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Bank Of Ireland Business Information, Profile, and History

Lower Baggot Street
Dublin 2
Ireland

History of Bank Of Ireland

The Bank of Ireland is the oldest bank in Ireland. Throughout the turbulent Irish history, the bank has demonstrated remarkable entrepreneurship by taking innovative risks and making them work--from opening a commercial branch in a tiny agricultural community in the 18th century to offering remote offshore banking over the Internet in the 21st century. Their corporate agility and strength has earned them the nickname "the Celtic Tiger" and established them as leaders in the international banking industry and global economy.

A Strong Beginning: 1783-1800

The Bank of Ireland opened for business on June 25, 1783, in Dublin, a day that marked a turning point in the financial history of Ireland. Until that point, banking had been handled by private institutions and individuals. The economy had been unstable and money scarce: a combination that devastated many small banks trying to establish themselves. One bank that survived was David La Touche and Son. The founder's grandson, also David La Touche, was elected the first Governor of the Bank of Ireland. Several members of the wealthy La Touche family were the bank's first clients and opened large accounts. Ireland was under British rule, and La Touche was a member of the Irish Parliament. His position helped the Bank of Ireland become appointed as the Official Government Bank. It became their duty to handle all funds coming into or going out of the Treasury Department.

Being the Official Government Bank gave the Bank of Ireland an economic edge over its competitors and helped create an image of security. This was important because the public had not forgotten the banking disasters of the earlier decades. The economy was bad and the majority of people were poor. The small group that did have money, mainly landowners, was very protective of their money and skeptical of banks. The promise of security helped attract some of this public sector. Checkbooks were issued from the bank's beginning; and in 1796, the bank issued personal passbooks to customers. Although the bank's main focus was securing larger commercial accounts, the number of private individual accounts was growing.

In 1784, the Bank of Ireland printed and issued its own paper currency in Irish pound and guinea denominations. The British government had decided to allow six Irish banks to issue their own currency under strict government regulations; the six included the Bank of Ireland, the National Bank, the Ulster Bank, the Northern Bank, the Provincial Bank of Ireland, and the Belfast Banking Company. The Bank of Ireland was the first to take advantage of this opportunity. Soon the other banks followed, and there were six different Irish banknotes as well as English currency being circulated in Ireland. By 1800, circulation of the Bank of Ireland's banknotes was £1.7 million (US $2.1 million).

Branching Out and Surviving the Great Potato Famine: 1880s

The bank quickly outgrew its Mary's Abbey location and purchased several small adjoining properties in 1790. It soon outgrew this expansion as well and purchased the Parliament House in College Green in 1803. The Parliament House Building had been vacated when the Irish Parliament was abolished according to the Act of the Union in 1801. This act declared Ireland part of "The United Kingdom of Great Britain." The Irish would no longer have their own Parliament; instead, they would have a member represent them in the English Parliament. The architect Francis Johnson was hired to remodel the building in a manner that would suit banking needs. The result was a very impressive and prestigious headquarters.

Ireland was a country of agriculture. The majority of its people were farmers living in the outskirts and rural areas of the country; and there were no banks in these outlying areas. In 1825, the Bank of Ireland opened seven branch offices for these customers. The new branches, referred to as "agencies," opened in Cork, Waterford, Clonmel, Newry, Belfast, Londonberry, and Westport. Banking was a new approach to money handling for most of these people, and they were apprehensive. But they eventually recognized the value and convenience, and by 1881, the Bank of Ireland had 58 branches in operation.

The 19th century brought disaster to Ireland in the form of the Great Potato Famine (1845-1849). At that time, potatoes were the main, sometimes only, food source for the majority of Irish people. When a potato blight completely destroyed potato crops during those years, the Irish people and the economy suffered enormously. It was estimated that nearly 1 million people died from starvation and disease while another million emigrated in search of a better life. Landowners were left with fields of useless rotting potatoes. Resentment was building toward the English government because while Ireland's people were starving, large amounts of food were being exported untaxed to England. Landowners were left with huge farms they couldn't farm, and farmers did not have the money to buy land. The Encumbered Estates Act in 1849 was created to allow landowners to sell their land even if they did not own it free and clear. This money was collected by the courts and distributed among creditors.

