'Private sources' option for bank aid

THE GOVERNMENT favoured further financial support for the banks coming from the private sector, Tánaiste Mary Coughlantold the Dáil.

She said the issue of recapitalisation, or the capital supports that might be needed for the financial institutions, would not be determined by picking a number off the top of one’s head.

“It will be done in an analytical way and, as I have indicated, clearly our preference is for that capital to be raised from private sources in the first instance,” she added. “There has been no final determination by the Minister for Finance, Brian Lenihan, or the Government, as to what those capital requirements will be.”

Ms Coughlan also said she was dissatisfied with the level of funding made available by the banks to businesses.

Lending capacity and access to working capital, she said, was a subject of ongoing discussion and she was working closely with Mr Lenihan on the issue.

“I am not completely satisfied that the amount of working capital being made available is sufficient to furnish the needs of the business community,” she added.

“On that basis, I am again working with the banks and the business community so that we may establish the absolute necessity for a change of attitude within the banks and move them away from their reliance, heretofore, on construction, to an expertise in business so that they may take on board the need to take particular risks in the context of supporting people within business.”

The Tánaiste was replying to Fine Gael leader Enda Kenny, who said that Standard Poor's had downgraded the rating of the Irish banks.

“Every business in the country now has a difficulty with banks,” he said. “When the National Asset Management Agency legislation was passed, we were told it would be the panacea for all business ills and would sort out the problem of lack of credit facilities for businesses.”

Mr Kenny said he had to deal with seven businesses on Monday that had been called in by the banks.

“These were legitimate businesses, well run, where nobody had stepped out of line and they borrowed the money on a variable rate,” Mr Kenny added.

He said people who had run their businesses well, and took the risk in borrowing at variable rates, were now “being screwed” by the banks.

Ms Coughlan said she was aware of a number of companies that had come forward on the basis of increased rates of interest.

Her department, the agencies and herself had been working with the banks to facilitate such people who had the bona fides as regards trading successfully through difficult times.

She added that it was on that basis she had introduced the stabilisation fund, which was working very well.