Central Bank of Ireland governor Patrick Honohan doesn't beat around the bush. He calls a spade a spade.

We all remember that it was the governor who put us straight in November 2010 on RTÉ's Morning Ireland radio programme about the talks taking place between the State and the EU/ECB/IMF troika at a time when the Fianna Fáil-led government was leading us a merry dance on the issue.

Yesterday, at the press briefing to discuss the Central Bank’s 2012 annual report, Honohan matter-of-factly told us that the Irish banks would need more funding before 2019 due to changes in capital reporting requirements imposed by the new Basel III accord.

The transition period for these changes to be implemented by banks in the EU is January 2019.

There were more than a few eyebrows raised at this frank admission.

Honohan's statement is in stark contrast to those of the various Irish-owned banks – AIB, Bank of Ireland and Permanent TSB. In public at least, the banks have maintained that they are adequately capitalised and that they do not envisage having to raise additional capital to bolster their ratios.

This is as much aspiration as anything else.

They are all working on a return to post-provision profitability in 2014 but this depends on the Irish economy returning to growth, the banks being able to tackle their cost bases while also implementing higher charges for certain services and products, and the mortgage arrears issue not blowing up in their faces amid pressure from the Central Bank and Government to sort it out decisively once and for all. Honohan declined to say how much would be needed, saying that the capital ratio stress tests (PCAR) due to be carried out in Ireland in September or October of this year would help to answer that question, along with the timing for this new funding.

He added to those comments later in the day when he told the joint Oireachtas Committee for European Affairs that "ideally" any new funds would come from the private sector.

This seems like wishful thinking, at least in the cases of AIB and Permanent TSB, which are almost 100 per cent owned by the State and have large, loss-making tracker mortgage books hanging around their necks.

Weary of austerity
Irish banks – including the now defunct Anglo Irish Bank and Irish Nationwide – have already received about €65 billion in bailout funds from the State and austerity-weary taxpayers will not relish the prospect of the exchequer's coffers being raided again by our financial institutions.

Nor will a Government mindful of Fianna Fáil’s resurgence in the polls and fully aware of the political capital that could be made of such a move by Sinn Féin and Independents representing the “ordinary working man”.

While we don’t know how much the banks will need in additional funding, we can assume it will be some billions of euro.

It is difficult to imagine private investors taking a punt on either AIB or Permanent TSB in the event that they need more capital to meet their regulatory obligations.

Bank of Ireland is a somewhat different case. Some weeks back, at the launch of the Central Bank's targets for financial institutions to deal with mortgage arrears, Minister for Finance Michael Noonan made it clear that Bank of Ireland would have to source any additional funding that it might need to deal with this issue from private investors.

Richie Boucher must already be weighing up a €1 billion-plus capital raising to take out the Government's preference shares by next March, when the cost to the bank would step up by €450 million if they haven't been redeemed.

There is appetite in the markets for Irish paper at present so Boucher has a chance of getting that away.

Of course, there is more than one way to skin a cat. Dealing decisively with their pension deficits would aid the capital ratios of both Bank of Ireland and AIB. Talks with staff on these matters are already under way.

System-wide solution
A system-wide solution that would relieve the individual banks of their billions of euro in loss-making tracker mortgages would also alter the calculations.

Honohan indicated yesterday that post-2019, the banks should be able to fend for themselves with capital markets. That’s the plan.

Given that it will have been more than a decade since the crisis began, it hardly seems like an ambitious target.

Yet there are so many caveats to the full recovery of the Irish-owned banks, that if someone offered us a return to normalised lending/banking post 2019 today, we’d bite their hand off.