Banks agree to pounds 11 billion merger deal.
The deal will create the UK's eighth-biggest bank and will mark the first time a British bank has merged with a bank in the European single currency zone.
It will be the biggest merger in the UK banking sector since Lloyds acquired the TSB group in 1995 for pounds 5 billion.
Alliance & Leicester declined to comment on weekend reports of the merger, but the outline of a deal is thought to have been thrashed out between the two banks.
The operations of the groups will be merged to create a single banking operation with around 500 branches in the UK and 300 in Ireland.
The two banks will retain separate listings in London and Dublin with Bank of Ireland owning 55 per cent and Alliance and Leicester owning 45 per cent of the operating company.
Bank of Ireland chief executive Maurice Keane has been tipped to be chairman of the merged business with Alliance and Leicester's chairman John Windeler as his deputy.