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Competition makes it difficult to sell off banks, claims report

SELLING off the nationalised banks is made more difficult by their bad reputation, and because of competition from elsewhere, according to the Department of Finance.

However, the economy here is now "stable" and bailed-out banks are becoming less dependent on special measures for their survival, the report said.

The findings were among a raft of details on the sector published on the Department of Finance website yesterday.

The report details progress on the banking-sector rescue, including the increasing amount of cash now on deposit and a reduction in emergency loans from the European Central Bank and the Irish Central Bank.

The four bailed-out Irish lenders still do not have access to normal market funding, and in part as a result of that, cash-hungry banks are paying too much for savers' deposits, it said.


Hopes of selling off the State's hold in nationalised lenders may be at risk because of competition from elsewhere, as stronger European banks vie with Irish lenders for the scarce resources and attentions of any outside investor who will actually consider taking on bank investments.

Efforts to privatise the Irish bank stakes are also made more difficult because of a negative perception of the Irish banks, the report admits.

Last year a consortium of US and Canadian investors did buy a stake in Bank of Ireland, but AIB remains almost entirely in state hands.

The biggest question marks over investing in Irish banks are in relation to the ongoing economic weakness -- a lack of growth and demand, and the degree of losses to be sustained by the banks.

Profitability, regulatory change and liquidity are all seen as less pressing by international investors, the report said.

Irish Independent