The Bank of Ireland (Irish: Banc na hÉireann) (ISEQ: BKIR. LSE: BKIR, NYSE: IRE) is a commercial bank operation in Ireland, which is one of the 'Big Four' in both parts of the island.
Historically the premier banking organisation in Ireland, today Bank of Ireland is number two to Allied Irish Banks. The Bank occupies a unique position in Irish banking history. At the core of the modern-day group is the old Bank of Ireland, the ancient institution established by Royal Charter in 1783.
The Bank of Ireland should not be confused with the Central Bank of Ireland, as it is a commercial bank and not the Irish central bank, as its name might suggest.
Bank of Ireland is the oldest bank in continuous operation (apart from 4 closures due to bank strikes, 1950, 1966, 1971, 1976) in Ireland.
Chronology of history to 1990:
1719: Abortive attempt to establish a bank to be called "Bank of Ireland". Another abortive attempt 2 years later.
1782: The bank was formed by an Act of the Irish Parliament in 1782 to support public and commercial finances in Ireland.
1783: 25 June 1783, the Bank of Ireland opened for business at Mary's Abbey (Off Capel St., Dublin) - now on the route of the Luas Tram (Red Line) - in a private house previously owned by one Charles Blakeney. 12700 banknotes were issued with a total value of £882,500
1785: First forgeries of Bank of Ireland notes identified. Forgery became extensive in subsequent years.
1787: March 2, 1787, the bank suspended cash payouts during a banking crisis.
1808: June 6, 1808, Bank of Ireland moved to 2 College Green. This building had been the parliament building until the Act of Union 1800 abolished the Irish Parliament. The Irish House of Commons had been damaged in a fire, and considerable modifications were made to this area before opening as a bank. (The Irish House of Lords was preserved, and remains to the present day, despite the fact that a statue of Queen Victoria was removed.)
1820: Bank of Ireland weathered one more of many banking crises - but many other banks fail.
1825: Bank of Ireland opened its first branch - in Cork. Six other branches were opened later in that year.
1835: Bank of Ireland introduced the overdraft - previously, all lending was by discounting of bills.
1847: Major banking crisis following the Great Irish Famine.
1857: Another banking crisis.
1864: Bank of Ireland first pays interest on deposits.
1886: Bank of Ireland first disclosed its accounts and balance sheet. Gross Profit was £220,681-9-5d. Total assets were £16,142,797-14-0d. There was another banking crisis, and a major bank failure - Munster Bank Ltd. Munster & Leinster Bank - now included in AIB was formed from the entrails.
1914: 190 staff members joined the army and saw service. 32 did not return.
1919: Irish banks recognise the Irish Bank Officials Association (IBOA), a banking union formed 2 years earlier.
1922: the bank's Governor Henry Guinness is appointed to the new Senate by WT Cosgrave.
1926: The Bank of Ireland Crest, originally applied for in 1783, was eventually granted. The Bank of Ireland took control of the National Land Bank - a friendly society. Following restructure as a limited company, it was rebranded as National City Bank Ltd.
1929 & 1935 Legislation to reform the corporate structure of Bank of Ireland - Limited liability introduced.
1948: "The Bank of Ireland 1783-1946" by F.G. Hall was published jointly by Hodges Figgis (Dublin) and Blackwell's (Oxford).
1950: Irish banks closed for 7 weeks due to a strike by members of the Irish Bank Officials Association. Other total closures in 1966, 1971, and 1976.
1956: The Bank was authorised to operate the Prize Bond scheme, on behalf of the government, and continued to do so until 1989.
1958: The Bank took over the Hibernian Bank Limited.
1965: The National Bank Ltd, a bank founded by Daniel O'Connell in 1835 had branches in Ireland and Britain. The Irish branches were acquired by Bank of Ireland and rebranded temporarily as National Bank of Ireland, before being fully incorporated into Bank of Ireland. The British branches were acquired by Williams & Glyn's Bank.
1983: Bank of Ireland Bi-Centenary. A commemorative stamp was issued. The Bank commissioned the publication of "An Irish Florolegium".
From the beginning, it was connected closely with the leading banking family in Dublin, the Huguenot La Touche family. A member of that family - David La Touche - was the first Governor.
Role as government banker:
The Bank of Ireland is not, and was never, the Irish central bank. However, as well as being a commercial bank - a deposit-taker and a credit institution - it performed many central bank functions, much like the earlier-established Bank of Scotland and Bank of England. The Bank of Ireland operated the Exchequer Account and during the nineteenth century acted as something of a banker of last resort. Even the titles of the chairman of the board of directors (the Governor) and the title of the board itself (the Court of Directors) suggest a central bank status.
