BANKS that get state support should have to prove their lending is helping create jobs, a prominent former banker and political adviser has said.
Calling for a "feasibility study" of the Government's banking supports, Michael Flynn said lessons could be learned from the practices of European recovery banking.
The European Bank for Reconstruction and Development (EBRD), of which Mr Flynn was a director, insists banks only lend to businesses that are generating jobs.
Mr Flynn said the EBRD invested the vast majority of its funds into "good banks", which were monitored on a weekly basis to ensure the jobs condition was met. Every EBRD investment was reviewed by a specialist independent board.
"The provision of state support to Irish banks should have conditionality attached, in that it must be used to support businesses, and therefore jobs. The use of the finance should be monitored weekly and reviewed annually," Mr Flynn said.
"It seems that this has not happened, because the unemployment figure has risen."
Mr Flynn also said Irish banks needed to embark on a whole new model of "micro finance" for the tiny but viable businesses that could be the cornerstone of recovery.
"Micro finance takes people off the dole. It allows people take control of their lives. As a nation, we do not know how to do this yet, but the model exists," said Mr Flynn, who was once an adviser to Fianna Fail.
He added Irish banks might best pursue micro finance by forging strategic alliances with international players who had already used the technique.
Mr Flynn also suggested that a new bank should be set up to compare its job creation with that of existing banks.
"It's not as difficult to set up a new bank, as it would have been when ICC Bank, ACC Bank etc were established," he said.
"Then, when it is successful, and the emergency is over, we can sell it as we did with previous state-owned banks."