Honohan ‘relaxed’ about foreign ownership in Irish banks
Central Bank Governor Patrick Honohan said he is "relaxed" about the idea of foreign investors taking control of Ireland’s largest banks.
“If our banking system had been largely owned by foreigners, then they would have absorbed very significant losses on their balance sheets,” Honohan said at an event in Dublin today. “I don’t really have a big problem.”
Taoiseach Brian Cowen said yesterday he will seek national elections early next year after seeking external aid on bailing out the country’s banking system.
Honohan said foreign banks can help improve access to credit and the nation “will have a slimmed down” financial system in the future.
The Government on November 21 was forced to seek a bailout from the European Union and the International Monetary Fund that analysts at Goldman Sachs estimate may total €95bn after mounting costs to stabilise the banking system pushed up state debt and eroded confidence.
Ireland may have to spend €50bn -- about one- third of gross domestic product -- to keep its banking system afloat, according to Central Bank figures published on September 30.
Allied Irish Banks and Bank of Ireland would each need at least €2.5bn to raise their equity Tier 1 ratios to more than 10pc, Ciaran Callaghan, an analyst with NCB Stockbrokers wrote in an note on November 18.
Bank of Ireland plunged 22pc to 31 cents at 10am in Dublin. AIB fell 17pc to 34 cents.
“We know that large international banks have made bad mistakes as well,” Honohan said. “Overall presence of foreign banks is a plus for the economy.”
A group of investor including US leveraged buyout firms Carlyle Group and WL Ross & Co, and led by Dublin-based Cardinal Asset Management, is among two preferred bidders for EBS Building Society, the government-controlled lender which is being sold.
Billionaire Dermot Desmond said last week Bank of Ireland or AIB should be sold to overseas buyers, as Ireland struggles to cope with a “financial emergency.”
The Government plans to unveil a four-year 15 billion euro austerity plan tomorrow.