The decision to open a full Phase 2 investigation follows an extended preliminary investigation.The inquiry will try to establish if the proposed deal could lead to a substantial lessening of competition in the State.

In April the two banks said they had agreed a Memorandum of Understanding to explore a route that could lead to a deal that would see Bank of Ireland buy nearly all of KBC Bank Ireland’s €9bn in performing loans as well as liabilities.

KBC also said it was reviewing its options to divest its non-performing loan portfolio and that execution of these two transactions would ultimately result in its withdrawal from the Irish market.

Then in August, KBC said it would sell most of its non-performing mortgage loan portfolio and a small number of non-mortgage non-performing loans in a transaction financed by funds managed by CarVal Investors.

Pepper Finance Corporation (Ireland) DAC will be managing the €1.1bn in loans after the transaction is completed.

The CCPC said it has received a number of submissions from third parties during the Phase 1 probe and it will continue to accept them until Wednesday November 10.