From the foundation of the Irish Free State in 1922 until 31 December 1971, the Bank of Ireland was the banker of the Irish Government, but was not the central bank. This function was fulfilled by the Currency Commission, which was later superseded by the Central Bank of Ireland in 1943.
On 20 March 2005, Bank of Ireland announced 2,000 job cuts in a move to reduce its cost base, this coming despite profits in excess of €1 billion for that financial year.
The headquarters of the bank until the 1970s was the impressive Bank of Ireland building on College Green, Dublin. This building was originally designed by Edward Lovett Pearce in 1729 to host the Irish Parliament, and it was the world's first purpose-built two-chamber parliament building.
The bank had planned to commission a building designed by Sir John Soane to be constructed on the site bounded by Westmoreland Street, Fleet Street, College Street and D'Olier Street (now occupied by the Westin Hotel). However the project was cancelled following the Act of Union 1800, when the newly defunct Parliament building was bought by Bank of Ireland in 1803.
In the 1970s the bank moved its headquarters to a modern building in Baggot Street, Dublin 2. As Frank McDonald notes in his book "Destruction of Dublin", when these headquarters were built, it caused the world price of copper to rise - such was the usage in the building. The main building is on the site of the former car assembly plant of Lincoln & Nolan, where Austin cars were assembled. Historically, the site was associated with the Battle of Rathmines in 1649, and it is said that the last skirmishes of that battle took place here. In addition to some Georgian houses, the site also included a pub (Laurence Ryans). The bank retained the pub licence for some years.
Built amidst a blazing row where Bank of Ireland was responsible for a weekend demolition of these Georgian houses, the bank as stands today is now regarded as an excellent example of the Miesien idiom, and among the purest contemporary corporate architectural forms built in Dublin. The old Bank of Ireland building continues today as a working branch of the bank. Today, visitors can still view the impressive Irish House of Lords chamber within the old headquarters building. The modern Irish Parliament is now housed in Leinster House in Dublin.
In 2010 the bank moved to a new, smaller headquarters on Mespil Road.
1995 19 December: Bank of Ireland merge First New Hampshire Bank with Royal Bank of Scotland's Citizens Financial Group.
1996 16 April: Bank of Ireland buys the Bristol and West building society for €882m, which keeps its own brand.
1999 22 May: It is announced Alliance & Leicester is in merger talks with the Bank of Ireland.
17 June: It is announced that merger talks with Alliance & Leicester have been called off.
2000 31 July: It is announced that Bank of Ireland is to acquire Chase de Vere.
2002 17 May: Bank of Ireland acquires Iridian, the US investment manager, which doubles the size of its asset management business.
2005 21 September: Bank of Ireland completes the sale of the Bristol and West branch and Direct Savings (Contact Centre) to Britannia Building Society. This is the first re-mutualisation of a former Mutual company. Britannia promises that there will be no compulsory redundancies.
2008 22 September: Moody's Investors Service has changed its outlook on Bank of Ireland from stable to negative. Moody's pinpointed concerns over weakening asset quality and the impact of a more challenging economic environment on profitability at Bank of Ireland.
2008 share price collapse.
2009 12 February: The Irish government announces a €7 billion rescue package for the bank and Allied Irish Bank plc.
27 February biggest bank robbery in the history of the state took place at Bank of Ireland at College Green.
Consultants Oliver Wyman validated Bank of Ireland's bad debt levels at €6 billion over three years to March 2011, a bad debt level which was exceeded by almost €1 billion within a matter of months.
2010 16 April: The European Commission orders the disposal of Bank of Ireland Asset Management, New Ireland Assurance, ICS Building Society, its US Foreign Exchange business and the stakes held in the Irish Credit Bureau and in an American Asset Manager followed the receipt of Irish Government State aid.
The Group provides a broad range of financial services in Ireland to the personal, commercial, industrial and agricultural sectors. These include checking and deposit services, overdrafts, term loans, mortgages, international asset financing, leasing, installment credit, debt financing, foreign exchange facilities, interest and exchange rate hedging instruments, executor, trustee, life assurance and investment fund management, fund administration and custodial services and financial advisory services, including mergers and acquisitions and underwriting. With the acquisition of New Ireland Assurance in December 1997 the Group has access to additional distribution channels and products for its life assurance and pensions business. The group provides services in multiple currencies, but primarily in the Euro.
