Bank of Ireland and AIB plan to merge IT services

The Republic's two biggest banks, AIB and Bank of Ireland, plan to merge their information technology services in a new joint venture company. Both financial institutions say the link-up is for purely commercial reasons and is not a precursor to a merger. But the Irish Bank Officials Association (IBOA) has expressed serious reservations about the move and warned of job losses.

Its general secretary, Mr Larry Broderick, believes that despite the banks' denials, the move is the "first step" towards an outright merger. The banks have notified the European Commission of their intention to form the new company. The Commission can take up to one month to either approve it or initiate an investigation to consider its impact on competition within the Irish banking sector. Any investigation could take up to four months.

An independent management team will be recruited to run the company and the banks insist neither AIB nor Bank of Ireland will have access to information concerning each other's customers.

The joint venture will also market its services to other potential customers, such as utility companies, in the Republic and Britain.

The two banks are hopeful that the regulatory hurdles will be cleared quickly and that the joint venture company can be established towards the end of 2002.

By establishing a new independent company the proposal is expected to by-pass the EU's merger control laws.

The joint venture will be established on a 50/50 basis and is expected to employ 700 staff, who will transfer from the information technology departments at Bank of Ireland and AIB.

Around 300 staff are employed at AIB's information technology unit, which is divided between its Dublin headquarters at Ballsbridge, and Donnybrook.

Bank of Ireland's information technology division is based in the Dublin suburb of Cabinteely where it employs about 200 staff. A further 200 to 250 Bank of Ireland employees from this unit have transferred to a joint venture with Perot Systems since 1998. Bank of Ireland will now exit that arrangement and those staff are expected to move to the new company.

Mr Broderick said the IBOA was concerned about the impact the plan would have on numbers employed by the banks in IT, and on the terms and conditions under which staff worked.

"We are extremely concerned. There is a huge difference when working for an IT company and a bank. The two banks are saying this is not part of a merger but it seems like the first phase of the two banks coming together," he said yesterday.

The union's biggest concern relates to Bank of Ireland staff, as the bank has already indicated that the number of employees at the new company will decline over a three-year period.

In a briefing, the staff were told that any job losses would be achieved through natural attrition and through voluntary severance deals, something that has not been discussed with the IBOA.

Mr Cyril Dunne, Bank of Ireland's chief information officer, said up to 80 jobs might be cut.

AIB has said it will enter into negotiations with the IBOA to reach an agreement on the transfer of staff.