Bank of Scotland is today expected to announce an agreement with IBM to outsource all its IT systems. The aim of the scheme is to save the bank millions of pounds a year.

Under the terms of the alliance, the bank's technology staff are expected to be transferred to IBM's payroll. It will be the first deal of its kind for a leading British bank.

Bank of Scotland refused to comment last night, but has said in the past that it would look for ways to keep costs under control through outsourcing.

The arrangement is expected to give the bank scope to embark on a new strategy after failing to convince the market that it had potential for further growth after its failure to win control of NatWest.

Among projects with which the Edinburgh-based bank has been connected are a new joint venture with Easyjet, which is said to want to set up an Easymoney website to add to a stable of products including car hire and internet cafes.

But the bank will be cautious about new joint ventures after being forced to abandon plans for a project with the American evangelist, Pat Robertson, when he made disparaging remarks about the Scots.

The outsourcing arrangement was described last night as "huge" by banking sources. IBM is already working on an internet project for the rival HSBC.

"It allows Bank of Scotland to get on with banking and IBM to get on with the computing," was how one industry source described the deal.

Arrangements of this kind are increasingly common in both public and private sector, but have not, until now, been used in British banking.

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