The Bank operates telephone and online banking services for its customers under the name 365 phone and 365 online respectively. The telephone banking service was launched in 1996 and was formerly known as Banking 365. The online banking service followed in 1997 and was initially known as Banking 365 online. It also offers the Laser payment system.
The Group markets and sells its products on a domestic basis through the most extensive nationwide distribution network in Ireland and its direct telephone banking service. The Group has built a market share among credit institutions in Ireland of over 20% of resources and loans outstanding.
The bank is headquartered in Dublin, and has operations throughout the Republic of Ireland. It also operates in the United Kingdom, particularly Northern Ireland, where it prints its own banknotes in Pounds Sterling. In Great Britain, the bank expanded largely through the takeover of the Bristol and West Building Society in 1996. On 21 September 2005 the Bristol and West retail and contact centre network was sold to Britannia Building Society. Bank of Ireland has still retained the right to use the Bristol & West name to sell Mortgages. Bank of Ireland also provides financial services for the British Post Office throughout the UK.
Operations in the rest of the world are primarily undertaken by Bank of Ireland Corporate Banking who provide services in France, Germany, Norway, Australia and the United States.
Although the Bank of Ireland is not a central bank, it does have Sterling note-issuing rights in the United Kingdom. While Bank of Ireland is headquartered in Dublin, it has operations in Northern Ireland, where it retains the legal right (dating from before the partition of Ireland) to print its own banknotes. These are pound sterling notes and equal in value to Bank of England notes, and should not be confused with banknotes of the former Irish pound.
Until April 2008, all Bank of Ireland notes featured the Queen's University of Belfast on the reverse side. A new series of £5, £10 and £20 notes issued in April 2008 (New-look notes will begin to be circulated in Apri), all featuring an illustration of the Old Bushmills Distillery, and these notes will gradually replace the previous series.
The principal difference between the denominations is their colour and size:
5 pound note, blue
10 pound note, pink
20 pound note, green
50 pound note, blue-green
The Bank of Ireland does not issue banknotes in the Republic of Ireland. Section 60 of the Currency Act 1927 removed the right of Irish banks to issue banknotes, however "consolidated banknotes", of a common design issued by all "Shareholder Banks" under the Act, were issued between 1929 and 1953. Theses notes were not legal tender.
Michael Soden abruptly quit as group chief executive on 29 May 2004 when it was discovered that adult material that contravened company policy was found on his Bank PC. Soden issued a personal statement explaining that the high standards of integrity and behaviour in an environment of accountability, transparency and openness, which he espoused, would cause embarrassment to the Bank.
An IR£30.5 million tax arrears liability was settled by Bank of Ireland in July 2000. The Bank told the Oireachtas Public Accounts Committee Inquiry that its liability was in the region of £1.5 million. The settlement figure was 'dictated' by the Revenue Commissioners following an audit by the Commissioners. It was in Bank of Ireland that some of the most celebrated of the "celebrated cases" of non-compliance and bogus non-resident accounts have to date been discovered and disclosed. Thurles, Boyle, Roscrea (1990), Miltown Malbay (1991), Dundalk (1989/90), Killester (1992), Tullamore (1993), Mullingar (1996), Castlecomer, Clonmel, Ballybricken, Ballinasloe, Skibbereen (1988), Dungarvan and, disclosed to the Oireachtas Public Accounts Sub-Committee, Ballaghaderren (1998) and Ballygar (1999).
The Public Accounts Sub-Committee Inquiry concluded that "the most senior executives in the Bank of Ireland did seek to set an ethical tone for the bank and unsuccessfully sought Revenue Commissioners assistance to promote an industry-wide Code of Practice.
In April 2008 it was announced that four laptops with data pertaining to 10,000 customers were stolen between June and October 2007. This customer information included names, addresses, bank details, medical and pension details.
The thefts were initially reported to the Garda Síochána, however the Banks senior management did not know about the problem until February 2008 after an internal audit uncovered the theft and the Bank did not advise the Data Protection Commissioner and the Financial Regulator until mid-April 2008. It also came to light that none of the laptops used encryption to protect the sensitive data.
The Bank has since released a press release detailing the seven branches affected and its initial response, later in the month the Bank confirmed that 31,500 customer records were affected as well as an increased number of branches.