This was an extremely difficult time for banks in Ireland because there was very little money. The Bank of Ireland was fortunate. Because they handled all government financial transactions, they had enough capital to function. The Bank of Ireland made many loans to other banks during the recovery period to help them survive. They also made loans to businesses, including the Dublin Corporation, to help them become reestablished. They could not do much to help the landowners due to a restriction that had been placed on them by the government: they were not allowed to lend money based on the security of land. When this restriction was lifted in 1860, they were in a position to make loans that would help revitalize the agricultural industry. The bank began paying interest on deposits as an incentive. By 1920, their deposit base was at £28 million (US $35.5 million) and loans to customers were £16 million (US $20.3 million).

20thCentury: Enduring the Troubles and Political Change

The beginning of the 20th century was a period of political turbulence. Ireland was still under English rule. Southern Ireland was fighting against both England and Northern Ireland for liberation. Northern Ireland did not want independence from the United Kingdom. The fighting took its toll on the barely recovering Irish economy. The New York Times reported a plunge in the Bank of Ireland's stock from 330 to 302 points in just ten days. There was civil unrest and crime. The Bank of Ireland suffered a loss of £4,000 in two branch robberies. The money was never recovered.

In 1922, Ireland split into the Irish Free State and Northern Ireland. The Irish Free State was given dominion status from England. Northern Ireland was still under English rule. The Bank of Ireland loaned the new Irish Free State government £1 million to help the fledgling organization. Soon after, the Bank of Ireland was appointed the official bank of the Irish Free State government. On February 7, 1922, an historical event marked the new Irish independence: Irish guards replaced the British guards who had guarded the Bank of Ireland's Parliament Building for over a century. In 1923, the Land Commission was established for making property loans. This caused the National Land Bank to suffer great financial difficulties since this had been their main business. In 1926, the Bank of Ireland purchased the failing National Land Bank and renamed it the National City Bank, Ltd.

In 1927, the new Irish Parliament, known as the Dail, passed the Currency Act. This act created the Currency Commission of Ireland whose responsibility was to oversee the issue of a new currency in the Irish Free State. The Currency Commission opened their office in the Armoury Building, which was part of the Bank of Ireland's Parliament Building headquarters. In 1928, the six different banknote series that had been circulated, were abandoned in favor of a single series of legal tender notes appearing in seven denominations and known as the Consolidated Banknote Issue. The Currency Commission also issued a new legal tender series for Northern Ireland known as the Belfast Issue. In Northern Ireland, all six of the earlier banknote series were still being circulated, as well as the new Belfast Issue and English currency. These multiple banknotes were confusing. The Bank of Ireland's banknote issue was greatly decreased during this time. This worked in the bank's favor because people began writing more checks in order to avoid the confusion.

In 1937, The Irish Free State became Eire under a new constitution. Eire declared an economic war against England and continued to strive for complete separation. They took a neutral status during World War II and refused to let England use Irish ports. They focused inward on ways to secure their independence and strengthen their government and economy.

In 1942, the Irish Parliament passed the Central Bank Act. According to this new act, the Central Bank of Ireland replaced the Currency Commission. In 1943, the Central Bank became the official bank of the Irish Government replacing the Bank of Ireland. The Central Bank became the only bank that could issue currency in Eire.

Ireland was once again undergoing political changes. In 1948, John A. Costello was elected Eire's prime minister. A new constitution ensued, and on April 18, 1949, Eire declared complete independence from England and became The Republic of Ireland.

End of the 20th Century: Growth and Diversity

No longer the official bank of the Irish government, the Bank of Ireland worked to expand and strengthen their position in the newly formed republic. They began acquiring interests in other banks and enterprises. In 1958, they acquired the Hibernian Bank Ltd. In 1965, they purchased the Irish shares of National Land Bank Ltd. and renamed it the National Bank of Ireland. This was a significant event. Daniel O'Conner established the National Bank in 1835 as a joint-stock venture. The bank's head office was in London, but its banking activities were mainly in Ireland. The majority of the bank's backers were English, and it was one of England's larger banks. This made it difficult to function considering the animosity and division between The Republic of Ireland and England. Since it was officially an English company, the tax on profits went to Britain, even though most of those profits came from transactions in Ireland. When the Bank of Ireland bought the Irish shares, the tax profits went to the Republic of Ireland's Treasury department. The National Commercial Bank of Scotland purchased the British shares.

The Bank of Ireland also focused on globalization. In 1970, the Bank of Ireland opened an office in London soon to be followed by offices throughout the United Kingdom. In 1997, they acquired Bristol & West, a large U.K. building society (equivalent to a savings and loan), and the New Ireland Assurance, one of Ireland's largest life insurance companies. By 2002, the bank operated over 250 retail branches in the Republic of Ireland and the United Kingdom. The Bank of Ireland also had businesses in Australia, Canada, Germany, Japan, and the United States.

