Irish Permanent and Irish Life believe their proposed merger will transform the landscape of financial services in Ireland.

Certainly, the link-up of the State's largest mortgage lender and its biggest life assurer will create a powerful new force in the Irish financial sector and cause rival institutions - not least AIB and Bank of Ireland - to sit up and take notice.

The new group's stated aim is to become the leading personal financial services provider in Ireland. From the outset, it will be a serious contender in the marketplace, occupying the number one position in both the life and pensions market and in residential mortgage lending. It will also have significant positions in the savings market, in personal loans and in commercial business.

Along with some 1.5 million customer relationships in the form of policies, mortgages and accounts, it will also boast the largest network of supporting brokers in the State, the largest direct sale force and a network of 91 branches and 101 agencies. "It provides us with a very powerful platform from which to grow," said Mr David Went, Irish Life's managing director who will head up the new group.

Merging the two companies will present opportunities to further grow revenues by allowing Irish Permanent's banking products - such as mortgages, car loans, current accounts and private banking services - to be offered to Irish Life's customers. Meanwhile, Irish Permanent's branch network will provide Irish Life with a distribution channel for its products.

"A key benefit of this merger is the enhanced distribution network it creates. In one bold move we have addressed our respective distribution requirements," Mr Went said. He also said Irish Life would continue to act as a wholesaler of products, distributing through companies that in some cases compete with other areas of the enlarged company's business. First Active, Irish Nationwide, National Irish Bank, TSB and Ulster Bank are among the firms with which Irish Life has ties.

"There has been no indication that any of those companies want to change those relationships as a result of the merger," Mr Went said. However, analysts believe it is unlikely that all these relationships will survive the merger. First Active, in particular, may not want to continue to work with Irish Life once the latter joins forces with its biggest rival.

The creation of a serious third force in this sector of the banking market should be good news for the customer. Already, cut-throat competition in the mortgage market has driven fees down and encouraged the speedy reduction of lending rates to their lowest levels ever.

Now the customer can hope increased competition in other areas of the personal finance market will lead to greater transparency and better value.

However, the Consumers' Association of Ireland has warned that bigger is not always better. The association fears that the new company will have a dominant position in life assurance with a market share of around 26 per cent. It has urged the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, to refer the merger to the Competition Authority.

An Irish Life spokesman maintained the merged group, by challenging the position of the two big banks, would promote competition in the market.