Company History:
Bank of Ireland
Incorporated: 1783
NAIC: 522110 Commercial Banking; 523930 Investment Advice; 523920 Portfolio Management Companies
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.
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).
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).
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.
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.
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.
Further Reading
"Banking in Ireland. Business, Bank Deposits, Loan and Harvests during a Civil War," New York Times, February 25, 1921, p. 24.
Blanden, Michael, "Celtic Tiger on the Prowl," The Banker, February 1995, p. 35.
"Building Societies in Turmoil," The Banker, May 1996, p. 10.
"The Central Bank," Central Bank of Ireland, accessed March 15, 2002, http://www.centralbank.ie.
"Chapter 9: Bank of Ireland," Tithe an Oireachtas, accessed April 3, 2002, http://www.irigov.ie.
"Debate on the Treaty between Great Britain and Ireland, signed in London on the 6th December 1921:Sessions 14 December 1921 to 10 January 1922," CELT, accessed April 6, 2002, http://imbolc.ucc.ie.
Dougherty, Joseph, "Central Bank of Ireland," New York University School of Law Web site, accessed March 15, 2002, http://www.law.nyu.edu.
"Due to Fear of Home Rule," New York Times, September 20, 1906, p.1.
"Encumbered Estates Act 1849," Public Record Office of Nothern Irleand, accessed April 4, 2002, http://proni.nics.gov.uk.
"The Great Famine in Ireland, 1845-1849," Ireland, accessed April 6, 2002, http://www.ireland-information.com.
"Ireland," Irish Paper Money, accessed March 28, 2002, http://irishpapermoney.com.
"Irish Dail Meets Today for Budget," New York Times, February 28, 1922, p. 2.
"Irish State Gets Loan of 1,000,000," New York Times, January 19, 1922, p. 17.
"The National Bank Ltd.," The Royal Bank of Scotland, accessed April 8, 2002, http://www.royalbankscot.co.uk.
"National Bank of Ireland Limited," Debates of the Houses of Oireachtas, accessed April 6,2002, http://www.oireachtas-debates.gov.ie.
"Welcome to Bristol & West," Bristol & West, accessed April 10, 2002, http://www.bristol-west.co.uk.
— Peggi Swan Skjelset