In order to handle the rapid growth, the Bank of Ireland went through a radical restructuring and became The Bank of Ireland Group. This group was divided into four major divisions: Asset and Wealth Management, Corporate and Treasury, Retail, and Other.

The Asset and Wealth Management division was also called Bank of Ireland Asset Management (BIAM). It provided fund management services concerning pension funds for large institutions on a global level in the United States, Canada, Japan, Australia, and Germany. They also managed investments and global securities at home and internationally. The Corporate and Treasury division was subdivided into three business units: Treasury, International Financing, and Corporate Banking. The Treasury unit's main function was to manage the group's Irish government securities portfolio, as well as any trading in Irish gilts, foreign exchange, and interest rate markets. They also offered foreign exchange, deposit, loan, and bond services to wholesale, corporate, and financial institutions. The International Finance unit offered international asset financing, provision of structured financial transactions, and loans to multinational companies. The Corporate Banking unit made loans to large corporations on a global level.

The Retail division was subdivided into five units: Branch Banking, Building Society, Business and International Banking, Insurance and Retail Business, and Northern Ireland. Branch Banking provided traditional banking services such as deposits, loans, and checking accounts. The Building Society specialized in mortgages, savings, and investments. Business and International Banking consisted of four subunits: International Banking, Current Asset Financing, Bureau de Change, and International Consultancy. International Banking dealt with international trade and currency. Current Asset Financing provided loans secured by various assets. Bureau de Change offered foreign exchange services in major tourist areas. International Consultancy provided support and training to overseas financial institutions.

The Insurance and Retail Business unit was divided into eight subunits: Life Assurance, General Insurance, Installment Credit Leasing, Credit Cards, Direct Banking, Consumer Lending, E-business and Payments, and Payments and Electronic Banking. Life Assurance offered life and pension products while General Insurance offered a more general range of insurance products. Installment Credit Leasing dealt in industrial banking, installment credit, and commercial mortgages. Credit Cards provided merchant services and issued MasterCards and Visa cards. Direct Banking provided telephone-banking services. Consumer Lending, E-business and Payments, and Payments and Electronic Banking dealt with those specific services. Northern Ireland focused on the banking products and services.

The Other Group division contained five units: BOIe, Security Services, Trust Services, Corporate Finance, and Stockbrokering. BOIe was the e-commerce unit and consisted of six subunits: Business On Line, Clikpay, BOInet Internet Training, Banking 365 Online, Fsharp, and Set Up Online. Business On Line offered online banking for business customers. Clikpay was an online credit-card payment service. BOInet Internet Training taught courses in using the online services. Banking 365 Online offered online banking to retail customers in Great Britain. Fsharp provided online services to customers living and working abroad. Set Up Online was an e-commerce service education provider. The Security Services unit specialized in safekeeping of domestic and international involvements. Trust Services provided management of trust accounts. Corporate Finance advised companies on mergers, takeovers, restructurings, and other financial matters. Stockbrokering provided investment strategies and services to institutional and private investors.

Converting to the Euro: 2002

In January 2002, Ireland saw yet another change in its currency. The long-anticipated switch to the new standard currency known as the Euro became official. The change was made to simplify the European currency system and promote commerce between European countries. The 12-state members that converted to the Euro were Belgium, Germany, Luxembourg, Greece, Spain, France, Ireland, Italy, Finland, Portugal, Austria, and the Netherlands. The Bank of Ireland and its customers were well prepared when the changeover took place.

The success of e-banking and e-commerce made virtual banking a viable way for individuals and businesses to conduct banking. A connection between countries was just a click away. The use of different currency systems made this type of commerce and trade confusing. The Euro implementation was viewed as a major step toward globalization. In order to continue as a strong force in the banking industry, the Bank of Ireland had to keep current on the new technologies and be able to implement them in a manner that would service their individual customers as well as their large corporate accounts, not only in Ireland but throughout the rest of the world as well.

Principal Divisions:Banking 365; Bank of Ireland Asset Management (BIAM); Bank of Ireland (BOI) Treasury; BIAM Ltd.; BOI Commercial Finance Ltd.; BOI Corporate Banking; BOI Credit Card Services; BOIe, Business On Line; BOI Finance; BOI International Services Ltd.; BOI Internet Training; BOI Trust Services; Bristol & West, International Banking; Clikpay; Fsharp; IBI Corporate Finance Ltd.; ICS Building Society; First Rate Bureau de Change; International Finance Services; J&E Davy Holdings Ltd.; Lifetime Assurance Co. Ltd.; New Ireland Assurance Co. PIC.

