BOSI plan ‘could badly hit top banks’

BANK of Scotland’s new interest bearing and low interest rate current accounts could cause mayhem for AIB and Bank of Ireland, according to financial analyst Eddie Hobbs.

Mr Hobbs believes Bank of Scotland, Ireland (BOSI) has pitched its new products perfectly to cherry-pick the most profitable elements of business banking while leaving the main banks with messy and high costs processes, like cash lodgments and coin distribution.

"For the first time in 10 years I have genuine sympathy for AIB and Bank of Ireland. Just imagine the school bully, who's been boss for years, suddenly finding himself up against a black belt it's no contest," said Mr Hobbs, finance spokesman for the Consumer Association.

Bank of Scotland are introducing two new current account products:

A business current account paying interest rates of up to 2.25% on credit balances greater than 50,000.

An overdraft account charging an interest rate 20% less than average.

"If Bank of Scotland can get their message across to the business community this has the capacity to cause mayhem in the business market. For the first time we now have real competition ," Mr Hobbs said.

The clever element of BOSI's proposals, he said, is that they encourage new customers to stay with their existing banks for day-to-day facilities "The interest rate bearing current account alone delivers a rate very close to the ECB rate and that's four times better than AIB," he said.

Mr Hobbs said when BOSI entered the Irish mortgage market the banks responding by cutting margins which he believes had the net effect of cutting mortgage rates by a full 1% "This time around the banks don't have the flexibility to match Bank of Scotland and they face really stiff competition for business customers the first time," he said.

BOSI chief executive Mark Duffy said: "Our proposition is a simple one, it will cost significantly less, pay more, eliminate most transaction charges and offer customers real choice for the first time in the Irish business banking market. "We believe this initiative will change the business market in the same radical way as we changed the home loan market some years ago."

BOSI intend opening the offer to new account holders from next month Mr Duffy believes their competitive strategy will enable BOSI to achieve its goal to be the number one business bank in Ireland by 2005.`