Ownership and control of Irish banks could shift overseas to the detriment of the Irish economy, Bank of Ireland governor Mr Lawrence Crowley has warned.

Addressing the Institute of Directors, Mr Crowley said the needs of small sectors of the Irish economy could be overlooked if AIB or Bank of Ireland were taken over by international banks as decisions would be based on global trends rather than local issues.

"Decisions taken in London, Paris or New York will be governed by global trends in global businesses, of which we are likely to be a very small part. The specific needs of small sectors of the Irish economy are unlikely to carry much weight."

One of the greatest strengths of the Irish banking system was its knowledge of and sensitivity to key economic issues in Ireland, according to Mr Crowley. The banks had been enormously supportive of Government economic policy and the needs of business, in good times and in bad, he said. "It is a racing certainty that the view from the seventh floor in Baggot Street will have a greener tinge than that from the 27th floor in Frankfurt."

He pointed to Ireland's experience in relation to the European Central Bank where policy is based on the requirements of the larger European economies which are currently out of kilter with those of Ireland. "A pan-European banking group will be no different. Decisions on sectoral lending exposures are unlikely to take too much account of any special circumstances in Ireland."

Mr Crowley stressed he was not trying to promote any form of protectionism or nationalism but believed the location and orientation of the management of Irish banks had fundamental implications for the economy.

"We are not entirely powerless in this situation. If we continue to deliver superior profit performances, we make ourselves less digestible to predators and we offer less potential to recoup the substantial premiums which will be necessary in any takeover." Nevertheless, Mr Crowley believes there is a strong chance ownership of the Irish banks will eventually pass into international hands, with management control also passing abroad, similar to what has happened in New Zealand. He urged the directors to consider the long-term implications of such a development.