Principal Competitors:Allied Irish Bank; Anglo Irish Bank; Royal Bank of Scotland.

Related information about Bank

An organization which offers a wide range of services to do with the handling of money. Most banks are commercial banks, which keep money on behalf of their customers, lend it to them, and offer them such facilities as currency exchange, money transfer, credit facilities, mortgages, and investment advice. A central bank in a country (such as the Bank of England or the Banque de France) is the banker for the government, issuing money on its behalf and setting the chief interest rate for loans; it is much involved in the country's monetary policy. Merchant banks offer specialized services to businesses, such as managing shares, dealing in gold or foreign currencies, and providing funds to finance a new business. Savings banks were founded in the 19th-c to encourage people to save, small deposits being placed in interest-bearing accounts. There are also several international banks, which regulate currency matters between countries and handle international loans, notably the World Bank.

see :wiktionary:banker for more meanings.

A bank is a business that provides banking services for profit. Some banks (called Banks of Issue) issue banknotes as legal tender.

Currently in most jurisdictions the business of banking is regulated and banks require permission to trade. Authorisation to trade is granted by bank regulatory authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans. There are also financial institutions that provide banking services without meeting the legal definition of a bank (see banking institutions).

Banks have a long history, and have influenced economies and politics for centuries.

The word bank is derived from the Italian banca, which is derived from a Germanic language and means bench. In recent history, with historically low interest rates limiting banks' ability to earn money by lending deposited funds, much of a bank's income is provided by overdraft fees and riskier investments.

Services typically offered by banks

Although the type of services offered by a bank depends upon the type of bank and the country, services provided usually include:

Taking deposits from their customers and issuing checking and savings accounts to individuals and businesses
Extending loans to individuals and businesses
Cashing cheques
Facilitating money transactions such as wire transfers and cashiers checks
Issuing credit cards, ATM cards, and debit cards
Storing valuables, particularly in a safe deposit box

Financial transactions can be performed through several different channels:

Branch
ATM
Mail
Telephone
Internet

Types of banks

Banks' activities can be characterised as retail banking, dealing directly with individuals and small businesses, and investment banking, relating to activities on the financial markets. However, some are owned by government, or are non-profit making.

In some jurisdictions retail and investment activities are, or have been, separated by law.

Central banks are non-commercial bodies or government agencies often charged with controlling interest rates and money supply across the whole economy.

Types of retail banks

Commercial bank, is the term used for a normal bank to distinguish it from an investment bank. After the great depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital markets activities. Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.
Community Banks are locally operated financial institutions that empower employees to make local decisions to serve their customers.
Community development bank are regulated banks that provide financial services and credit to underserved markets or populations.
Postal savings banks are savings banks associated with national postal systems.
Private banks manage the assets of high net worth individuals.
Offshore banks are banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.
Savings bank In Europe, savings banks take their roots in the 19th or sometimes even 18th century. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises.

Building societies and Landesbanks both conduct retail banking.
Ethical banks are banks that prioritize the transparency of all operations and make only social-responsible investments.

Types of investment banks

Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital markets activities such as mergers and acquisitions.
Merchant banks were traditionally banks which engaged in trade financing. For example, First Bank (a very large bank) is involved in commercial and retail lending, and its subsidiaries in tax-havens offer offshore banking services to customers in other countries. In Europe and Asia, big banks are very diversified groups that, among other services, also distribute insurance, hence the term bancassurance.

Other types of banks

Islamic banks adhere to the concepts of Islamic law. Also, deposit makers earn a share of the bank?s profit as opposed to a predetermined interest.

Banks in the economy

Role in the money supply

A bank raises funds by attracting deposits, borrowing money in the inter-bank market, or issuing financial instruments in the money market or a capital market. The bank then lends out most of these funds to borrowers.

However, it would not be prudent for a bank to lend out all of its balance sheet. Some governments (or their central banks) restrict the proportion of a bank's balance sheet that can be lent out, and use this as a tool for controlling the money supply.

Size of global banking industry

Worldwide assets of the largest 1,000 banks grew 15.5% in 2005 to reach a record $60.5 trillion. The large number of banks in the US is an indicator of its geographical dispersity and regulatory structure resulting in a large number of small to medium sized institutions in its banking system. Risks include liquidity risk (the risk that many depositors will request withdrawals beyond available funds), credit risk (the risk that those that owe money to the bank will not repay), and interest rate risk (the risk that the bank will become unprofitable if rising interest rates force it to pay relatively more on its deposits than it receives on its loans), among others.

