Lochlann Quinn and Michael Buckley have escaped - for the moment - the consequences of AIB's Allfirst debacle. As the dust settles, they should not be allowed embrace the Bank of Ireland's idea of a merger, argues Denis Coghlan
Mary Harney and Charlie McCreevy agree on many things. Selling off State companies and cutting business taxes are prime examples. But while the Tánaiste and leader of the Progressive Democrats regards competition as an indispensable element for a healthy economy, the Minister for Finance has capitulated to the major banks.
Not that he came out in the open to say it. The Minister for Finance is too cute for that. Instead, he instructed officials at his Department to tell journalists, off the record, that he would have no major objection to a merger.
Bank of Ireland and Allied Irish Banks got the message. And Mary Harney, who has responsibility for competition and consumer protection, got the mucky end of the stick in the weeks before a general election.
Fine Gael and the Labour Party were similarly blind-sided. In the interests of consumers and the thousands of banks officials who could lose their jobs through merger and rationalisation, they came out against the proposal. Fianna Fáil was left as the only party that would - unofficially - support a merger.
Michael Soden, who had, as the new chief executive of Bank of Ireland, floated the idea in the first place, knew that a Fianna Fáil win was vital to the creation of a banking monopoly in this State. It was an astute move, grounded in the difficulties of AIB and its vulnerability to a foreign takeover.
The theory was that the two banks, together, would be able to fight off foreign predators and sustain a strong Irish banking sector. The old green flag was being waved.
Lochlann Quinn, the chairman of AIB, who recognises a more efficient money-making machine when he sees one, was quite taken by the merger idea. And he believed that politicians would embrace such a union if the public could be convinced of its merits. It was a huge "if". The turkeys would have to vote for Christmas.
Playing the green card was Mr Soden's opening gambit. But it had lost its potency. Mr McCreevy had already sold State banks to foreigners and the Government was preparing to dispose of Aer Lingus. Anyway, as Mary Harney pointed out, AIB was already 50 per cent foreign-owned.
So, was the Minister for Finance playing games, cosying up to the banks for political advantage when he knew both the Competition Authority and the European Commission would almost certainly oppose a merger? Perhaps. But the Minister's record in ignoring the voracious, profit-driven appetites of the banks is a cause for concern.
Mr McCreevy has consistently failed to put regulations in place to protect small business and the consumer from the power of the big two. Three years ago, the McDowell report advocated major changes in banking controls to protect the consumer and to reform the financial sector. Legislation will finally be introduced within the next few weeks, but it hasn't a hope in hell of becoming law before the election is called. And there is no evidence an interim Financial Service Regulatory Authority - promised "immediately" almost 12 months ago - will become effective. What is absolutely clear is that the Minister, both by action and inaction, has contributed powerfully to the "bottom line" of both banks.
Reducing corporation tax on trading income from 32 to 16 per cent over the past four years has represented huge windfall profits. And his failure to introduce regulatory powers to protect consumers is reflected in high interest charges and poor-quality services.
As a duopoly, the banks are untouchable. Bank of Ireland is in the process of reducing the number of its branches by 20 per cent. AIB chopped 13 per cent of its branches in three years and more closures are planned. Other cost-cutting exercises, such as the withdrawal of traditional paper transactions like bill-paying and cheque cashing, are under way.
What would it be like as a monopoly? Between them, the two banks would control 80 per cent of the Irish market, where their charges and profit margins are already among the highest in Europe. They would dominate the stock market through ownership of Davy and Goodbody, and control a sizeable section of the insurance and mortgage markets.
Mary Harney thought such a development would be a bad thing for competition and for bank customers, particularly small businesses. As Minister, she would refer the matter to Brussels for arbitration.
Given that two Swedish banks, with 50 per cent of that market, were given the thumbs-down by the European Commission last year, the outcome would appear predictable.
Jim Mitchell thought the merger would be like a marriage between Fianna Fáil and Fine Gael, and concluded that the result would greatly reduce competition and generate a lopsided market.
Derek McDowell of the Labour Party said it was not the way to encourage competition. And, he pointed out, a merged entity would still be vulnerable to a foreign takeover.
Given that spread of opposition, in the absence of consumers' views, Mr Soden and Mr Quinn had better think of a more constructive way of making money.
As for Mr McCreevy, he should stop buttering up bankers and implement the OECD report that advocated competition and regulatory reform as a spur to growth and a counterweight to inflation.
Denis Coghlan is Chief Political Correspondent of The Irish Times