The future of Bank of Scotland's Irish business has been thrown into further doubt in the last few weeks after a large US private equity firm, believed to be Blackstone, baulked at a deal to buy the bank's assets at a significant discount, it has emerged.

Sources told the Sunday Tribune that the $93bn private equity giant, which has been on the hunt for distressed debt in Ireland this year, had completed due diligence on Bank of Scotland Ireland's (BOSI) €35bn loan book before pulling out at the last minute.

The aborted deal is be­lieved to have been the "significant development" crypt- ically announced by Bank of Scotland chief executive Joe Higgins to staff in late July following the Sunday Tribune's revelation that the bank was planning to shut its retail bank, Halifax, and transfer €20bn in assets to the UK's asset protection scheme, leaving only a rump business in the Irish market.

The approach from the private equity firm is also understood to be behind a spate of high level departures that have seen the heads of retail and commercial banking, as well as the chief operating officer, all resign over the summer.

Former head of retail Antoinette Dunne, ? seen as a possible future chief executive for Bank of Scotland Ireland ? head of banking Paul Cunningham and chief operations officer Richard McDonnell were thought to have left because of the bank's limited prospects.

The Sunday Tribune contacted former chief executive Mark Duffy who left the bank early this year, to see whether he was involved in the private equity interest, but he made no comment. Blackstone did not return a call seeking comment.

Higgins is now facing a challenge in dealing with BOSI's troubled franchise, which has been strategically abandoned by its UK parent, Lloyds TSB.

Bank of Scotland Ireland had begun a strategic review, dubbed Project Primrose, late last year after the UK Treasury forced HBOS, then BOSI's parent, to merge with Lloyds as part of its bank rescue plan.

After the conclusion of the review, Lloyds planned to move BOSI's assets to the UK asset protection scheme, but Lloyds has reportedly been reconsidering its participation due to fears over the cost.

Last month it emerged that Lloyds had retained UK corporate finance advisors Hawkpoint to run the rule of over the entire Irish operation ? without local management's knowledge ? with an eye towards divesting entirely from the market.

A number of international private equity groups have been looking to buy distressed debt in Ireland, including loans set to go into Nama.