On Her Majesty's Service - Halifax, Ulster Bank etc

Following the decision not to participate in the Government Guarantee scheme, Halifax/Bank of Scotland (HBOS) ran full page press ads during the week to reassure customers and to promise to utilise the freedom from the scheme constraints to bring innovative and better value products to the Irish market.

The latter point was the key message from motor-mouth Mark Duffy, HBOS MD in Ireland, in a series of media interviews following the announcement of the decision not to participate.

It’s worth recalling that HBOS, both here and in UK, would now be defunct if the UK government had not stepped in to save that bank. It is still likely that the UK Government will end up as the largest shareholder in a combined Lloyds-TSB/HBOS merged bank.

When the Irish Government announced the bank guarantee scheme, originally confined to six Irish-owned institutions, the UK government protested to Dublin that it would seriously disadvantage UK banks operating in Ireland, while simultaneously giving an unfair advantage to Irish banks operating in the UK market.

Is it safe to assume that the Irish government will be raising similar concerns with their UK counterparts, particularly if Ulster Bank/First Active also opt to stay outside the scheme?

In effect, two UK state-owned banks, themselves recent casualties of the financial services meltdown, will be handed a competitive advantage in the Irish market, potentially damaging the recovery prospects for the Irish financial system.