First Active has bowed to the inevitable this week with the announcement of 175 job losses and the closure of 25 of its 76 branches. The bank candidly admitted that it was Bank of Scotland's aggressive entry which forced the down-sizing, due to be completed by the end of January 2000. But with foreign competition set to intensify here in the years ahead it may not be long before First Active has to seek further cost savings.

The restructuring promises annual cost savings of €13 million (£10.24 million) for First Active but even with its slimmed down organisation, costs are still above the average for the industry. Profit margins on mortgage and savings products will remain under pressure for some time and all financial institutions will have to develop cheaper ways of delivering these products to customers.

All are increasingly looking at options such as telephone and Net banking as a more cost-effective way of interfacing with customers. First Active expects to have such services up and running in 2000 and is under some pressure to make them work.

Now that First Active has made its move, the EBS and Irish Nationwide building society will be forced to examine their cost structures sooner rather than later. Job losses and branch closures will have to be considered.

The international ratings agency, Moodys, has put all Irish financial institutions on notice that it will be closely watching just what they are proposing to do about their costs. It stresses that all institutions will have to introduce greater flexibility and lower cost services.

Today, the immediate threat is from Bank of Scotland and Northern Rock and by next year, Royal Bank of Scotland could end up as the owners of Ulster Bank. This is just the start of a new era of competition which will keep Irish banks focused on cost cutting.