Banking crises have developed many times throughout history when one or more risks materialize for a banking sector as a whole. Prominent examples include the U.S. Savings and Loan crisis in 1980s and early 1990s, the Japanese banking crisis during the 1990s, the bank run that occurred during the Great Depression, and the recent liquidation by the central Bank of Nigeria, where about 25 banks were liquidated.

Regulation

The combination of the instability of banks as well as their important facilitating role in the economy led to banking being thoroughly regulated. In addition, banks are usually required to purchase deposit insurance to make sure smaller investors are not wiped out in the event of a bank failure.

Another reason banks are thoroughly regulated is that ultimately, no government can allow the banking system to fail.

Public perceptions of banks

In United States history, the National Bank was a major political issue during the presidency of Andrew Jackson. Jackson fought against the bank as a symbol of greed and profit-mongering, antithetical to the democratic ideals of the United States.

Currently, many people consider that various banking policies take advantage of customers. Specific concerns are policies that permit banks to hold deposited funds for several days, to apply withdrawals before deposits or from greatest to least, which is most likely to cause the greatest overdraft, that allow backdating funds transfers and fee assessments, and that authorize electronic funds transfers despite an overdraft.

In response to the perceived greed and socially-irresponsible all-for-the-profit attitude of banks, in the last few decades a new type of banks called ethical banks have emerged, which only make social-responsible investments (for instance, no investment in the arms industry) and are transparent in all its operations.

In the US, Credit unions have also gained popularity as an alternative financial resource for many consumers. Also, in various European countries, Cooperative banks are regularly gaining market share in retail banking.

Profitability

Large banks in the United States are some of the most profitable corporations, especially relative to the small market shares they have. For example, the largest bank, Citigroup, which for the past 3 years has made more profit than any other company in the world, has only a 5% market share. Merging banking, investment, and insurance functions allows traditional banks to respond to increasing consumer demands for "one stop shopping" by enabling cross-selling of products (which, the banks hope, will also increase profitability).

Bank size information

Top ten banking groups in the world ranked by tier 1 capital

Figures in U.S. dollars, and as at end-2005www.economist.com/markets/indicators/displaystory.cfm?story_id=7141354 The Economist, The world's biggest banks, List of the world's ten largest banks by tier 1 capital at the end of 2005

Citigroup — 60 billion
Royal Bank of Scotland — 38 billion

Top ten banking groups in the world ranked by assets

Figures in U.S. dollars, and as at end-2004www.economist.com/surveys/displaystory.cfm?story_id=6908408 The Economist, Thinking big, List of the world's ten largest banks by assets in 2004

UBS — 1,144 billion
Royal Bank of Scotland — 1,110 billion

Top ten bank holding companies in the world ranked by profit

Figures in U.S. dollars, and as 2003

Citigroup — 10 billion
Royal Bank of Scotland — 4 billion

Top ten banks in the world ranked by market capitalisation

Figures in U.S. dollars, and as at 26 July 2006www.economist.com/displayStory.cfm?story_id=7226067 The Economist, On Citi's tail, List of the world's biggest banks, by market capitalisation, as at 26 June 2006

Citigroup — 110 billion
Royal Bank of Scotland — 95 billion

History of banking

Main article: History of banking

Florentine banking — The Medicis and Pittis among others
Banknotes — The evolution of modern central banking policies
Bank of America — The invention of centralized check and payment processing technology
Swiss bank
United States Banking
History of Money and Banking in the United States by Murray N. History of banking in the Middle-East

Chronology

Key Dates:
1783: Bank of Ireland is incorporated and opens at Mary's Abbey in Dublin.
1784: The company prints and issues its own bank notes.
1808: The company purchases the Parliament House as its new headquarters.
1825: The company opens seven branch offices in Ireland.
1922: Bank of Ireland is appointed as the official bank of the Irish Free State.
1926: The company acquires the National Land Bank and renames it National City Bank, Ltd.
1942: The Central Bank Act is passed, and the Bank of Ireland is no longer the official bank of Ireland.
1958: Bank of Ireland acquires the Hibernian Bank, Ltd.
1965: The company acquires Irish interests of National Bank, Ltd. and renames it National Bank of Ireland.
1970: The company opens an office in London.
1996: The company acquires the British building society Bristol & West and New Ireland Assurance, a life insurance company.
2000: The company initiates online banking.
2001: Bank of Ireland introduces Fsharp, an online banking service for customers living and working abroad.
2002: Ireland and the Bank of Ireland convert to the Euro.

Additional topics

Company HistoryFinance: Banks & Credit

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