Banks 'should be sold to foreign investors'

Ireland’s banks should be sold off to foreign owners to quicker clean up the debt crisis, the country’s top banker declared today.

Patrick Honohan, governor of the Central Bank, also claimed a new government will be able to change the terms of the €85bn IMF/EU bailout.

The banking chief said getting overseas investors to take over the homegrown banks that survive the current economic mess was looking like the best option.

“Increasingly, it seems evident that placing the continuing parts of the system on a firm footing can best be done through the involvement of new foreign owners who can bring capital, risk control and other management skills,” he said.

In a speech to the Institute of International and European Affairs (IEA) in Dublin, he said such a move would “short circuit” measures needed at the moment to reduce the banks’ financial risk to the State.

These measures could be prolonging the clean up process, he said.

Mr Honohan said the prospect of international investors being attracted to Irish banks was “not unreasonable”.

He added: “I look forward to welcoming new owners of Ireland’s downsized and cleaned-up banks.”

Mr Honohan also suggested a new Government would get a “sympathetic hearing” from the IMF/EU if they wanted to bring in alternative cost-cutting measures, as long as they brought the country’s finances under control.

Rolling back Celtic Tiger excesses has heightened uncertainty among international lenders but the bailout package had bought time to restore confidence in Ireland, he said.

In a reference to claims the deal diluted Irish sovereignty, he argued its success was hinged on the actions of Irish authorities.

Mr Honohan added that the IMF/EU does not believe Ireland’s debt crisis is anything other than manageable.

Finance Minister Brian Lenihan said while alternative cost-cutting measures could be agreed within the bailout package, changes to interest rates were a different matter.

“The interest rate for funding from the IMF and the various EU funding lines were determined by a common approach for any borrower,” he said.

“Accordingly, any changes to these rates cannot be negotiated for Ireland in isolation and must be seen in the wider context.”

Mr Lenihan said it was always the case that the present administration or any new Government could bring in changes where savings are made as long as it had the same impact.

“What is clear, however, is that the size and speed of the budgetary adjustment is not open for discussion,” he said.

“Support under the programme is conditional on this level of adjustment being achieved.”