Banks grew ‘too large’ to manage, admits Lenihan

BANKS grew “too large” for a small country like Ireland to manage, Finance Minister Brian Lenihan said yesterday, admitting repairing them “will cost a very definitive amount of money”.

He said the IMF and EU bailout for Ireland will “primarily deal with banks” and he’s confident it will bring a “permanent resolution to our difficulties in this sector”.

The minister said a number of “crunch issues” remain to be resolved in negotiations between Irish officials and the EU/IMF bailout team, who have been in talks for more than a week on a rescue package.

But he insisted the question of increasing the corporation tax rate above the current rate of 12.5% has not even come up in discussions on a rescue package expected to be in the region of €85 billion.

“There isn’t any pressure coming from our European partners on this issue,” he said. “We’re making good progress in the negotiations but you’ll appreciate that this issue hasn’t arisen in the course of the negotiation.”

The focus of the talks has turned to how the bailout will be divided between what the banks need and what will be required for the day-to-day running of the country.

Discussions are also focused on the interest rate Ireland will have to pay on the bailout. Sources say this has not yet been agreed, despite hints by Taoiseach Brian Cowen on Wednesday night that it could be in the region of 6%.

At a Thanksgiving dinner for the American Chamber of Commerce in Dublin’s Four Seasons Hotel yesterday, Mr Lenihan said the banking sector “did grow too large for a small sovereign like Ireland to manage”.

He said banking problems were “serious” because of “the large holes” found in their asset books by NAMA.

“The repairing of this will cost a very definitive amount of money but it’s manageable,” he said.

“I’m confident that the negotiations now under way will ensure we have a permanent resolution of our difficulties in this sector.”

Mr Lenihan said passing the budget will be of “vital importance” to the country.

“I’m quite satisfied from discussions both with parties in Government and the various representatives in Dáil Eireann that there is a majority for this budget, that it will pass,” he said.

“That in itself will send a signal to the world that Ireland is managing its own affairs, that Ireland is putting its funding basis in order.”