Government officials have been told by US state department officials that they will review the use of laundries and cash registers to sell Irish-owned laundries, in a move that will hit the country’s banking sector hard.
The laundries deal with US firm Tysons Group, which is part of a wider group of businesses that includes the banks of Britain, Italy and Australia, was approved by the Irish Government’s Financial Action Task Force (FATF).
The announcement came after Tyson Group secured a deal worth nearly $7 billion in the US, with which it has signed a $1 billion deal with the Irish bank BBVA.
The deal is subject to approval by the US authorities and the US Department of Justice.
The Department of Finance said it would consult with the Department of Health on the proposed changes.
Tysons has been involved in the Irish banking sector since the mid-1990s and has extensive experience in the financial services sector.
“The Government of Ireland has taken the necessary steps to minimise any negative impacts on the banking sector and ensure the continued access of businesses to Ireland for the benefit of the economy and its citizens,” Finance Minister Michael Noonan said.
Tyson’s US owner, BBVA, is part-owned by the Australian firm BlackRock.
The announcement has triggered a wave of criticism in Ireland.
“The US is the biggest country in the world where they have a huge financial centre.
This is a major threat to the Irish financial sector,” said a spokesman for TD Bank.”
There is a risk the laundries could be shut down and the banking system of Ireland would be exposed, especially for small and medium sized businesses.”
He said the Irish Banking Association is not in favour of closing down Irish banks.
“If there are no other viable options then it is a matter of time before the Irish government closes them,” he said.
The Tysson deal has prompted concern from the banking industry in Ireland and the wider banking sector in the United States, where the industry is also under pressure to attract investment to revive its fortunes.
Irish banks are among the world’s most vulnerable sectors.
They are struggling to stay afloat amid an economic downturn and a housing crash.
“This is a worrying time for Irish banks and our economy,” said Mark Doyle, a senior analyst at Credit Suisse.
“We do not have the infrastructure in place to make this kind of change in a timely manner.
The Government has said it is looking at the potential impacts to Irish banks, the impact on small and micro-lending businesses, and the effect on other industries in the country.”
It is important to understand that while there may be some potential for this deal to generate some economic benefit, there is a real risk to Irish banking.
“The US Department’s Office of Foreign Assets Control said it has been monitoring the Tysos deal.
The US has been holding a series of talks with Tysmans, including with the Australian bank.”
We are aware of the recent announcement by Tys and are working with the US government on the matter,” the US embassy in Dublin said in a statement.”
Our view is that we can work closely with the T-B Group and will work with the Government of the United State of America to fully review the agreement with T-Tys, which we hope will lead to a swift resolution of the issue.
“The Irish Banking and Finance Authority (IBFA) has also asked the US Treasury Department to investigate the deal.”
A final decision on the transaction is not expected until after the US Government reviews the transaction,” IBFA said in its statement.
Irish banking regulator IBRC is also in contact with US authorities.