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Cyprus-style bailout will never happen again, says Honohan


Central Bank governor Patrick Honohan

Central Bank governor Patrick Honohan

Central Bank governor Patrick Honohan

CENTRAL Bank Governor Patrick Honohan has said he would have done the Cypriot bailout differently.

But he declined to give details, claiming it was now "water under the bridge".

Under the controversial international rescue deal, which was debated in the Cypriot parliament yesterday, the island's second-largest bank is being wound down while wealthy depositers suffer hefty losses. Mr Honohan said he did not personally favour the bailout arrangement.

"What happened in Cyprus will not happen in any other country. It was certainly an unusual process that we observed," he said at the launch of the Central Bank's annual report.

"That doesn't mean all features were bad, but it means that some features and the way that they evolved were not the best. I would have done it differently myself."

No impact

Mr Honohan said there had been no impact on the Irish banking system from Cyprus.

Meanwhile, Mr Honohan later told the Oireachtas Committee on European Affairs that Europe must press ahead with banking union, to transform the financial system from "a source of risk and instability to a source of growth and support to the real economy.

"Announcement of action to build a banking union, combined with the firm commitment of the ECB, has contributed greatly over the past several months to the gradual but clear restoration of confidence in euro area financial markets," Mr Honohan said.

"Banking union, shifting supervision of banks to the European level, combined with a single-resolution regime and a common system for deposit protection will reassure citizens and markets that a common, high level of prudential regulation is being consistently applied."

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Mr Honohan said the Central Bank was still working towards carrying out stress tests on the banks at the latter part of the year. By 2019, the banks will need more capital under international regulations.

"In an ideal situation, that capital will come from private investors, as is happening all over Europe, all over the world, where bank capital is being pushed up through the market system," he said.

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