The sharp fall in bank shares and an expected lack of appetite for any public offering of financial stock is causing concern at the Department of Finance with ICC Bank on the market and negotiations under way on the merger and flotation of ACC Bank and TSB Bank.

The Minister for Finance, Mr McCreevy, is studying a detailed position paper and recommendation on the sale of ICC submitted by his advisers, ABN-Amro. He must decide whether to proceed with the sale in a market which has weakened significantly and with only one bidder left for the bank.

A decision to sell would result in the take-over of ICC by Bank of Ireland by the end of January. Such a decision would depend on the acceptability of the price and the business plan submitted by the only bidder, Bank of Ireland. If the Minister accepts the offer, a sale could not proceed until the board of ICC recommended the offer to its shareholders. This is a technical requirement since the bank has a small number of minority shareholders and is listed on the stock market.

As one source close to the deal said: "The decision now is whether to sell or not. The issue is whether what is on the table is sufficiently attractive to the Minister as the main shareholder, and, to the ICC board, staff and unions." The ICC board and its advisers, HSBC, are understood to be considering the business plan submitted by Bank of Ireland and the proposals for the integration of ICC with Bank of Ireland's operations and for the establishment of operating committees.

Bank of Ireland had to submit a detailed response to a questionnaire drawn up by the partnership group at ICC - management and unions. This questionnaire was designed to tease out the bank's plans for the development of ICC and its staff. The Bank of Ireland business plan aimed to meet what ICC was looking for in a bidder - a good strategic fit between the bidder and ICC and the clear commitment to the development of ICC as a specialist bank for small and medium companies.

With only one bidder left Mr McCreevy is perhaps concerned that the State may not get the best price for the operation.

While the price is now expected to be less than the £300 million (€381 million) mooted when the market was at its height, a decision not to sell now is considered unlikely.

Price is not the only issue involved and a suitable plan for the future of the business and its employees is understood to be considered as at least as important as the price achieved.

A decision not to sell to the Bank of Ireland would involve either withdrawing ICC from the market or starting a fresh tender process. Neither course would guarantee a better result. As one source said: "The problem is there are not too many options left. The bank, through no fault of its own, is worth less now than when this process started. Failure to complete a sale would damage staff morale and the enthusiasm for transformation, the Government would have to put in more capital to facilitate growth and you would have to ask where that would leave a small operation like ICC in one year's time."

The fall in the value of bank shares together with the poor post-flotation performances of Eircom and First Active have cast some doubt over whether a merged ACC and TSB could be successfully floated. While the market could improve between now and the proposed May 2000 float date, market sources said other options including the possible sale of the merged entity are now being considered.

"It is the Government's call. Nothing is ruled in or out at this stage. But within the constraint that the Government does not want to remain an owner the best way to get the deal done has to be found." What will be achievable for ACC/TSB is now further complicated by the impending change of ownership at Ulster Bank and the danger that if there are three large banking stocks on the market there would be little appetite for shares in a much smaller bank.