Bank of Ireland's management and board of directors will be expected to explain fully the rationale for its disastrous liaison with Alliance & Leicester.

After the deal was aborted on Wednesday, group chief executive, Mr Maurice Keane, sought to assure staff and shareholders that the bank was still pursuing a range of options to expand and develop the institution.

The bank insists the collapse of the talks will not deter it from seeking other opportunities in Britain but it will clearly have to be cautious about its next target.

Bank of Ireland had been linked as a possible bidder for Bradford & Bingley and is constantly assessing merger and takeover possibilities in the British market.

Mr Keane has maintained for some time that Britain is the bank's natural focus. Its purchase of the Bristol & West building society two years ago has provided the bank with a solid foothold from which to expand. To date that acquisition has proved profitable.

The rationale for merging with Alliance & Leicester, from the bank's point of view, was to allow it gradually to expand its presence in Britain and eventually become part of a pan-European banking alliance. Despite the breakdown of the latest discussions its strategy is likely to remain broadly the same.

The concern now is that the bank has in fact heightened the likelihood that ultimately it will be taken over by a bigger European player.

In the meantime, Bank of Ireland shareholders and staff will have to wait for indications of its next move. Indeed, they may soon be treated to a share buy-back scheme to compensate them for their recent trauma.