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Make banking local again

Sir -- Whether Brian Lenihan appoints the candidates recommended by Shane Ross (Sunday Independent, January 30) or the usual political cronies, it will make little real difference to the way banking is conducted in Ireland.

To clean the Augean stables of Irish banking will require more than a change of key personnel at the top. What is really needed is a FD Roosevelt style 'new deal' which sees a radical shake up of the system.

For some time I have proposed that the major banks be nationalised, fused together, broken up into smaller regional units and that retail and investment banking be separated. AIB and four other financial institutions are now 'nationalised' and Bank of Ireland is likely to follow at the end of the month unless it can raise additional working capital.

Now is the time for a finance minister to structure an Irish banking system fit for purpose. Under the present system, the wealth of Cork, Galway and other parts of Ireland is transferred to the Dublin money markets and then 'invested' in either bonds or high-risk investments such as property speculation. If banking was regional again, as it was from 1880-1980, local funds would be invested locally. This, surely, is what a banking system should do -- transfer the deposits of investors to people who want to start or expand a business.

At present, SMEs are 'starved' of capital as the banks 'recapitalise'. Yet, there are funds available to invest in new or existing enterprises. This is crazy.

Finally, what should not happen is that the Irish banks rescued at enormous cost by the taxpayer, should be sold off in 10 years' time for a bargain price. The banks now belong to the Irish people and governments are now involved in banking whether they like it or not.

Bernard O'Grady,

Muswell Hill, London

Sunday Independent