TSB has already agreed to a merger with National Irish Bank, Ireland's fourth-largest and a subsidiary of National Australia Bank. This deal is understood to be worth pounds 100m.
But when the merger was presented to the ministry of finance for clearance the government put it on hold amid accusations from opposition parties that it would fail to promote competition.
The government wants to create a third banking force to rival Allied Irish Bank and Bank of Ireland, each of which has 40 per cent of the market. There is pressure for the third force to be created by public rather than private institutions such as NatWest.
NatWest's plan is to buy TSB through its Ulster Bank subsidiary, which is already Ireland's third-largest bank.
Albert Reynolds, the prime minister, recently attacked Ireland's two biggest banks for not supporting small businesses. The ownership of TSB seems likely to be decided on political grounds as much as by what NatWest is prepared to offer.
Although privately owned, TSB's savings bank status means it answers to the Department of Finance. There is determination in government circles to avoid further scandals like Greencore when opening up the financial sector.Reuse content