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The venture, provisionally called Sigma, would have seen Ireland's two biggest banks unite their IT support divisions into a single entity employing 700 people.
The venture would have helped the two banks save around EUR19 million apiece per year, it was claimed when the deal was announced. Moreover, Sigma would have had the purpose and the capacity to serve as an IT outsourcing business for other banks and financial institutions around the world.
But last week it was reported that the EU Competition Commission had failed to approve the tie-up and decided to extend its review period by two weeks. This review was the only remaining hurdle in establishing Sigma, which was set to begin operating by the end of this year.
However, according to the banks, the decision to cancel the scheme was "taken following an indication from the Commission that the joint venture would be subjected to a second-stage further detailed investigation lasting for a prolonged period, the outcome of which was uncertain."
"Both banks concluded that such an extended process would create great uncertainty and would be unduly costly. It could also have an adverse impact on customer service and would be de-stabilising for staff," AIB and Bank of Ireland said in a joint statement. The two banks said they were "disappointed" that the venture would not proceed.
AIB said that in the short term, it will go back to "business as usual" and will concentrate on making its own IT department "as efficient as possible." A spokesperson for AIB said these plans will not include job cuts.
Bank of Ireland, meanwhile, has said it may consider other joint venture possibilities, perhaps with non-financial services companies. "It was clear that we were prepared to go through with this plan," said a BoI spokesperson, "and we may look at other options along similar lines now."
The formation of Sigma would have required Bank of Ireland to exit its current IT joint venture with Perot Systems. That venture, called PS Information Resource and located in Cabinteely, was created in 1998 and performed many of the services that the BoI/AIB venture was set to execute. But with the AIB venture now abandoned, the Perot Systems unit will continue operating with all 250 jobs intact.
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