Minister won’t rule out bank buy

FINANCE Minister Brian Lenihan refused yesterday to rule out the possibility that Allied Irish Bank and Bank of Ireland may yet have to be nationalised, as market sentiment towards the banking system here continues to worsen.

The Government would have to continue to “adapt policies to events,” he said.

Mr Lenihan said due diligence was currently being conducted on AIB and BOI before e7 billion of taxpayers’ money is pumped into the two banks under the Government’s re-capitalisation scheme.

Asked if he might yet change his mind and take the two banks into public ownership rather than recapitalise them, Mr Lenihan recalled the fate of Anglo Irish Bank.

Anglo was due to receive e1.5bn of taxpayers’ money under re-capitalisation in December until due diligence revealed irregularities at the bank. It was subsequently nationalised instead.

“I don’t think that will be the case in Bank of Ireland or Allied Irish,” Mr Lenihan said. “But remember this: we’re living in a very uncertain world where banking is concerned. The stresses that exist in our banking system exist throughout North America and Europe as well, and we have to adapt policies to events.”

Mr Lenihan conceded there had been an outflow of funds from Irish banks in recent weeks as worries about their stability grow.

He refused to say how much, however, insisting: “It has not reached critical levels.”

Earlier, Senator Shane Ross had told the Seanad the outflow had amounted to billions last week alone.

“Nobody should be in any doubt that billions of euro left this country for overseas destinations last week. Presumably billions of euro are still leaving as panic is beginning to occur in the money and currency markets. That is an indication of the kind of precipice we are now going over,” he said, adding: “We are very close to a disaster nationally.”