Ulster Bank has begun writing to thousands of account holders who had their loans with the institution sold to a third party late last year to advise them to make alternative banking arrangements.

The loans were connected with Project Aran, a portfolio of Irish real estate loans sold by Ulster's parent company Royal Bank of Scotland to a Ceberus-controlled entity.

Some 1,200 debtor connections are involved in these loans, comprising more than 4,000 accounts, including current accounts and credit cards. Some 97 per cent of the accounts are thought to be in default and the customers are being given 60 days to switch to alternative banks.

Given the contraction in Irish banking since 2008 and the exit of various players from the market, AIB and Bank of Ireland are the most likely alternative providers for Ulster Bank customers.

It is understood that those Ulster Bank customers who are overdrawn will see their account transferred to Cerberus if they do not switch to an alternative provider.

RBS received about £1.1 billion from the sale of Project Aran, which closed in the first quarter of this year and involved about 5,000 assets.

The sale was carried out by RBS Capital Resolution, a work-out vehicle set up by the UK bank to reduce higher risk exposures. It has reduced its book of troubled Irish assets from £4.8 billion gross to about £1.5 billion in the past 18 months.

It is understood that RCR is preparing another Irish portfolio for sale, comprising commercial real estate assets as it continues its deleveraging of problem loans.

Two portfolios are already on the market – Project Coney, a collection of commercial loans including 70 pubs, and Project Trinity, which involves 6.8 acres of development land in Ballsbridge that was acquired by Sean Dunne at the height of the property bubble for €380 million.