AIB has announced it will cease operations on the Isle of Man and Jersey at the end of next year.

The bank said the decision to wind-down the business was part of “an on-going strategic review” being undertaken by AIB as it attempts to become a “smaller, domestically focused bank”.

AIB operates two subsidiaries on the islands, AIB (CI) and AIB International Savings Limited, which between them have a loan book of about €400 million and deposits of more than €2 billion.

A 30 day consultation period is to begin with the 170 staff employed in the businesses immediately. An AIB spokeswoman said no decision had been taken on whether the staff would be laid off or redeployed.

The bank said customers affected by the move will be contacted shortly to discuss future arrangements.

Joe Moynihan, AIB Jersey & Isle of Man chief executive, said “an orderly wind-down process of the business will begin today”.

"Ongoing uncertainty in financial markets since 2009 has had implications for the business and created difficulties that challenge the viability of the offshore business model for AIB,” he said.