Should AIB & BOI be sold to foreign banks?

I am perplexed by the regularity with which Central Bank Governor Patrick Honohan seems to publicly put our two main high street banks up for sale to any taker. A prospective buyer would be foolish to offer anything other than a firesale price, given the governor’s undisguised keenness to offload AIB & BOI.

Perhaps the Governor has failed to register the exodus of foreign-owned banks from our high streets in recent times? Halifax/Bank of Scotland has closed down, as has Postbank. National Irish Bank is withdrawing from traditional branch banking and Ulster Bank’s appetite for business has been markedly reduced in recent years as RBS, its UK parent, struggles.

Selling the two large Irish-controlled banks to large foreign institutions will probably result in them being the “runt in the litter” of a portfolio of overseas holdings. Instead of the performance of the Irish market being the first item on the agenda at every board meeting, it will be the last item – under AOB!

Future investment in the Irish market could be significantly curtailed, leaving us permanently reduced to the status of an economic backwater.

Actively managing a reduction in size of the balance sheets of AIB & BOI makes sense as it limits future risk. However, a firesale of the Irish-based banks or their assets will a short-sighted and costly solution which we will doubtless live to regret.