Lenihan seeks to approve increase

FINANCE Minister Brian Lenihan has asked the Dáil for permission to increase his proposed €7 billion investment in the country’s two main banks.

He said it was not his desire to pump additional money into AIB or Bank of Ireland but if it was necessary, he wanted clearance to take control of either institution.

And, while introducing the legislation needed to free up money from the National Pension Reserve Fund, he said he wanted the power to widen the scope of the state’s investment.

“I should emphasise at this point that the state does not intend to take control of the recapitalised financial institutions.

“However, if the fund was to underwrite a future share issuance by these institutions, it is possible that the fund’s overall holding could constitute a controlling interest.”

Fine Gael’s Michael Noonan said Mr Lenihan should accept the markets had made a judgment on the e7bn investment and had decided it was not enough.

He said the share prices of the two banks had continued to drop and if the Government was to win confidence in international markets, it had to do more or do something different.

Mr Noonan said if the banks go in search of further investment they will be rebuffed and the state will end up stepping in again.

He said the minister should act more decisively as this would stop the perception that the country was always reacting.

“Why are you [Mr Lenihan] always chasing the issue? If he got ahead of the game for once I think he would give confidence and I think the public are waiting for confidence,” he said.

The Investment of the National Pensions Reserve Fund and Miscellaneous Provisions Bill 2009 will allow the Government to take e4bn for the fund and borrow another e3bn from funds supposed to be invested in it next year.

It also makes other changes to how the fund can be used. For the first time it will allow the commission in charge to invest in options even if it does not predict a profit.

And it will allow the commission to buy shares put on the market by either of the banks if nobody else purchases them.

The Bill will be debated in the Dáil again this evening.