Record bank robbery:
On 27 February 2009 it was reported that a criminal gang from Dublin had robbed €7 million from the Bank of Ireland's main branch in College Green. The robbery was the biggest in the history of the Republic of Ireland, during which a girlfriend of an employee, her mother and her mother's five-year-old granddaughter were held hostage at gunpoint. Gardaí arrested six men the next day, and recovered 1.8 million euro.
A spokesperson for the bank said: "Bank of Ireland's priority is for the safety and well-being of the staff member and the family involved in this incident and all of the bank's support services have been made available to them."
Bank of Ireland is a major sponsor of rugby union in Ireland, being the shirt sponsor of three of the four Irish provincial teams (Connacht Rugby, Leinster Rugby and Ulster Rugby) . Irish Cricket team also enjoys sponsorship from the bank.
2008 share price collapse:
On 21 Feb 2007, Bank of Ireland shares reached €18.83 during the day, and closed at €18.65. With almost exactly 1bn shares in issue, this valued the company at €18.8bn
On 5 March 2009, the shares reached €0.12 during the day, thereby reducing the value of the company by over 99% from its 2007 high. At the 2009 AGM, shareholders criticised the performance of Auditors, PriceWaterHouseCoopers.
Quality of Audits Questioned:
The annual profitability as at Feb 2007, was subsequently published as €1.95bn The profit for the half-year ended 30 Sept 2008 (unaudited) was published on 13 Nov 2008 as €0.706bn, and the outlook presented by the Governor was that the second-half of the financial year to March 2009 would be "marginally better than break-even." Thus the expected annual profit for 2008/9 is around €0.7bn.
Although there has been a substantial drop in profits, the drop in the share price is much greater than would be appropriate, based upon the published results and the interim statement of 13 Nov 2008 There is a very substantial gap between the confident but cautious tone of the announcements of 13 November and the newspaper reports of the following day, typical of which is that of the Irish Independent "Analysts not convinced of Goggin Case". Clearly, both the media and the brokers and analysts have little confidence in the management of the company. The second and more serious problem, (which, it must be said, remains unacknowledged by bank management, the financial regulator and the Irish government) is solvency. The question concerning solvency has arisen due to domestic problems in the crashing Irish property market. Bank of Ireland, like most Irish financial institutions, has exposure to property developers in their loan portfolio. These property developers are currently suffering from gross over-supply of property, much still unsold, while demand has evaporated. The massive immigration from Eastern Europe which had propped up demand has now reversed due to rapidly rising unemployment in Ireland. Irish property developers own speculated billions of Euros of overvalued land parcels such as urban brownfield and greenfield sites, and also agricultural land at an average value of €23,600 per acre ($32,000 per acre or €60,000 per hectare) which is several multiples above the value of equivalent land in other European countries.
Irish banks correctly identify a systematic risk of triggering an even more severe financial crisis in Ireland if they were to call in the loans as they fall due. The loans are subject to terms and conditions, referred to as "covenants". These covenants are being waived in fear of provoking the (inevitable) bankruptcy of many property developers and Irish banks are thought to be "lending some developers further cash to pay their interest bills, which means that they are not classified as 'bad debts' by the banks". Furthermore, Bank of Ireland's impairment provisions are not being increased correspondingly on their balance sheet. Their accounts for the last financial year states a bad debt provision of only €46 million which is a reduction of 8% from the previous year. This does not appear to be consistent with the real negative changes taking place in property market fundamentals. It should be said, however, that this is in line with most financial institutions' projected figures; doubtless a more realistic estimate will be made when next their accounts are published. In late 2006 the Chief Economist of Bank of Ireland Dr Dan McLoughlin claimed that house prices would increase another 12% by the end of 2006 to reach an average national house price of €395,000 (over half a million dollars on average). In retrospect, the claim, made at the height of the Irish property bubble, was completely inaccurate, doubtless in hindsight many banks are regretting their lending decisions made during this time.
The Central Bank told the Oireachtas Enterprise Committee that shareholders who lost their money in the banking collapse are to blame for their fate and got what was coming to them for not keeping bank chiefs in check, but did admit that the Central Bank had failed to give sufficient warning about reckless lending to property developers.
An interesting footnote to this story is that, on 7 October 2008 Danske Bank wrote off a substantial sum which included property-related losses incurred by its Irish subsidiary - National Irish Bank. Write downs by the domestically-owned Irish banks are only now beginning to take place. Rumours circulated that Spain's Grupo Santander had expressed an interest in acquiring Bank of Ireland but the acquisition was not undertaken when due diligence had been undertaken. This was subsequently denied by Bank of Ireland.