Honohan expects banks inquiry


The Governor of the Central Bank, Dr Patrick Honohan, believes there will be an inquiry into the causes of the crisis that has convulsed Irish banks.

Dr Honohan made his comments to RTÉ’s The Week In Politics in an interview to be shown in full later this evening.

He also said Irish banks that receive State capital will be strong enough to sell their possible majority Government stakes to foreign investors in a year or two

The State already has indirect 25 per cent stakes in Allied Irish Banks and Bank of Ireland and is launching the €54 billion National Asset Management Agency to remove a portion of performing and underperforming loans from the banks’ balance sheets.

Dr Honohan reiterated that some capital needed by those banks after the creation of the Nama would come from the Government and that would possibly push its stake above 50 per cent.

"It could be majority government ownership. I'm not committing to that. I think it's quite possible. It could well be that state's shareholding could be above 50 per cent," Dr Honohan.

"I would see in one or two years, I expect that the banks would not only be strong but

confident and it's at that stage foreign investors will be keen to come and buy the shares that the government will then have in the banks."

The Government has said it is ready to provide that extra capital if the banks do not manage to find private sources but wanted to avoid further full nationalisations after taking over Anglo Irish Bank in January.

"I think there will be private ownership. The Government will take a larger stake. I fully expect that to happen and am not prepared to put a number on the percentage the government will own," Dr Honohan said, referring to the two top lenders.

Ireland has so far poured €11 billion into its top two banks and state-owned Anglo and is set to pump up to €2.4 billion into the two buildings societies, EBS and Irish Nationwide, that are to sell loans at discounted price to NAMA.

Dr Honohan said it would take two years before the overall figure needed to cleanse the banking sector would be known.