, who would continue with repayments as usual.
The bank has operations in Dublin, Belfast, Cork, Galway, Limerick and Waterford. Bank of Scotland's remaining businesses in Ireland and Northern Ireland, including its Halifax branch network and customers service centre in Northern Ireland and its insurance operation in Shannon, are unaffected.
Minister for Finance Brian Lenihan said it was clear there was far too much lending in the Irish economy at the height of the boom and "many foreign banks participated in this frenzy".
"Thankfully, the taxpayer does not have to bear the cost of the mistakes by these banks, their shareholders and other governments in other countries have to carry those losses," Mr Lenihan said.
Trade union Unite, which represents 830 employees at the bank, said staff were "in shock".
“Lloyds Bank may look upon this as a balance sheet exercise but the impact on workers who had pledged their future to the bank is devastating,” said Unite regional organiser Brian Gallagher.
“The bank, one of the largest financial institutions in Europe, has moral, legal, personal and financial obligations towards its loyal staff in Ireland. The implications of today’s announcement for our members and their careers are massive, and Unite will consult widely with staff in the coming days before we go into discussion with management.”
A spokeswoman for the bank said it would take between eight and 10 years to wind down the loan book. "Their jobs will be safe for the foreseeable future," she said.
The announcement comes only months after the bank said it would close its retail branches of Halifax in Ireland, just four years after the Halifax chain was opened. Some 750 jobs were lost with the closure of 44 branches of the bank.
BoSI moved into the Irish mortgage market in 1999, and bought State-owned lender ICC two years later.
Following the announcement that Halifax was to close, more than 50,000 credit card and current account customers were forced to move their business elsewhere.
The bank's 40,000 to 45,000 customers were able to retain their mortgages but must move to a new lender if they seek to remortgage or top up their loans.
A spokeswoman for BoSI today said remaining mortgage customers would be unaffected by the closure of BoSI. "Their existing arrangements with the bank will all be the same, there'll be no changes to their accounts. All they'll see is a change in their statements to Bank of Scotland plc."
Business lobby group Isme said it was concerned about the closure.
"This announcement raises serious concerns on a number of fronts. Firstly, assurances need to be provided for existing customers’ current funding requirements," said Isme chief executive Mark Fielding.
"Secondly, it restricts all SMEs options in attempting to secure finance in an already shrinking banking market. Thirdly, reduced competition will result in increased bank interest and charges, for already hard-pressed bank customers."
