Anglo Irish Bank has decided to sell off its Isle of Man trust company for £35 million (€52 million) to a group of locally based managers.

The decision to sell leaves fewer Irish institutions operating on the island, which administers a low-tax environment. The deal, involving the Anglo Irish Trust Company, is believed to have been concluded shortly before Christmas.

A spokeswoman for the bank said yesterday that, following a strategic review, it decided that "after four years of continuous growth the potential for the trust company was best maximised outside their existing banking structure".

The management buyout (MBO) at the Isle of Man trust company will mean that many staff, who previously worked with Ernst and Young, will remain with the company. Anglo bought the trust company several years ago from Ernst and Young.

Anglo said the company name would change in due course and this would be announced when finalised. The MBO team said they hoped the business could grow further and they described the Isle of Man, a British dependency, as the "leading and best regulated offshore financial services centre".

The Isle of Man, often described as a "tax haven", is no longer as popular with Irish banks, with only Anglo Irish and Irish Nationwide now running major operations there. Anglo's assets on the island have been growing in recent years, as have those of Irish Nationwide.

Overall, the assets of Irish financial institutions on the island have been falling, with Bank of Ireland, AIB, Ulster Bank and Permanent TSB shedding deposits, according to a banking survey published in the last year by KPMG.

Most Irish banks are refusing to accept offshore deposits from Irish residents, with some returning the money that has already been deposited.

Tom Browne, head of wealth management at Anglo, said last year that less than 1 per cent of its Isle of Man deposits came from individuals resident in Ireland.

Irish Nationwide has said that less than 2 per cent of its Isle of Man depositors have Irish addresses, and that it stopped accepting such deposits or opening accounts for Irish residents three years ago.

Anglo's deposits in the Isle of Man are believed to come from local trust funds and individuals, as well as from UK expatriates based overseas and foreigners living in the UK.

In its last annual report for 2005, Irish Nationwide said of its Isle of Man operation: "The Society's banking subsidiary in the Isle of Man has performed very satisfactorily and continues to grow and is a very cost effective source of sterling deposits, which accommodates our expanding commercial lending programme in the UK."