Consolidation the new watchword for banks

Just before Bank of Scotland set the cat among the Republic's financial pigeons, news from elsewhere showed another face of the future of financial services which will have both the banks and their customers thinking. Deutsche Bank, the largest in the world, and Dresdner Bank, its German rival and third in its domestic market, are talking about effectively merging their retail banking operations.

Following bank mergers in Italy, France and Spain, this initiative bodes ill for the continued independence of all the main Irish banks and building societies.

Granted, the German experience is somewhat different with banks vying with highly successful publicly-owned local savings companies for customers' business. But there are some things in common. First among these is the desire by banks worldwide to cut costs in the highly expensive business of branch banking. Second is the need for smaller independent banks, like Dresdner, to demonstrate they have a clear strategy for survival in a more competitive world. The parallels with Bank of Ireland come to mind.