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Borrowing may get easier -- Honohan

THE nationalisation of AIB could actually make it easier for businesses and ordinary people to borrow from the bank, Central Bank governor Patrick Honohan said yesterday.

When the curtain fell on Anglo Irish Bank last year, new lending was halted immediately, and the bank began its slow descent into oblivion.

But, Finance Minister Brian Lenihan insisted that the nationalised AIB will remain a fully functioning bank, while Prof Honohan said the bank might even lend more once it's State-owned.

AIB has spent much of the last year trying to fill a massive capital hole by selling off foreign assets and trying to plan a stock market raising -- yesterday's announcement effectively takes that pressure off.

"Hopefully now they are putting their capital problems behind them and they are no longer in denial about the scale of the losses, they will focus on the future," Prof Honohan said.

"The future business of the banks in Ireland is supporting customers," he added.

The Central Bank boss admitted, however, that whether AIB actually loaned more once it was nationalised would be down to its new management.

"We can bring the horse to water," he said, "now it's a question of getting it to drink."

"Anything that increases SMEs access to finance is to be welcomed," said Mark Fielding who heads up small business lobby group ISME.

He added, however, that it was "hard to see how" developments at AIB would "open up the purse strings", suggesting lending might get even tighter if the regulator increased the demands on banks.

Mr Lenihan, meanwhile, stressed that the nationalised AIB "must be run on full commercial terms" with the same freedoms as other banks.

"AIB is not being nationalised in the same way that Anglo Irish was," he said. "It will remain a listed institution (on the stock market) with full commercial autonomy."

Irish Independent