To get a sense of how enthusiastic UK lenders were to lend into the Irish commercial property market, it's worth recalling the words of developer Sean Dunne from last year when discussing how eager UK lenders were to fund his gargantuan Ballsbridge development.
Dunne was in Thailand in 2005 when he won the battle for the supposedly iconic Jurys Ballsbridge site for which he paid €275m. For most investors outside the property world this was nosebleed territory, with Dunne paying an extraordinary €54m per acre, albeit for a prime site in Dublin 4.
But for Dunne and potential lenders back in Dublin, this was a chance to earn big loan commissions and it was not a moment for holding back or self-restraint. Dunne claims that while he was in Thailand he was effectively given seven days to come up with the €275m to secure the site, after winning the initial tender.
This is how Dunne recalls what happened next. "I phoned up a very good friend of mine, Richie Boucher... He said, 'Sean, if I was trying to borrow the money you are trying to borrow, I wouldn't stay in Thailand, I'd come back to Dublin.' That was good advice. I came back to Dublin. I then met two banks – I spoke to Bank of Ireland and I spoke to Irish Nationwide – but Paul McDonnell in Ulster Bank, I met him...''
Within days Dunne was in a funding relationship with Ulster, the largest part of Royal Bank of Scotland's Irish operations.
"That Friday night, at nine o'clock, Ulster Bank walked through the door of my office,'' Dunne recalled. "They produced a letter for the full purchase price. I obviously had a business relationship with Ulster Bank. I was doing business with Ulster Bank for three to four years."
While Dunne's account suggests that uber-property lender Irish Nationwide steered clear of the deal ultimately, there was no suggestion in the early part of the relationship between Ulster and Dunne that there was anything but mutual respect. In fact, Ulster were able to pick up awards for winning Dunne's business.
Finance magazine gave the deal a "recommended'' mention at its awards subsequently and McDonnell referred to the bank funding "100% of the purchase of Jurys Hotel on a senior/junior basis''. Dunne in more recent years has claimed to have also invested his own "substantial equity in the deal''.
While the Dunne deal is perceived, at least from the outside, to be the 'signature' deal done by Ulster, its lending to Irish developers has been very significant over the last five years. Bernard McNamara has been a borrower of Ulster Bank, as has the Menolly Group, led by Seamus Ross, Liam Carroll and Treasury Holdings. The bank also ended up embroiled in the Thomas Byrne affair after advancing developer John Kelly funds for various projects; it later took a claim against Kelly for the recovery of monies.
Another expensive lending decision for Ulster was its move into funding property firm the Taggart Group, which got into difficulty almost a year ago, owing €150m to its banks, chief among those Ulster Bank.
For its part, Ulster executives have come out with their hands up in relation to mistakes made on property lending. In February Robert Gallagher, chief executive of Ulster Bank Corporate Markets, referring to the lending practices of Irish banks, said "there is no question that we bankers have made mistakes".
"We have lent too much money relative to our deposit base [and] we filled that gap in the wholesale markets on a short-term basis," he said.
These mistakes included a concentration of "risk exposure" to certain people and markets, and issuing loans based on "incomplete information".
The legacy from an Ulster/First Active perspective is a depressing one for shareholders in RBS, which is now effectively controlled by the UK Treasury.
The Ulster Bank group for instance reported a 76% slump in operating profits in 2008, with the bank's impairment losses rising to £394m. It also said it was witnessing an increased flow of cases into its "problem debt management process".
For Lloyds Banking Group – owner of a plethora of Irish banking brands – it's been an even more difficult few years since the Irish property market turned down. The group, through a series of acquisitions has come to control the following brands: Halifax, HBOS and Bank of Scotland (Ireland).
But the most public lending decision Bank of Scotland (Ireland) in particular ever made was the large sums it decided to advance to developer Liam Carroll. The often repeated joke was that Bank of Scotland advanced Carroll's companies so much money that the developer had a permanent office in its Stephen's Green headquarters.
According to the most recent indications from the long-drawn-out court process concerning Zoe Developments, Bank of Scotland is owed approximately €324m. The only positive for Bank of Scotland (Ireland) was that among its securities was the Google offices housed in a Carroll building on Barrow Street in Dublin city centre.
The company's lenders have also provided funding to other troubled development/building interests, including the Fleming Group. But the hotel sector has become a potentially nasty exposure area for the group, although fresh figures on impairments caused by this area are not available.
The other high-profile backing it gave was to Bernard McNamara's Burlington Hotel site, which was bought in 2007 for €290m. This property has remained a hotel, and unlike Dunne, McNamara has wisely shelved plans for a €1bn redevelopment. The site and hotel are owned by a company called Glasbay and in that company a large shareholder is Solutura Limited, which is an associated company of Bank of Scotland (Ireland). Nobody really knows how much the value of the stake in the Burlington is worth, but one can only presume that Bank of Scotland is sitting on a large paper loss for now, in the hope that it gets developed down the line. A stream of cashflow is clearly coming in the meantime.
Either way the bank has shown no appetite to call in any loans provided to the likes of McNamara.
Property developer Larry O'Mahony and former IRA man, now developer, Tom McFeely have also been involved with companies who've successfully borrowed from Bank of Scotland (Ireland).
Another regular borrower from Bank of Scotland (Ireland) has been Pierse Construction.
Nobody knows what loan losses, if any, are occurring on any of these individual accounts, but it's clearly been a sobering few years for the UK banks and the mess left behind is a considerable one. Nobody knows the scale of this mess exactly, but from the size of the capital infusions both banks have been forced to provide to the Irish subsidiaries, it must be significant.
For example, Bloomberg calculated recently that Royal Bank of Scotland Group and Lloyds Banking Group injected €3.03bn into their Irish units during the past 10 months amid rising real-estate losses.
The Irish bailout's sterling cost is £2.8bn, more than the £2.6bn spent by British taxpayers on military operations in Afghanistan last year, it pointed out. Costly indeed.